The term " the term real assets refers to a broad category of investment options that are characterized

by the fact that they are tangible (as opposed to stocks, bonds, and CDs which are "paper" assets.) Real assets, also sometimes called hard assets, can play an important part in any investment portfolio - including those focused on safety and income.Real assets have intrinsic value due to its utility and is derived by virtue .of what it represents Investing in real assets is essentially the same as investing in financial assets in that investors expect returns through either income and/or capital appreciation. The major differences from investing in financial assets and real assets are the requirement of specialized knowledge and the lack of centralized markets. Specialized knowledge of real estate and collectibles is essential in order to obtain profits in these investments. Investors in financial assets can get by less specialized knowledge by investing in mutual funds for example and replying on finance professionals. On the other hand, investing in real estate, precious metals etc requires one to make the right purchases and sales at the right prices. There is very little pricing transparency because there are no formal markets such as stock exchanges for stocks. Thus, information is not .readily available Why invest in Real Assets?

Real Assets have low correlations to traditional stocks and bonds.

Because

commodities have low correlations to stocks and bonds, they can be a good choice to lower your overall portfolio risk while enhancing your potential for better long-term riskadjusted returns.

Hedge against inflation.

Inflation

is the increase in the amount of currency required to purchase goods and services. Commodities can help protect investment portfolios against inflation because they represent the value of goods and services, not the value of currency
When

it comes to investing - whether for income or for growth - you can't afford to ignore the eroding effect inflation can have on the value of your assets.

Provide diversification. Real Assets are a unique class that can provide valuable diversification benefits to an investment portfolio.

Used in combination with traditional assets like stocks and bonds, they can potentially reduce overall portfolio longterm risk while increasing upside potential. the major drawback of investing in real assets are that they are not marketable like stocks and some bonds that can be sold within minutes, as well as not being liquid. An investor hence, might never obtain the asked price and in order to sell .the real asset might have to incur significant price conessions

Real estate real estate has provided an attractive investment alternative for many years and will likely continue to do so in the future. When talking about real estate, we must differentiate between actually owning physical real estate and owning securities that .represent an interest in real estate assets Physically owning real estate can provide an excellent store of value and can hedge against hedge against inflation. Rental properties (whether residential or commercial) can also provide relatively consistent cash flow for investors seeking income. However, there are several factors investors must consider when purchasing physical real estate. Physical real estate investment can be time-consuming and can be prone to difficulties that are not present in other types of investing (i.e. fixing a broken water heater or dealing with difficult tenants.) Furthermore, real estate often requires a substantial initial investment, which can make it difficult for smaller investors to build a diversified portfolio. Finally, real estate is less liquid than most other asset classes .making it difficult for investors to raise cash if necessary Purchasing a home is often the largest financial investment people make in their lifetimes. Investing in real estate has also been a proven way for speculators to earn a substantial income over the years. As with virtually all investment vehicles, there are a variety of advantages and disadvantages to real estate investing, and it involves an .element of risk High Value, High Profits

Real estate may be expensive to purchase, but this also means that even a relatively small increase in value can result in a nice return. For example, if you purchase a property for $100,000 and its value increases by a mere 5 percent in one year, you've still achieved a $5,000 return on your investment in a short period of time. Although real estate is a high-cost investment, it doesn't necessarily require a lot of money to get started. Anyone who has ever purchased a home knows that if you meet the borrowing criteria of financial institutions you can acquire a property for a relatively low down payment. You may be able to work out even more favorable terms if you buy the home directly from the seller. If you plan to purchase several properties and build a business, you can do it at your own pace over time. After your first property makes a profit, you can use the proceeds to purchase a second property, and so forth. You can make real estate investing a full-time business, or buy just one property and use rental income to pay the mortgage over the years.

Ability to Leverage

Set Your Own Pace

No Guarantees

Although real estate has generally been a good investment over time, there is no guarantee that investors will make money. As evidenced by the mortgage crisis in the United States in 2008-09, home values can decrease rapidly. Homeowners can lose their properties and speculators can lose thousands of dollars. Unlike other investment vehicles such as stocks or mutual funds, the process of buying or selling a home can be time-consuming. If an investor needs to unload a property in a hurry for some needed cash, he may be out of luck. In the case of the 2008-09 mortgage crisis, plummeting home values made properties difficult to sell for a profit, and potential buyers had more difficulty in obtaining credit. Homes require maintenance and upkeep, which can require a lot of money, especially if you own several properties. Roofs need replacing, houses need painting, and gutters and spouts need cleaning. if you don't have the time to do it yourself, you'll have to hire a property manager or contractor to do the work for you. You'll also have to property taxes and insurance premiums.

