Working professionals have been able to save some money now though they have been working from home since last few months. They are now looking out for investment destinations to park these savings and earn returns on them. However, the only problem is they find it difficult to understand different asset classes as most of them are somewhat complex.

We have identified some of these financial products with a detailed explanation for a better understanding of these working professionals.

You can also apply for 12-month payday loans from direct lenders to invest money in these financial products or to finance your basic needs if you are out of a job. These are unsecured loans which are even meant for bad credit borrowers, which are often ignored by established commercial banks.

These loans have an instant decision. Thus the approval or rejection decision is given on the same day, and the loan amount is transferred in the next hour, once it is approved.

Let’s now look at these financial products in a bit detail, here it goes:

  • Equity Investing: You first need to have a Demat or Trading Account with a broker who is registered with The Financial Conduct Authority (FCA). After which you can start your investing or trading journey by buying stocks of companies. The returns on your investment here are in two forms, namely share price appreciation and dividend.

You become a shareholder and thus, small owner of the companies in your portfolio. As a prudent investor, prefer to diversify your investments across different companies in different industries. Avoid putting all your money in just one company’s stock. The risk is higher here. Thus analysts suggest diversifying one’s portfolio for better returns and lower risk.

  • Mutual Funds: These are somewhat similar to equity investing with the difference being that here a fund manager is investing your money on your behalf. Mutual funds collect money from a pool of investors and the fund manager who is managing that fund will invest this money as per his research and knowledge.

The Net Asset Value (NAV) of that fund will decide your returns. You can invest money in a mutual fund as one-time lump sum investment in one go, or you can start a Systematic Investment Plan (SIP) wherein you need to pay a fixed amount every month.

The risk here is relatively less compared to equity investment if you are a novice investor. It is advised by many market veterans that if you are planning to invest in mutual funds then stay invested for long-term that is for 10-15 years or more to benefit from the effect of compounding on your returns.

Also, the tax on your returns is less if you are investing from more than 5 years. Thus, it is preferable to attach a long-term financial goal like your child’s higher studies or his/her wedding to a mutual fund.

  • Derivatives: This is also known as F&O Market, which is Futures and Options as these are the most traded instruments in the derivatives segment. They derive their value from the underlying asset, which could be a share, commodity, index, or currency, and thus they are known as derivatives.

They fall in the category of risky investment category as they are highly volatile as futures and options come with an expiry. Both of them are traded on the London Stock Exchange, and traders can trade them using their Demat account.

Futures have an obligation which needs to be honoured at expiry while options give you a right to buy or sell before expiry, there is no obligation in options. Derivatives can make you a millionaire in a few months, or it can twist your fortunes another way round as well, thus trade derivatives with strict stop losses to minimize the downside.

  • Commodities Trading: This segment deals with buying and selling commodities like natural gas, crude oil, gold, silver, copper, iron, rubber, cotton, the power to name a few.

 You can speculate on future prices of these commodities and accordingly take a position on them. However, to be profitable you need to have knowledge about the commodity you are planning to trade and as a practice; you should follow every news related to that commodity.

Commodity trading is good for short-term gains, but you have to track and monitor them for better returns constantly. If your trading capital is low, then you can approach direct lenders for 12-month payday loans.

Currency Trading: The most active and the most volatile market, the currency market is open all day as when one market closes, other opens based on time zone difference.

 In this, currency traders take a position on currencies like US Dollar, Euros, Pound Sterling, Indian Rupee, Swiss Francs etc. They bet on the prices of these currencies vis-à-vis Dollar or other currency, the exchange rate. This trading is the most difficult and complex financial product as the potential for both upside and downside is high.

Either you will go from rags to riches or another way round. Go for currency trading only when you are 100% sure else avoid taking such risk and settle for less risky instruments and asset classes.

These were some of the complex financial products simplified for your understanding. We hope you got the basic idea about them along with the risk-reward ratio.

There are other less complex financial products as well like bank deposits, real estate, gold ETFs etc. which have low risk and your money is comparatively safer. Decide which asset class is right for you based on your risk-taking ability, don’t just blindly follow others.