I bet 90% of the folks reading this blog will say investment in fixed deposit would be the safest investment instrument in the world. Why?
Well, keeping a capital in the bank insures and ensures capital safety and fixed rate of return after a particular period of time.
Some of you may also argue that investment in mutual funds is also a safe investment. But then, your investment will remain subject to market risk. If the market crashes due to any reason whom will you hold responsible? Certainly not the mutual fund guys.
There are only two instruments which can and will remain one the safest investment instruments in the world – investment in equity and investment in government bonds.
Investment in Equity
First a fall remove the wrong notion that investment in equity is risky. Why? Well, purchasing a stock of a particular company is as same as owning a fraction of the company. Owning equity will make the company liable to pay dividends and bonus shares (which was not possible in case of mutual funds) to you, which you can re-invest.
Moreover, a company with great fundamentals will also provide appreciation in your capital investment. In order to find a good company you must knowledge of various financial ratios and knowledge of analyzing financial statements.
Investment in Bonds
Before investing in bond, you should know what is a bond. When your country’s government need money to carry out some capital expenditure without taking out money from their own pocket, they issue a bond in the public. In return of the capital given by the public, government pays interest as per agreed time duration.
The interest is guaranteed but relatively lower than probable returns of mutual funds and stock markets. This instrument is risk-free in nature for solely one reason, the government gives a guarantee that under no circumstances will they default on the bonds.
These bonds are popularly known as Treasury Bills.