Asset Class

•An asset class is a group of similar investment

vehicles.
•Different classes, or types, of investment assets -
such as fixed-income investments - are grouped
together based on having a similar financial
structure.
• They are typically traded in the same financial
markets and subject to the same rules and
regulations.
Different Asset Classes
Stocks or equities:
Equities are shares of ownership issued by
publicly-traded companies.

Bonds or other fixed-income investments :

Fixed-income investments are investments in debt
securities that pay a rate of return in the form of
interest.
Cash or cash equivalents, such as money market
funds :
•The primary advantage of cash or cash equivalent
investments is their liquidity.
•Money held in the form of cash or cash equivalents
can be easily accessed at any time.
Forex, futures and other derivatives:
•This category includes futures contracts, spot and
forward foreign exchange, options, and an
expanding array of financial derivatives.
•Derivatives are financial instruments that are
based on, or derived from, an underlying asset.
•For example, stock options are a derivative of
stocks.
Credit Market(Debt Market)
•The credit market is a financial market where the
government and companies issue debt to investors
to raise money.
•Here, the investors buy and sell securities, mostly
in the form of bonds.
•Also, in a developing market like India, these
markets are an important source of funds.
Equity Market
•An equity market is a platform for purchasing and
selling stocks of various listed companies.
•Various traders conduct buying and selling of a
company’s stocks with the help of a stockbroker.
FOREX(Foreign Exchange) Market
•Forex (FX) as it is called is trading of a single
currency for another at a certain price and bank
deposits on the over-the-counter (OTC) market
place.
• It simply means buying one currency and selling
the other.
Currency prices are determined by a host of
economic and political conditions, most
importantly, interest rates, international trade,
inflation, and political stability.
•Occasionally, the government participates in the
foreign exchange market to influence the value of
the country’s currency by either flooding the
market with their domestic currency to lower the
price or buy in order to raise the price.
• This is known as central bank intervention.
Commodity Market
•Commodities are bought and sold in the
commodities market.
•This financial market is widely utilized by
producers, manufacturers, and wholesale traders
as a price discovery mechanism for various goods
and commodities.
Three primary commodity exchanges are currently
operational in India
1. Multi Commodity Exchange (MCX)
2. National Commodity and Derivatives Exchange
(NCDEX)
3. Indian Commodity Exchange (ICEX)
•Most traders and investors simply classify the
different commodities into agricultural and non-
agricultural commodities.
• The non-agricultural commodities can be further
sub-classified into three different categories -
bullion, energy, and base metals.
Financial Instrument
•Financial instruments are contracts for monetary
assets that can be purchased, traded, created,
modified, or settled for.
•In terms of contracts, there is a contractual
obligation between involved parties during a
financial instrument transaction.
•If a company were to pay cash for a bond, another
party is obligated to deliver a financial instrument
for the transaction to be fully completed.
•One company is obligated to provide cash, while
the other is obligated to provide the bond.
•Basic examples of financial instruments are
cheques, bonds, securities.
Types of Financial Instruments

Financial
Instruments

Foreign
Cash Derivative
Exchange
Instruments Instruments
Instruments
Cash Instruments
Cash instruments are financial instruments with
values directly influenced by the condition of the
markets.
Two Types
1. Securities and deposits
2. Loans
Securities: A security is a financial instrument that
has monetary value and is traded on the stock
market.

Deposits and Loans: Both deposits and loans are

considered cash instruments because they
represent monetary assets that have some sort of
contractual agreement between parties.
Derivative Instruments
Derivative instruments are financial instruments
that have values determined from underlying
assets, such as resources, currency, bonds, stocks,
and stock indexes.
Foreign Exchange Instruments
Foreign exchange instruments are financial
instruments that are represented on the foreign
market and primarily consist of currency
agreements and derivatives.
Asset Class
Fixed Income Investments
Fixed Income Investments offer a fixed rate of
return with the interest getting accumulated over
a predetermined period of time.
•Post office Recurring Deposit
•Post-Office Monthly Income Scheme
•Post-Office Time Deposit
•Savings Bank Account
•Bank Recurring Deposits
•Bank Fixed Deposits
•Public Provident Fund (PPF)
•Life Insurance
•Pension and Annuity
•Sovereign Gold Schemes
•Stocks and Equity
•Mutual Funds
Mutual Fund
•A Mutual fund is a pool of investments by
different investors in securities such as debt,
equity or both.
•In simple words, it collects funds from investors
like individuals and institutions and invests them
in bonds, stocks or other short-term investment
plans.
Importance of Mutual Funds in Economic Progress
•A mutual fund helps accumulate money for
investment purposes which stimulate industries in
the economy.
•It channelizes and deploys the public’s small
savings in the economy through investments.
•It helps in capital accumulation for developing
countries like India to support development.
•A mutual fund also plays a crucial role in creating
an investment-friendly environment in India.
Benefits of Mutual Funds
•Investors can diversify their funds into several
securities, such as debt and equity, which help
lower the risk.
•There is no entry load to invest in mutual funds.
•Investors possess complete transparency on
several investments of their money.
•Investors obtain expert management and advice
to take care of their funds.
•Mutual funds provide flexibility in switching
between funds.
•Investors attain tax benefits by investing their
money in securities.
Insurance
It is a contract, a legal agreement between two
parties, i.e., the individual named insured and the
insurance company called insurer.
Types Of Insurance
1. Life Insurance
2. General Insurance
Term Insurance: Gives life coverage for a specific
time period.

Whole life insurance: Offer life cover for the whole

life of an individual.

Endowment policy: a portion of premiums go

toward the death benefit, while the remaining is
invested by the insurer.
Money back Policy: a certain percentage of the
sum assured is paid to the insured in intervals
throughout the term as survival benefit.

Pension Plans: Also called retirement plans are a

fusion of insurance and investment. A portion
from the premiums is directed towards retirement
corpus, which is paid as a lump-sum or monthly
payment after the retirement of the insured.
Child Plans: Provides financial aid for children of
the policyholders throughout their lives.

ULIPS – Unit Linked Insurance Plans: same as

endowment plans, a part of premiums go toward
the death benefit while the remaining goes
toward mutual fund investments.
General Insurance
Everything apart from life can be insured under
general insurance.
Health Insurance: Covers the cost of medical care.

Fire Insurance: give coverage for the damages

caused to goods or property due to fire.

Travel Insurance: compensates the financial

liabilities arising out of non-medical or medical
emergencies during travel within the country or
abroad.
Motor Insurance: offers financial protection to
motor vehicles from damages due to accidents,
fire, theft, or natural calamities.

Home Insurance: compensates the damage caused

to home due to man-made disasters, natural
calamities, or other threats.