No Liquidity

Expenses

An easier way of owning real estate is to purchase securities backed by real estate properties. These securities can be stocks (real estate investment trusts, or REITs) or bonds )mortgage-backed securities or commercial mortgage-backed securities.) When purchasing ( it is important to analyze the underlying real estate that backs them in order to determine how stable the cash flows are likely to be. Although owning real estate securities is easier in many ways than owning physical real estate, an investor does lose the benefit of owning a real asset. investors with the willingness and ability to invest directly in real estate should probably do so; investors with smaller portfolios or those who are uninterested in the effort required for direct real estate .purchases should consider securities backed by real estate

Precious metals For thousands of years, investors have viewed gold as one of the best stores of value, and therefore one of the safest investments in the world. In times of crisis or market panic, investors often flock to the safety of gold, pushing its price higher. Furthermore, gold is traditionally considered a good inflation hedge and during times of inflation the price tends to rise. Despite these benefits, gold has not been an exceptional long-term investment and has suffered through lengthy periods of .underperformance, which are generally followed by shorter periods of strong gains Nevertheless, gold may be an appropriate holding as part of a diversified portfolio focused on safety. However, it is important to remember that gold does not provide any income and is therefore not appropriate for investors interested in generating cash .flow from their portfolios

Read more: http://www.investopedia.com/university/safety-and-income/realassets.asp#ixzz1V6qKAgTE .Adv Precious Metals Can Hedge Against Inflation .1 Precious metal investing is becoming more common, especially in these tough economic times when other investments are losing money. Precious metals make the perfect solution for your investment capital because over the last decade these prices have gone through the roof, and show no signs of coming down any time soon. In the past, when inflation rises so does the value of precious metals, so this investment will help you hedge against future inflation. This makes these metals ideal for a large .number of investors Precious Metals Are Global Currency .2 Precious metals have been used around the world for many centuries as currency. If you have possession of the precious metals you can get currency anywhere in the world, making these metals very versatile no matter where you are. This is only true though if you actually invest in metals that you keep in your possession, and not in precious metal funds or precious metal stocks. These other methods can also be easily .sold, it just requires more time and effort There Are A Wide Variety Of Precious Metal Investment Options Available .3 Precious metal investing can be simple or complex, because there are a number of different investing methods that can be used to meet your needs and goals. You can choose to invest in precious metal bullion, coins, bars, stocks, futures, options, and others. This makes it very easy to find the right precious metal trading method that fits your risk levels, you trading strategies, and your precious metal preferences. This .means you can benefit more from your investment decisions You Can Take Possession Of Your Investment .4 With an investment in precious metals, you can actually take possession of your investment. If you choose coins, bars, bullion, or other physical forms of precious metals, you can keep your investment secure and safe, and in your possession. No other type of investment allows for a large investment to be physically kept by you. This does have risks involved as well though, because your entire investment could be .stolen if you do not keep it in a secure place like a safe deposit box Precious Metal Investments Can Diversify Your Portfolio .5 Investment portfolio diversification is important, and precious metal investing can help you diversify your portfolio to minimize risks and maximize returns. Because many of these investments are considered low risk, you can add them to raise the trading stability and lower the trading volatility for your investments. This will allow .you to realize small gains even if some of your investments are not doing so good

Precious Metal Investments Are Very Liquid And Marketable .6 Precious metals trading can be a great way to boost the liquidity and marketability of your investments. Because of the high demand that the precious metals market experiences almost continuously, these investments can normally be sold very quickly and easily. This may not be true if you buy bars of large weights though, because you may need to find an investor who trades on a large scale basis. Most precious metals .investments can be easily liquidated though, making them ideal There Are A Number Of Precious Metals To Choose From .7 Precious metal investing offers a wide variety of metal options. You can choose to invest in gold, silver, platinum, or any other precious metal. This allows you to create a unique investment strategy that is tailor made to your investment needs and precious metals preferences. You can choose to invest in one precious metal or all of them, .using precious metal funds which invest in more than one metal type However, like with any other financial instrument, investing in precious metals also ;has its disavantages which are as follows precious metals are equivalent to savings or wealth stores, not investments, and they , are vulnerable to the weaknesses inherent in currency.t In contrast to property investment, there is no financing, thus no leveraging to .1 .allow you to build wealth .In contrast to tax deferment opportunities, there is no tax advantage .2 .In contrast to real estate rental, there is no income potential .3 Your investment is subject to confiscation; arguments that collectible coins are .4 immune from seizure are flawed since there is no guarantee this protection wont ever .change Precious metals are prone to manipulation by those motivated to suppress their .5 .value in order to boost paper money The myth of superior gold liquidity. This argument fails on a couple counts. .6 Proponents tout the facility of buying and selling gold, but there are hidden costs in offers of guaranteed buy-back of gold purchases. When you are ready to liquidate your investment, youll be penalized with a 1.5% premium for melt-down value, on top of shipping & handling plus insurance expenses. Real estate actually benefits from its lack of liquidity because combined with higher transaction costs, this equates to lower volatility. In contrast, the low transaction costs and high liquidity claimed for .precious metals are a perfect formula for greater volatility If gold does go up in value, the gain is nominal rather than an actual increase in .7 buying power. This is because when gold appreciates it typically coincides with a

