FINANCIAL

SECTORS
By- Nidhi Bulchandani
Meaning of Financial Sectors:

■ The financial sector is a section of the economy made up of firms and institutions that
provide financial services to commercial and retail customers. This sector comprises a
broad range of industries including share market, mutual funds, gold, Banks/FD, PPF,
Real estate , Post office, Insurance.
■ A strong financial sector is a sign of a healthy economy. The financial sector generates a
good portion of its revenue from loans and mortgages and thrives in a low-interest-rate
environment.
 SHARE MARKET:

■ A Share market is a market where shares of many different companies are bought and sold. It is
like any other normal market where people go to buy and sell shares.
■ By purchasing stock which we become a partner of that company. The fluctuation in the price
of any stock depends on the position of the company.
Pros and Cons Of investing in Share market :
CONS-
PROS- • Risk involved
• Grow with economy.
• Stockholders of broke companies get
• Easy to buy
• Don't paid last
need a lot of money • Takes time to research
to start investing • Taxes on profitable stock sales
• Stay ahead of inflation
• Competing with institutional and
• Liquidity
professional investors
MUTUAL FUNDS:
■ It is a trust that collects money from a number of investors who share a common
investment objective. Then, it invests the money in equities, bonds, money market
instruments and/or other securities. Each investor owns units, which represent a
portion of the holdings of the fund. The income/gains generated from this collective
investment is distributed proportionately amongst the investors.
Pros and Cons of investing in Mutual funds:
GOLD:
■ A yellow metallic element that occurs naturally in pure form and is used especially in
coins, jewelry, and electronics.
■ Gold fund, as the name suggests, invests in various forms of gold. It can be in the form
of physical gold or stocks of gold mining companies. Gold funds which invest in
physical gold offer investors the convenience of buying pure gold at low cost. There is
no possibility of theft and you can sell these units at market linked prices anytime.
Pros and cons of investigating in gold :
Pros Cons
Inflation hedge Storage of the physical gold

Security of Value Not A Passive Income Asset

Portfolio diversification Premiums and Taxes

Simplicity Gold has a terrible Historical

return

Hedge Against a Disaster

BANKS :
■ In a Fixed Deposit, you put a lump sum in your bank for a fixed tenure at an agreed
rate of interest. At the end of the tenure, you receive the amount you have invested
plus compound interest.
■ Is a special segment of banking operation that helps individuals or organisations raise
capital and provide financial consultancy services to them.
Pros and cons of investing in banks/ fd:
PPF( Public Provident Fund):
■ PPF full form, Public provident fund is a popular investment scheme among investors
courtesy its multiple investor-friendly features and associated benefits. It is a long-
term investment scheme popular among individuals who want to earn high but stable
returns.
Pros and Cons of investing in PPF:

PROS CONS

It provides guaranteed returns since it is The lock-in period is long-term, i.e., for
backed by the central government. 15 years.
The investment can either be made in Joint accounts are not permitted, i.e.,
installments or as a lump sum. one person can only handle one account
except it is of a minor.
As per Section 80C of the Income Tax There is a maximum limit of Rs.1.5
Act, the deposit can also be claimed for the lakhs laid for depositing in a PPF
rebate. account.
Minors and housewives can be allowed to There is no liquidity.
open a PPF account.
REAL ESTATE:
■ Real estate investing refers to the purchase of property as an investment to generate
income rather than using it as a primary residence. In simple terms, it can be
understood as any land, building, infrastructure and other tangible property which is
usually immovable but transferable.
Pros and Cons of investing in Real Estate:
POST OFFICE:
■ The post-office term deposit (POTD) is similar to a bank fixed deposit, where you save
money for a definite time period, earning a guaranteed return through the tenure of
the deposit. At the end of the deposit's tenure, the maturity amount comprises the
capital deposited and the interest it earns.
Pros and Cons of investing in Post Office :

PROS CONS

Low Minimum Amount – The maximum tenure of a post office FD

The minimum is only ₹1,000. is five years, and you cannot opt for a
longer tenure.

High Interest Rates – Currently, the Banks offer more flexible tenures of FDs
Post Office FD interest rate is high, far than post office FDs, offering only
more than banks and some NBFCs give tenures of 1, 2, 3 and 5 years.
you. This ensures you high returns.

Premature Withdrawal – You Most services rendered are not online,

can withdraw your FD before maturity. and this may be a disadvantage to many.
 INSURANCE:
■ Insurance Investments means any investment offered by an insurance company or life
office, whether the same involves a deposit, a loan, payment of premiums, acquisition
of a right or interest in or arising out of insurance or life policies, or in a statutory fund
or any similar investment.
Pros and Cons of investing in Insurance: