Notes from Zerodha varsity:
Where to invest?

 The following are some of the popular asset classes.

  1. Fixed income instruments (FD, Bonds)
  2. Equity
  3. Real estate
  4. Commodities (precious metals: Investments in gold and silver): There are several ways to invest in gold and silver. One can choose to invest in the form of jewelry or Exchange Traded Funds (ETF).

A note on investments:

For instance, a young professional may be able to take a higher amount of risk given his age and years of investment available to him. Typically investors should allocate around 70% of their investable amount in Equity, 20% in Precious metals, and the rest in Fixed income investments.

Alongside the same rationale, a retired person could invest 80 percent of his saving in fixed income, 10 percent in equity markets and 10 percent in precious metals. The ratio in which one allocates investments across asset classes is dependent on the risk appetite of the investor.

2.1 What is the stock market?

The main purpose of the stock market is to help you facilitate your transactions. So if you are a buyer of a share, the stock market helps you meet the seller and vice versa.

Also, it is important to note that you can access the stock market via a registered intermediary called the stockbroker.

There are two main stock exchanges in India that make up the stock markets. They are the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). Besides these two exchanges, there are a bunch of other regional stock exchanges like Bangalore Stock Exchange, Madras Stock Exchange that are more or less getting phased out and don’t really play any meaningful role anymore.

2.2 Stock Market Participants and the need to regulate them

  1. Domestic Retail Participants – These are people like you and me transacting in markets
  2. NRI’s and OCI – These are people of Indian origin but based outside India
  3. Domestic Institutions – These are large corporate entities based in India. A classic example would be the LIC of India.
  4. Domestic Asset Management Companies (AMC) – Typical participants in this category would be the mutual fund companies such as SBI Mutual Fund, DSP Black Rock, Fidelity Investments, HDFC AMC, etc.
  5. Foreign Institutional Investors – Non-Indian corporate entities. These could be foreign asset management companies, hedge funds, and other investors

2.3 The Regulator
In India the stock market regulator is called The Securities and Exchange Board of India often referred to as SEBI. The objective of SEBI is to promote the development of stock exchanges, protect the interest of retail investors, regulate the activities of market participants, and financial intermediaries.