devaluation for paper money. Moreover, those gold profits are taxable, in contrast with the most tax-favored status enjoyed by real estate investment. By exploiting the 1031 tax-deferred exchange it is possible to trade up tax-free with property for a lifetime. Even if the dollar depreciates, your asset appreciates with inflation and you .will have locked in a long-term loan that you repay for free (Other real assets(collectibles Collectibles such as silver, jewelry, art, or even stamps and comic books can all be considered real assets. Many of these assets may act as a store of value and provide safety to an investor's portfolio while holding the potential for capital gains. However, most of these markets are highly specialized and investors should have a clear .understanding of what they're getting into Many of these collectibles are intended to be purchased as part of a hobby or for other intangible purposes. Therefore, individuals will face unique challenges when attempting to navigate these markets with the intention of making an investment. Some of these challenges include a lack of information, difficulty finding available inventory, a lack of reliable pricing data, high storage costs, and very large differences in the prices at which similar items can be bought or sold. Also, most of these assets do not generate any income. All of these factors contribute to make many collectibles .inappropriate for the average investor If an individual is interested in collectibles as part of a hobby or for aesthetic reasons, and if the investment aspect is seen as a bonus, these assets may very well form a reasonable portion of a diversified portfolio. Likewise, if an individual has some unique advantage and presents an unusual ability to profit in these markets, they should certainly pursue that opportunity. However, the majority of investors should probably leave collectibles to those truly passionate about them and instead focus on more traditional asset classes. (Read Contemplating Collectible Investments to learn (.more Read more: http://www.investopedia.com/university/safety-and-income/realassets.asp#ixzz1V6qVKfBd

Financial Assets A financial asset refers to a non physical asset such as bank balance, or a security. An asset that derives value because of a contractual claim for example Stocks, bonds, bank deposits, and the like are all examples of financial assets. Unlike land and property--which are tangible, physical assets--financial assets do not .necessarily have physical worth Investment in securities ex. IPO IPO exchange traded funds are ETFs which allow traders to profit from the up-andcoming stocks. Investing in them holds many advantages and disadvantages. Advantages of investing in IPO ETFs

1. These enable investors to gain exposure to IPOs when they are first introduced in the market. Investors can own diverse stocks from various industries and sectors. 2. They track some of the companies with the highest growth-potential and allow investors to profit from successful IPOs. 3. They follow specific rules for including and excluding the stocks in their portfolio and thus are often less risky than investing directly in those stocks. 4. They are periodically adjusted and thus are very good investments when markets are steady and rising. Disadvantages of investing in IPO ETFs 1. They are risky investment instruments as IPO stocks can be highly volatile, over-valued and from small companies. 2. They are new instruments, and there is not much performance history available. 3. IPO stocks (after an IPO) may be more prone to failing in a down market. 4. The 1000 day selling rule (selling shares of companies on completion of 1000 days of public trading) can backfire, if major performing stocks are removed from the portfolio; like when Google is removed from IPOX-100 index. 5. The quarterly portfolio adjustments may cause opportunity loss (when a major performing company of the quarter is not included in portfolio) or loss (by retaining a major under-performing company of the quarter). The sequence is unmistakable. First, there would be a prolonged bull run in the secondary market. Next is the turn of the primary market to follow the action. It happens always, and it is no different this time. Look up the number of initial public offers or IPO (the first public issue of shares by a company) lined up in the recent past. Read some of the names and they do not sound impressive. Well that is the whole point to be cautious about an IPO. Many dubious companies are in the process (some already have) to crash in on the investors fancy for stocks, following a continuous bull run in the market for the last four years. There is nothing new in the trend. Every time you see the market booming you will also notice that a lot of companies are readying up their public offers. In fact, they have been waiting for the right time. The sad part is along with genuine companies, a lot of dubious characters also get into the market. They know they can cash in the favorable sentiment in the market.

