In a market correction, almost every instrument starts to fall drastically. Some negative news comes out every week, causes more fear and panic amongst investors. This leads to majority of investors who have not done any stock market paid course, selling off their investments and moving out of the market. Short sellers become the new heroes as traders start minting money by shorting stocks and derivative contracts.
In such markets, it’s best to avoid catching a falling knife. Then what to do with the money we had to invest?
As a wise investor, having attended stock market free webinar, we would find various other alternatives to invest in.
In this blog, we will look into various alternatives where we can invest, as someone with knowledge of Top 5 Online Stock Market Courses in India would do.
- P2P Lending
Peer-to-peer lending is a type of lending of money directly to businesses or people without any official intermediary or financial institution participating. P2P lending is usually done via online platforms that align lenders with those in need of money, i.e., borrowers.
P2P lending provides loans of both kinds- secured and unsecured. However, the majority of the loans in P2P lending are unsecured personal loans.
Loan listings are visible on the lender’s dashboard along with each borrower’s relevant financial, credit and personal details. Lenders can use this information to make an informed choice and send a proposal to fund the borrower. Offers in this segment are accepted on a first-come, first-serve basis. A lender can fund up to 10% of a borrower’s total loan requirement. As per the best stock market courses, it is a risky form of investment to do.
How does peer-to-peer lending work?
P2P lending is a very simple process. All such transactions are carried out with the help of an online platform. The steps mentioned below depict the usual P2P lending process:
- A potential borrower who needs money and is interested in getting a loan, fills up an online application on a P2P lending platform.
- The platform checks the application and determines the risk and the applicant’s credit rating. Then, the applicant is assigned the appropriate interest rate for the loan amount they seek.
- When the application gets approved, the applicant is provided with the available options from the lenders or investors based on the applicant’s credit rating and interest rates assigned to them.
- The applicant can determine the best from the suggested options.
- It is the responsibility of the applicant to pay periodic (usually monthly) interest payments and repay the principal amount at maturity.
The company maintaining the online platform charges both borrowers and investors for the provided services.
Is P2P lending legal in India?
P2P lending is legal in India, and in August 2017, RBI classified all the P2P lending sites under Non-Banking Financial Companies (NBFC).
Is P2P lending safe?
The risk involved with peer-to-peer lending is the risk of default by the borrower. In simpler words, the risk is simply if the borrower cannot pay the interest and the principal amount. If a borrower defaults, a good P2P platform assists the lenders in recovery and file legal notice against the defaulter. But this is the limitation of all the platform can do.
One can mitigate the risk by giving loans to several borrowers instead of giving all of the money as loan to one borrower. This is similar to diversification taught in a stock market paid course.
You can check this website Faircent which is India’s first peer-to-peer (P2P) lending platform to receive a Certificate of Registration (CoR) as an NBFC-P2P from the Reserve Bank of India (RBI).
This table shows the list of borrowers at Faircent with the names, the tenure for the loan, the rate at which the loan was taken, the amount borrowed, paid and the payment due.
It gives you a fair idea of what returns you can expect.
2. Invoice discounting
Invoice discounting is when a company borrows short-term funds from financial institutions or banks based on their outstanding invoices. It helps the business get short-term loans to fulfill its short-term liquidity needs.
It is considered an alternative to business loans. It allows the business to give its unpaid bills to the banks, and they get up to 90% of the outstanding bill value as funds. As per stock market course in Noida, it is a good investment asset.
How does it work?
Let’s understand it through an example:
Suppose a business owner sells goods to Coco-Cola worth Rs. 20,00,000 on credit. Still, Coco-Cola agrees to make payment after two months of purchase. Assume the business owner is in dire need of money and can’t wait. In that case, the business owner can discount the purchase invoice with the bank for two months before its due date. For example, if the same trader discounts their bill/s with the bank offering a discount rate of 12% p.a., they will receive Rs. 19,60,000 after paying an interest of Rs. 40,000 to the bank.
Why was the business owner charged 2%?
Because the total rate is 12% and the credit is just for two months. Thus, 2% is charged and paid to the bank.
Many platforms provide these services, like TradeCred, KredX, Tata capital, Grip Invest, etc. One such platform KredX provides a marketplace for business owners and investors to purchase invoices raised on blue chip companies. The default rates will also be significantly lower, as these are invoices raised on blue chip companies as they are well established in market and have good brand loyalty usually, making it a good investment asset as per stock market courses online free with certificate.
3. Sovereign Gold Bond
A Sovereign Gold Bond is a government-issued bond denominated in units of gold. It is a debt instrument issued by RBI on behalf of GoI and is backed by the government’s credit. As per best stock market courses in Delhi, it is one of the finest investment assets in such a market.
SGBs offer investors a very convenient and cost-effective way to invest in gold without the hassle of owning gold physically. SGBs are issued to applicants in denominations of one gram of gold or in multiples thereof. SGBs can be bought and sold on stock exchanges, making them extremely convenient. The price of the bonds is linked to the market price of gold, providing investors with exposure to the gold market without the need to buy and store physical gold.
SGBs offer a fixed rate of interest of 2.5%, P. A which is paid out periodically, providing investors with a regular income stream. It is a must have asset even in bull market as per stock market courses in Chennai.
But you must invest in this asset, only if you have a long-term horizon. Gold has long spells of underperformance and short bursts of rising prices, which allows its long-term returns to stay relatively high. You can buy these bonds using Wint Wealth or any other platform.
4. Corporate bonds
Private corporations are in constant need of funds. They could be expanding to a new geography or launching a new product. Companies raise capital either through debt or equity instruments. Corporate bonds are debt instruments with a specific tenure and interest rate. The lenders, or the bondholders, receive periodic coupon payments at this rate. The company repays the principal amount or face value to the bondholders at maturity.
Corporate bonds have a higher risk than government bonds as their repayment depends on the company’s profitability. Therefore, they pay a higher return than government bonds to compensate for the risk. As per stock market course in Noida, always check the credit rating before investing in a corporate bond.
You can see that Muthoot Finance is offering a bond at an 8.25% rate. At this time, when markets are very uncertain, 8.25% is a good rate. The platform we are watching here is Wint Wealth.
If you view the details, you will know the credit rating, collateral, type of bond, minimum investment and maturity date, etc. These factors help you in deciding whether to invest here or not.
On the top left, you can see that the type of bond is a senior secured bond which means these corporate bonds are backed by specifically designated collateral. Therefore, in the event of default by the company, the collateral can be used to pay off the bondholders. This classification also denotes priority in the event of liquidation of the company. Secured bondholders get priority in payment of dues before other bondholders in case the company files for bankruptcy.
- Corporate FDs
Corporate deposits or company FDs are term deposits wherein you put your money for a certain period at a fixed interest rate to get a return. Non-banking financial companies (NBFCs) and other financial institutions offer them at a higher interest rate than a regular bank FD. The maturities of company FDs range from a few months to a few years.
In layman’s language, it is the FD or Fixed Deposit from the corporate houses and NBFCs. Now, generally, returns from corporate FDs are 1-2% higher than the FD returns. One must ensure that they only buy high-rated corporate FD by checking the company’s rating as per analysis done through lessons from best stock market courses. Past repayment history is also recommended to be checked once. As per best stock market courses in Delhi, Triple AAA-rated bonds are safer than double AA-rated bonds.
Also, these securities are taxable as per your income tax slab. If you fall under the 30% tax bracket, you must pay 30% tax on the interest you’ve earned in corporate deposit. A platform that you can use to buy these corporate FDs can be Golden Pi. You can see Bajaj Finance offering Corporate FD at a rate of 7.95% PA. The CRISIL rating is also high. Such bonds always become a good avenue to invest when markets are falling for people who have done a stock market paid course.
If you are young, make sure you invest a considerable portion of your investments in equity markets and a small portion in safe instruments, as mentioned above. But just investing in Equities can be risky; hence, diversification is very important as per Top 5 Online Stock Market Courses in India.