Next step, understand the different avenues for investments (jargon - asset classes). I will also attempt to map them kind of risk/return they provide as well as the liquidity constraints they impose. Liquidity is the ability to purchase/convert the investment (jargon - monetary asset) into into goods/services. Cash is the most liquid asset.
Fixed deposits, Bank Deposits, RDs - Low return, Low risk, High liquidity
Equities (stocks) - High risk, High return (if you are not stupid), High liquidity
Bonds/PPF/Post office savings/etc - Least risk, Low return, Low liquidity
Gold - Least risk, Low return (unless there is a financial crisis), Medium liquidity (very low liquidity for married Indians!)
Real Estate (favorite amongst Indians) - Low to Medium risk, Medium to high returns (if you are not stupid), Very low liquidity
Art (if you are ambitious) - High risk, potentially very high return, Least liquidity
Mutual funds - depends on which type it is (Equity, Bonds/Gilt/Debt, Diversified. Gold, ETFs) - we will talk in detail about MFs in a subsequent post
I would suggest you take a look at the Mint Money guides (some available at http://mintmoney.livemint.com/mint-money-guides/) to develop some understanding of different type of asset classes. Once you develop a good understanding of these, we need to begin creating a portfolio. This needs to be done in two steps - current and on-going portfolio.
More in subsequent posts...Till then keep reading about the different asset types...Remember invest into areas that you know...rather than what your friend/relative advices you!
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