That says it all. Sure, we have glorious example of Reliance, who raised money from the stock market to build companies of Ambanis (senior) dream. However, there are hundreds of dubious characters who also sold dreams and raised money from the market, only to vanish overnight with investors hard earned money. When the market is booming, everyone wants a piece of the pie. It is difficult to get allotment in good IPOs in a booming market. Disappointed investors would then turn to dubious issues, thinking they can make quick bucks. When the tide turns, they end up with dud shares. The intention is not to dissuade investors from subscribing to IPOs or forcing them to look at every IPO suspiciously. It is to make them aware that the rule of the game is not different for IPOs. It is the same as one buys any stock. An investor has to do his own research if he wants to make money. Dont think every IPO would fetch profit on the day of listing at the stock exchange. Be it the secondary market or primary market, an investor should always remember that he can make money only on quality stocks. For that he has to look at the track record of the company, its management, the industry etc. That is exactly the problem. Stocks which are already listed in the market will have a lot of financial data and research available in the public domain. However, when it comes to IPO, one has to rely solely on the prospectus which makes the research little tedious. However, if the investor persists he will get most of the crucial data like the history of the company, details about the management, and financial data among other things. Sure the investor may have little apprehension about the reliability but still he can make a good analysis. An investor must stick to known names in an industry he is familiar with. He must also, find out from the media what kind of interest the issue is generating among institutional or prominent investors. Place extra attention to industry you are getting into. When the market is on a song, all sectors may be performing well. But most industries have a cycle and it may catch up sooner or later. Pricing is another key area. IPOs are mostly highly or overpriced in a booming market. This could become a serious disadvantage when the tide turns. Look at the kind of valuations some of the IPOs are getting these days. Obscure companies are commanding the same valuations as their peers in the business for a long term. That is not realistic. When there is down turn, lesser known companies would be hit harder.

Known names would withstand the trouble and bounce back. It will not be the same for the new companies.

Secondary market securities The stock market is a big auction house for pieces of company ownership, called stocks. Despite the risks and volatility of the stock market, there are considerable advantages in investing money in stocks. 1. Outperforms Other Investments
o

Historically, the returns on investments in the stock market are higher than those on invesments held in other markets and assets. This means that, over time, money will grow more if it is invested in the stock market. The historical average for stock market investments is approximately eight percent per year. Another advantage of stock market investments is the ease of access (and exit) in the stock market. Thanks to new Internet technology, an investor can easily take a position in a company and leave that position in a matter of seconds. The diversity of options is one more advantage of investing in the stock market. Companies that have their stocks listed in the market cover a range of industries and services. This offers the investor a chance to diversify his portfolio and make money in a variety of economic conditions. Investing in stocks that earn dividends is a unique advantage of the stock market. Stocks release a portion of the profits in the form of dividends to their stock holders. Meanwhile, the stock still has the ability to increase in price, creating two ways for the stock to earn money for the investor. While critics often point out the examples of companies that release fraudulent earnings statements as a way to taint the entire market, the vast majority of the companies release accurate information about the money they spend and earn. This adds a layer of transparency in the investment. It's not difficult to research a company's financial statement. It's also easy to monitor the stock's share price. This information is available in newspapers and magazines, as well as online.

Easy Access
o

Asset Diversity
o

Dividends
o

Transparency
o

Easy Review and Research

o

Disadvantages of trading markets As I mentioned many beginners underestimate the difficulty of trading and overestimate their ability as a beginner, also they have a lot of expectations. Therefore, most of them lose money and infect some degree of psychological damage upon themselves. When those traders can't achieve to their expectations, a conflict created between their beliefs about how things should be and the actual conditions that don't match their beliefs. This conflict causes stress, fear, anxiety, confusion and so on. :Disadvantages

The stock market is a popular investment choice and the value of stocks owned by investors is more than $15 trillion for the two main stock exchanges located in the U.S., according to the World Federation of Exchanges. For many individual investors there are some good reasons to not be invested in the stock market. Understanding the disadvantages of stock market investing will help an investor decide if the market is the right choice. The stock market subjects investors to high levels of volatility. This means sometimes the market goes up and sometimes the market goes down. Investors do not mind volatility to the upside, but downward volatility can damage wealth. For example, when the stock market dropped in July 2008, the market lost over half its value in less than a year, as indicated by the S&P 500 stock index. An individual at retirement age may not want a large proportion of retirement assets in the stock market. A retiree needs regular income and many stocks pay little or no dividends. To provide money for living expenses, shares of stock would have to be sold, reducing the portfolio and incurring commissions. Also a major drop in the market will reduce the total capital the retired person has to generate income. Since a bear market--defined as a time when security prices are falling--comes along on average every six to eight years, having most of a person's retirement assets in the stock market will eventually lead to some tight finances. Investors that want to invest in the market may be discouraged by the large number of choices. The Wilshire 5000 stock market index covers the entire U.S. stock market and includes over 6,000 stocks. There are over 4,000 stock mutual funds. It can take a lot of time, education and effort to research the market and select an appropriate stock portfolio. The size and complexity of the stock market makes it difficult for an individual investor to successfully meet investment goals.

