Top 4 Safe & Secure Alternate Investments to Invest Our Hard Earned Money

Alternative Investments are the investments which are defined in Regulation of Securities and Exchange Board of India; these are privately pooled money investment which includes mutual funds, equity funds, general and life insurance. These investments are the choice of investment opportunities which investors should know before investing into any kind of Asset in the market.

Basically, this investment includes hedge funds, real estates, commodities, private equity and derivatives contracts, these are held by institutional investors and have high minimum investments, there is a lot of diversification in these types of investments and is held over for a long period of time, much longer than 12 months in comparison to short term investments.

Some Safe Alternative Investment Includes:-

1. Mutual Funds
2. Equity Funds
3. General Insurance
4. Life Insurance

Mutual Funds

Mutual funds are the investment funds which includes save money on the securities from the investors like stakeholders, shareholders and it also includes shares, bonds, market securities, assets and many other stocks, who wishes to invest their money with low cost. These funds are very flexible in nature as there is an involvement of liquidity ratio.

Details about Mutual funds

Mutual funds varies a lot as there are benefits of taxes and wide variety of huge choices among it, there is a comprehensive diversification in it which is convenient for the investors to invest, all the individuals or stake holders who invest in it has a full stake on the gains and losses equally.

Diversification in mutual funds itself suggests that it depends upon the categories of which securities does the fund manager invests in. These funds are accumulated with the pool of money for investing in shares and securities and are operated by professional managers for operating all the income of investors.

The funds are mostly taken from the public and are invested it in securities, bonds, stock or shares as the funds are mostly hired by the Board of Directors Mutual funds are redeemed as required which are known as NAVPS or net asset value per share, In this investment funds most of the managers are the owner of this fund as they adopt the analysts who can pick investments or can do the market research properly.

Equity Funds

In Mutual funds there are mostly three types of funds which are privately investment fund that includes equity funds, fixed income funds, and money market funds that buys ownership’s in businesses most often in the form of publicly traded common stock.

These funds are the Mandatory funds which are invested into stocks and papers of public limited company, their main motive is for long term investment goals, these funds are also convenient and are at low cost, these are basically classified into large capital, mid capitals, multi capitals, balanced, etc.

The other name of equity funds is stock funds, and these are principally categorized according to company size, its investment style port folio, etc. These funds are at high return rate and are very beneficial funds. At presently there are more than 2500 equity funds available.

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Insurance is referred to as a policy, in which an individual receives a financial safety and protection against the losses from an insurance company. Generally, there are two types of insurance:

Importance of Insurance

Life Insurance: This insurance is basically against an individual loss of income, that would be resulted if the person is no more or passed away, the person who is received as a beneficiary shall be safeguarded and proceed with it from the financial impact of that deceased person, life insurance includes the term of the person.

General Insurance: This insurance is also known as non-life insurance, it includes the policies of automobiles, home owner policies, this insurance comes under all the insurance except the life insurance and it totally depends upon the payment provided for the particular financial year.

General insurance also has some other name in other countries like in US and Canada, it is called as property and casualty insurance and in Europe it is called as Non Life Insurances. This insurance basically includes health, accident, home, motor, etc.

Thus, alternative investments are diversified with low cost and for unique, thus Mutual Funds, Insurance, and Equity funds does not come in conventional investment or the traditional modes of investments like stocks, bonds, cash, etc but these includes private equity, hedge funds, managed features, real estate, commodities and derivatives contracts, which are very certain and for long term goals with flexible nature that might attract investors to invest in it.

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Why should I need to have a Financial advisor?

Welcome to MPF,

Ahh we understood that you are in the urge of understanding the importance of a financial advisor. At the same time something popping up your mind that “Do I still need a financial advisor or a planner to decide my retirement, child planning or wealth management?”.

A hypothetical question! Let me try to explain why you require a financial planner or an advisor to protect your money or to start with your wealth creation.

Who are a Financial Planner / Advisor?

Professional with deep understanding in finance, taxation and wealth management who service their clients to accomplish their financial goals by allocating their money in different financial instruments like equity, mutual funds, Term Deposits etc.

For many people the goals are towards their children education, retirement planning, buying a home, starting a business, vacation, wealth creation etc.

Financial advisor carry out their activity through “fact finding” sessions by asking number of questions to understand your requirement and your current financial positions.

Based on the discussions they come up with the affordable and suitable financial products for you to achieve your future goals.

Though the financial advisor do the same activity, but the immense difference among the service are provided by different types of advisors and now the services may cost you few thousands.

Now a days professional are coming up with different titles, sometime they are financial planners, financial advisors, and Investment planners, Investment advisors or wealth managers.

They may not do the same type of work, in general financial planners or advisors may be / interested able to help you on the complete picture of portfolio including budgeting, debt balancing and financial planning, however Investment advisor or wealth managers mostly will help you on finding the best investment opportunities.

Fee based Planners

Now fee based planners are quite popular in the industry and they provide a solution or recommendation to you for a fee. The fee can be an hourly fee or a planning session fee or it may be charged as an annual fee based on the assets under management (AUM). 

They offer financial planning, retirement planning, child education planning, budgeting; debt balancing etc. the entire fee details are revealed to the clients upfront and the clients can understand the exact service what will be getting for the fee.

The biggest advantage here is, the service what we are getting is an unbiased advisory since the planners don’t get any compensation or sales fee from the organizations. So they do not offer you any particular product.

This image will help the user to understand the need of a financial planner
Image credit : Pixabay

Commission based planners

They also provide the same set of service as fee based planners, however they don’t they don’t charge any fee from their clients. They receive commission or a brokerage from the organization for selling the product.

Mostly they receive a percentage of the total amount clients invest in particular funds or products.

Now you may think that the possibility of suggesting a product which gives them a big commission even though they are a profitable to the client.

You may have a question now when do I need to hire a financial planner? Hmm tricky & a good question, its completely personal, if you have any queries related to money, taxation, saving, retirement planning or just a re balancing your financial portfolio, financial planner or an advisor can help you.

Because they are in the market, they will get the updates on the inflation, deflation, GDP, market situation and a global economy etc. they will be able to help you professionally. On the other hand may tend to take an emotional decision during the crisis.

However if you’re capable to manage your finances without any emotional decision, if you find enough time to do the research, if you have ample amount of knowledge or skills when it comes to investing, then absolutely you do not require a financial planner.

If your answer is no for any of these question definitely you should hire a financial planner to take care of your financial situations.

How much you Pay for the Planning or Advice?

Fee based financial planner may charge from Rs 1000 to Rs 5000 per hour, you may find some planners will advise only HNI’s (High Networth Individuals) and impose investment of Rs 5 lakh on the low end ranging upto crores.

Commission based advisers will receive a percentage of the total number of transaction that you make. Financial planners also offer managed Portfolio Management Services (PMS) may charge 0.2% to 2% of the total investment amount.

Ultimately this is absolutely own discretion of individuals to choose financial planner / advisors to make their money grow, and again when you get an advice from the professional it is your duty to understand the concept well and ask them many questions before investing in any products. Finally it’s your hard earned money.

At the same time nobody can force anybody to take advisory service or force them to invest in the recommended products.