Online Investment Options in India
Online investment and trading opens various avenues for financial planning. Whether you want to make an investment for a specific purpose (like tax or retirement) or you are a serious trader in the equity market, you can do it all through you online trading account. You can access your entire portfolio at a click at any time of the day with no paper work involved.
Some products like Equity, Mutual Fund and IPO investment are offered by almost all websites while the rest may or may not be offered by various websites. Here let’s take look at some online investment options in India
Generally this is the primary reason for having an online trading account. Equity trading is the purchase or sale of company stocks through various authorized stock exchanges. The investors (in India) can trade on the BSE (Bombay Stock Exchange) or the NSE (National Stock Exchange) and there are various options that are available for trading like Cash Trading, Margin Trading, Margin Plus Trading etc.
Initial Public Offer (IPOs)
An initial public offering can be described as the first sale of stock by a company to the public. If a company has never issued equity in the market before then their raising of capital through the equity option is known as an IPO. The Coal India IPO in October 2010 was one of the most sought after IPOs, it was a massive amount of Rs. 36000 crores and was oversubscribed 15 times.
IPOs are often treated as lottery and are generally sold on the day they are listed; you need to decide whether you are investing in a lottery or a business and then take action accordingly.
These are units that you buy from an Asset Management Company; the AMC pools the funds of the investors and further invests it in various ways. The AMC may invest them in specific areas like the infrastructure or IT, equities, debt or a mix. Since your money is being managed by experts you are freed from the burden of tracking the market or the risk of volatile markets since your risk is diversified.
You could invest in ETF (exchange traded funds), open ended funds or buy the units when the fund is introduced. However it is important to remember that all MFs might not be available in demat form and some might not have a tie-up with the website you have an account with.
Auto Invest is an account variant offered by Kotak Securities where the investor can invest in Gold ETFs and MFs. Gold ETFs are like mutual funds where the money collected is invested in standard gold bullion.
There are a variety of bonds that you can invest through your online investment account. The choice includes GOI (Government of India) Bonds, NHAI Bonds, NABARD Bonds and Infrastructure Bonds that are primarily for tax saving purpose. IFCI and REC recently came up with Infrastructure Bonds for tax benefit under section 80 CCF.
Religare, IDBI Paisa Builder, ICICI Direct and Kotak Securities provide you the facility to invest in bonds online.
Derivatives are investment that a person makes with an aim either to maximize returns or minimize the risks. They do not have any value of their own but they derive their value from the movement of price of the underlying asset. A derivative is an agreement to buy or sell the underlying asset or security within a certain time limit in the future at an agreed price.
Futures and Options are type of derivatives. A future provides the holder an opportunity to buy or sell the underlying asset at future date at a specific price. These are standardized contracts with a fixed expiry date, contract size and price. An option is similar to a future with one major difference; the buyer of the contract is not obligated to exercise the contract; he/she has the option not an obligation to buy or sell.
Kotak Securities offers a Super Derivatives account which is specially made for those investors who want to trade in futures and options.
The option of trading in the commodities market has been recently made available to Indian investors. With the setting up of National Commodity and Derivatives Exchange Limited (NCDEX) in December 2003 a platform was made available for trading in commodities.
Commodity trading is similar to stock trading except that instead of trading stocks commodities are exchanged. So what are commodities? They are naturally grown products or products that exist naturally like gold, wheat, coffee, cotton, oil, sugar, platinum etc. For trading in commodities you will require a separate demat account; the formalities are similar to opening a normal demat account.
Some websites provide separate account variants in case you want to trade in commodities like Share Khan has a Speed Trade account and ICICI Direct has an Active Trader account.
You can also invest in the National Saving Certificates (NSC) and Kisan Vikas Patra (KVP) through you online investment account; both the schemes are run by Government of India through Post Offices.
The minimum investment for NSC is Rs.1000. thereafter in multiples of Rs. 100 while in the case of KVP the minimum permissible investment is Rs.1000 and further investments can be made only in multiples of Rs.1000. ICICI Direct com provides facility for investing in them online.
This is another financial planning tool that is available online; you can buy both general and life insurance online. Reliance Money and ICICI Direct offer this facility but all products may not be available online.
Conclusion – Online investment
Whether you do online investment or offline investment, please learn some basics before investing