HIgh Volatility

Not Suitable to Provide Retirement Income

Large Number of Choices

Risks of Ownership

Owning stock is owning part of a corporation. If the corporation declares bankruptcy, the owners or shareholders are last in line to receive any proceeds from the corporate breakup or reorganization. In most cases if a company goes bankrupt the shareholders receive nothing for their shares. Very large and well know companies have gone bankrupt. The list includes General Motors in 2009, Lehman Brothers in 2008 and Enron in 2001.

Read more: The Disadvantages of Investing in the Stock Market | eHow.com http://www.ehow.com/list_6532127_disadvantages-investing-stockmarket.html#ixzz1V7bldeZM .very steep learning curve in the beginning-1 .it is not that easy to control your emotion-2 .you can end up broker if you do things wrong-3 Read more: Advantages of Investing in the Stock Market | eHow.com http://www.ehow.com/facts_5157518_advantages-investing-stockmarket.html#ixzz1V7bJBWxw Government securities ou can invest in certain bonds which are directly offered through Government. These bonds give you much better returns than Savings Account, but have some lock-in period which varies as per country to country. Some places issue taxable bonds and some offers tax-saving bonds also. You need to find out at your place about the taxation policies for these bonds. These Government bonds may be considered as the safest way of investment as they are directly issued via Government bodies. Some banks also sell these Government bonds, so you may check the details from .the bank website whether they are offering these types of bonds or not Now let's take a look at some of the good things about investing in government bonds. As previously mentioned, these bonds are considered very low-risk, meaning the return is predictable. Unlike stocks, which have the possibility of performing better than bonds, a bond offers a guaranteed return. There are also tax breaks for holders of government bonds. For example, in the United States the interest on U.S. bonds may be tax deductible which can save money on the amount of taxes owed. You can purchase government bonds at investment firms, banks and brokerages. There may be minimum requirements for purchase. If you want to do some research, there are government run websites that can tell you more about purchasing bonds, including the minimums, the details on maturity and much more. All in all, if you want a safe investment that you can count on for a guaranteed return, government bonds are the way to go. The Zero Default Risk of the G-Secs. offer one of the best reasons for investments in G-secs so that it enjoys the greatest amount of security possible. The other advantages of investing in G- Secs are: Greater safety and lower volatility as compared to other financial instruments. Variations possible in the structure of instruments like Index linked Bonds, STRIPS Higher leverage available in case of borrowings against G-Secs.

No TDS on interest payments Tax exemption for interest earned on G-Secs. up to Rs.3000/- over and above the limit of Rs.12000/- under Section 80L (as amended in the latest Budget). Greater diversification opportunities Adequate trading opportunities with continuing volatility expected in interest rates the world over

U.S. government bonds are issued by the U.S. Treasury. Government securities are considered to be the safest income investments. They are owned by investment companies, individual investors and even foreign governments. But there are disadvantages investors should consider before investing in government bonds. The trade-off for the safety of U.S. Treasury bonds is their lower interest rate compared with other investment-grade debt securities. For example, in mid 2010, when the 10-year Treasury note was yielding just under 3 percent, the A+ rated 10-year bonds from Goldman Sachs had a yield of 5.3 percent. The interest paid on government bonds is included in an investor's income for federal income tax purposes. Treasury bond interest is exempt from state income taxes but is still taxable at the federal level. Coupled with the low interest rates, the taxes make it difficult for government bond investments to keep up with the rate of inflation. Government bonds are marketable debt securities. Once a bond is issued, the amount of annual interest it pays is fixed. The bond market adjusts for changing interest rates by changing the market price of bonds. Increasing interest rates will cause bond prices to fall. Longer-term bonds will have a greater market price change than short-term bonds. Investors who want to sell the government bonds to reinvest the proceeds at higher rates will suffer a loss of principal on the sale. The Financial Web website notes that the payment of principal and interest on Treasury bonds is subject to political risk. It's possible that Congress could decide to stop or reduce the payment of interest on outstanding government bonds. No market expert believes that this outcome is probable. However, the U.S. Treasury does issue 30-year bonds, and a lot could happen in such a long time frame.

Low Return

Taxable Income

Prices Can Fall

Political Risk

Broker Markup

Investors who buy government bonds through a bond dealer or broker receive the yield and price the broker offers. Bond dealers and brokers buy bonds on the open market and add a markup to the bond price for their profit margin. The bond markup reduces the yield to the investor. Bond investors who buy smaller amounts of government bonds will have a greater percentage markup and greater reduction of yield. Investors who want to sell their government bonds will also receive a price lower than the current secondary market price, providing additional margin to the dealer.

Read more: Disadvantages of Government Bonds | eHow.com http://www.ehow.com/list_6708226_disadvantages-governmentbonds.html#ixzz1V7MqXG00 Debt instruments Debt market refers to the financial market where investors buy and sell debt securities, mostly in the form of bonds. These markets are important source of funds, especially in a developing economy like India. India debt market is one of the largest in Asia. Like all other countries, debt market in India is also considered a useful .substitute to banking channels for finance he most distinguishing feature of the debt instruments of Indian debt market is that the return is fixed. This means, returns are almost risk-free. This fixed return on the bond is often termed as the 'coupon rate' or the 'interest rate'. Therefore, the buyer (of bond) .is giving the seller a loan at a fixed interest rate, which equals to the coupon rate Advantages The biggest advantage of investing in Indian debt market is its assured returns. The returns that the market offer is almost risk-free (though there is always certain amount of risks, however the trend says that return is almost assured). Safer are the government securities. On the other hand, there are certain amounts of risks in the corporate, FI and PSU debt instruments. However, investors can take help from the credit rating agencies which rate those debt instruments. The interest in the instruments may vary depending upon the ratings. Another advantage of investing in India debt market is its high liquidity. Banks offer easy loans to the investors against government securities. Disadvantages As there are several advantages of investing in India debt market, there are certain disadvantages as well. As the returns here are risk free, those are not as high as the equities market at the same time. So, at one hand you are getting assured returns, but .on the other hand, you are getting less return at the same time Retail participation is also very less here, though increased recently. There are also some issues of liquidity and price discovery as the retail debt market is not yet quite

.well developed Post office instruments are completely risk-free, and you do not need to have large sum of money to start investing in these post office schemes. Some schemes offer Tax-saving benefits and some gives tax-free returns. So you need to find out some scheme as per your requirements. These are some of the safe and secure investments that you can opt for. Though the interest rates are not so high, but still you must invest some part of your money into any of these investment instruments. It is your hard-earned money, so better play safe and invest some part in secure funds also. To get more returns on your invested amount, check out the below links:

These schemes are offered by the Government of India. Safe, secure and risk-free investment options. No Tax Deduction at Source (TDS). Nomination facility is available. Nomination can be changed at any time The instruments are transferable to any Post Office anywhere in India. Attractive rates of interest. Insurance policies

Life insurance is an important purchase, and in some cases it can be a wise investment as well. Universal insurance and whole life insurance policies combine the traditional death benefit with an element of investing, making them an attractive choice for some shoppers. But it is important to examine both the advantages and the disadvantages of combining the life insurance you need with your investment portfolio. Combining an important purchase like life insurance with an overall investment strategy is one way to simplify your life. If you are busy, it can be difficult to get started with investing, and many people end up neglecting their financial planning as a result. By combining the purchase of a life insurance policy with investing, you can get a jump start on planning for the future and protecting your family. If you have a family to protect, you need to have some sort of life insurance in place. Buying life insurance protects those you love in the event you are no longer around to take care of them. For many people, the investment element makes life insurance more attractive, thereby increasing the odds that those individuals will get the protection their families need.

Simplicity

Protection

High Commissions

One drawback of using life insurance as an investment is that the commissions are often quite high. To make matters worse, it is often very difficult to determine exactly how much those commissions actually are. The cost of the commission is often hidden deep in the fine print, and it is generally written in language that is difficult for someone without an insurance background to understand. Compared to term life insurance, which provides only a death benefit, life insurance with an investment option can be quite costly. Before investing money in a whole life or universal life policy, be sure to price comparable term life policies as well. You might find that you can save hundreds, or even thousands of dollars a year by purchasing straight term life insurance. You can then take those savings and invest them elsewhere, using a mixture of stocks, bonds and mutual fund investments.

Costs

1. Read more: Advantages and Disadvantages of Investing in Life Insurance | eHow.com http://www.ehow.com/list_6758538_advantages-disadvantagesinvesting-life-insurance.html#ixzz1V7aAaat6Guarantees. When you buy a segregated fund through a life insurance company, there are typically guarantees of capital under two circumstances. The first is when you die and the second is when you reach a 10-year maturity period. While this may seem incredibly advantageous, remember that the life insurance company is not offering you these benefits for free. They come at a cost and in some cases a very expensive cost. If you are going to buy a segregated fund, make sure you take the time to find out the fees that are being charged. 2. Creditor Protection. Safeguarding assets from seizure by creditors is an important and often overlooked aspect of asset management. One valuable protection strategy utilizes the preferred status accorded by Canadian law to certain products offered by life insurance companies. Generally, assets held within life insurance contracts and annuity products, including most insurers RRSP, segregated fund contracts and term deposits cannot be seized by creditors, provided that certain conditions are met when the contracts are arranged.One of the attractive features of life insurance policies is the element of creditor protection. In recent years however, this protection has been challenged on many fronts. Despite these challenges creditor protection benefits still exist in many circumstances. 3. Probate Protection. When you have to probate an estate at death, there is the potential for significant fees and time delays depending on the complexity and size of the estate. One of the ways to minimize fees and time delays is through the use of investments with insurance companies. Essentially, investments

held with an insurance company transfer directly to the named beneficiary at death. 4. Pension Income Credit. Persons age 65 and over who receive annuity income from a qualified pension are eligible to claim a maximum tax credit of $1,000 on their tax return. There are many types of pension incomes that qualify for the credit as discussed below, but amounts received from OAS, CPP and QPP do not qualify for the credit.When a person is age 65 and older at any point in the year, the definition of pension income for purposes of the tax credit includes:
1. 2. 3. 4. 5. 6.

Income from a superannuation, pension fund or pension plan; An annuity payment out of an RSP or an annuity purchased with a refund of RSP premiums received on the death of a spouse; A regular payment out of a RIF, a LIF, or an LRIF; An annuity payment out of a deferred profit sharing plan purchased by the person or by the plan. The income (or interest) element of GICs held with a life insurance company. The income (or interest) from a non-registered, prescribed annuity. So, if you have GIC interest income or life annuity income through non-RRSP money, having that money through a life insurance company may help you qualify for the $1000 pension income credit. So, if you are over the age of 65 and you look at line 314 on your income tax return, check to see if you have anything in this line. If not, talk to your financial advisor about how to take advantage of the pension income credit. Mutual funds Advantages and Disadvantages of Investing in Mutual Funds The Advantages: Diversification: A single mutual fund can hold securities from hundreds or even thousands of issuers. This diversification considerably reduces the risk of a serious monetary loss due to problems in a particular company or industry. Affordability: You can begin buying units or shares with a relatively small amount of money (e.g., $500 for the initial purchase). Some mutual funds also permits you to buy more units on a regular basis with even smaller installments (e.g., $50 per month). Professional Management: Many investors do not have the time or expertise to manage their personal investments every day, to efficiently reinvest interest or dividend income, or to investigate the thousands of securities available in the financial

markets. Mutual funds are managed by professionals who are experienced in investing money and who have the education, skills and resources to research diverse investment opportunities. Liquidity: Units or shares in a mutual fund can be bought and sold any business day (that the market is open), thus, providing investors with easy access to their money. Flexibility: Many mutual fund companies manage several different funds (e.g., money market, fixed-income, growth, balanced, sector, index and global funds) and allow you to switch between these funds at little or no charge. This enables you to change your portfolio balance as and when your personal needs, financial goals or market conditions change.

The Disadvantages: When you invest in a mutual fund you place your money in the hands of a professional manager. The return on your investment depends heavily on that manager's skill and judgment. Research has shown that few portfolio managers are able to out-perform the market. Check the fund managers track record over a period of time when selecting a fund. Fees for fund management services and various administrative and sales costs can reduce the return on your investment. These are charged, in almost all cases, whether the fund performs well or not. Redeeming your mutual fund investment in the short-term could significantly impact your return due to sales commissions and redemption fees. Foreign market While the US has a multitude of ETFs to add to your investment portfolio, there is a plethora of foreign country and region ETFs as well. However, before you invest in a foreign ETF, you should be aware of the risks and benefits. 1. Advantage: Foreign Exposure If you feel there are some foreign regions that are potential growth areas or emerging markets, a country ETF may be the perfect asset to increase your international exposure. Sponsored Links 2. Disadvantage: Taxes ETFs are known for their tax advantages. However, every country has different tax laws, so there may be particular foreign ETFs that are not a good fit for your etf trading strategy if they have a negative effect on your tax return. Make sure you research all tax laws of the region for your ETF before you make the investment. 3. Advantage: Diversification If your portfolio is heavy on domestic investments, some foreign exposure may help balance your overall stratagem. Adding a country or region ETF to your portfolio can expand your investment horizon.

4. Disadvantage: Currency Rates While adding a foreign ETF may be a boon to your portfolio, you have to factor in thecurrency rates of your ETF region. If currency rates are skewed, a country ETF may not be the best match for your portfolio. 5. Advantage: Risk Management If your portfolio or business has exposure to a certain region, investing in a foreign ETF may be a good way to reduce that risk and protect yourself against negative developments in certain countries. 6. Disadvantage: Flexibility While the US has a lot of different ETF products to add to your portfolio, the selection may be sparse for other countries. Many regions dont have a lot of ETFs, and they arent always to most liquid investments. Trading activity for foreign ETFs can be limited and in turn limit your investment strategy. While foreign ETFs can help minimize risk, gain international exposure, and diversify your portfolio, you have to weigh the disadvantages of region ETFs before you get started and make your final decision to include them in your portfolio. .Money market instruments A money market account is a type of savings account that earns interest based on the performance money market products, such as Treasury bills, certificates of deposit and commercial paper. This type of account is offered by banks as a higher yield alternative to a savings account. A money market account is notably different than a money market fund, which is offered by investment firms and brokerage houses. Higher Yields The APY (annual percentage yield) on a money market fund is typically higher than the average yield on a savings account. This gives the account holder the opportunity to earn more funds on a safe account as opposed to a simple checking or savings account. Liquid Funds A money market account is similar to a savings or checking account in that the money can be drawn on immediately, as desired by the account holder. Sometimes, there are limitations on the number of withdrawals in a set time period. However, even if the account holder exceeds the number of allowed withdrawals, the penalty is a small fee under $20 in most cases. Checks can also be written on the account as well. Insured Investment Unlike a money market fund, a money market account is an FDIC insured deposit. As long as the consumer places his funds in an FDIC insured institution and has his account balance below the current FDIC limits, the account is completely insured by the FDIC. A money market fund, on the other hand, is similar to investing in the stock market and provides the account holder with no insurance on his investment.

Money funds earn prevailing short-term interest rates, but this means that your cash barely keeps up with inflation. After you pay taxes, the purchasing power of your money goes down. If you invest in tax-exempt funds, you don't earn enough to keep up with inflation. Money markets are not insured by the U.S. government's Federal Deposit Insurance Corporation (FDIC). Money Market Funds are Not Good Long-Term Investments Most money market savings accounts don't let you write unlimited checks for any ol' amount, as local banks do. Checks have to be written for a minimum amount (often $100 but your account could be different), so they're not good for paying a $25 sewer bill. Also, funds may restrict the number of checks that you write every calendar month. These funds also charge management fees and expenses, for giving the convenience of investing in market-rate, short-term, fixed-income securities. Therefore, you could obtain slightly higher yields on your money if you invest in commercial paper directly. Of course, you would have to have a lot of money to do this. Plus, dealers would charge you "retail" prices, and you would not obtain the same diversification. Since these money funds track prevailing interest rates, if short-term interest rates in the overall economy go down, so does the yield on your money. In the amazing range of choices available to a potential investor today, money market funds stand out as safe and secure options offering high liquidity and moderate to low returns on investment. If the investor is not too aggressive in seeking very high returns from his investment, then a money market fund is a good mutual fund in which to park his surplus funds for some time. But like every good thing, a money market fund also has certain drawbacks, and one should be fully aware of these demerits and invest accordingly, after making allowances for those disadvantages. Let us look into three such disadvantages and explain some steps one can take to balance these disadvantages while investing in money market funds. Low Transaction Limits Money market funds permit very few free transactions per month, so that the funds can be invested in higher tenure papers and thereby earn higher interest for the investor. For instance, most money market funds allow only 3 to 5 checks to be issued per month, beyond which charges could be levied. The way out is to have the money market fund as a secondary account in which the investor doesnt need to access his funds for a considerable amount of time. The primary account should be a checking

account which allows many more transactions per month even though no interest is paid on such an account. Low Interest Rates When compared to other market linked investments or even term deposits or government securities, many money market funds offer much lower interests, since their main priority is to preserve the capital and maintain the net asset value at $1. First, one can purchase this fund from a brokerage firm which might be able to negotiate for better rates on your behalf on account of the higher volume of business they generate. Second, you should have a reasonable mix of high returns and low risk in your total investment portfolio. This will help in averaging out the low return investments and give you a better overall return on investment. High Fees Unlike many savings and checking accounts which have the option of negotiation for getting a charge free product, most money market funds have high annual fees which eat away a large portion of your investment upfront. The solution to this is to scout around for the fund which offers the best rate, so that the impact of the annual fees can be reduced.