I think we need to "Diversify"

The costs are not coming down. Look around you - everything is
becoming day by day. The cost of milk, paper, electricity, water,
transportation, education. You name it. But the sources of income
are not increasing many folds for all classes of the society.
The need of the hour is to utilize your earnings and make them
grow at an accelerated pace to cover your future requirements of
finance.
The economy has opened up in many nations and we are no longer
confined to the boundaries of our country.
Any movement in the global capital markets affect the Indian
Sensex too. If you have all your investments in shares then your exposure is
very high since if the share market becomes bearish you end up
losing a lot of money.
What is the solution? If you have noticed the advertisement of a
mobile phone company where one of the manager says, “Sir, I think
we need to DIVERSIFY”.
In this dynamic scenario, it is highly recommended that one should
have a neatly diversified portfolio of financial assets for future
sustenance.
A portfolio is basically a list of financial assets held by an
individual or a firm.
What are the avenues of diversifying investments for a normal
middle-class person? There are many options of investment available
today. The most common option used by people are savings account
in a bank but the returns from a savings account are the least.
One can choose from risky options to relative secure ones based on a person’s propensity to absorb risk.
Let us look at few such options.
1. Mutual Funds - Regularly invest in diversified mutual funds in
the form of SIP (Systematic Investment Plan). If you understand
the market a bit and can invest some time regularly then only
consider sectoral funds. Sectoral funds are those which invest in
the stocks of a particular industry like infrastructure, power,
metals etc. Starting a SIP is very simple. You can give instruction to your bank so that a fixed amount is invested in the fund directly from your account on a fixed date of the month. This leads to a discipline and saves lot of your time.
These funds are liquid and you can withdraw your money within 2 business days. The benefit of mutual funds is that you need not keep track of them on day to day basis like stocks.
All you need to do is keep an eye on the list of stocks that form the
investment basket of a particular fund.
It is better to invest in some good mutual fund rather then keep your money lying in a savings account earning meagre interest. You can check these details on www.moneycontrol.com or www.valueresearchonline.com
2. Fixed Deposits - There are lot of banks these days which
advertise 390 or 590 days lock-in period FDs. There are others which run upto 5 years. All you need is walk-in to a bank branch. The whole procedure can be completed in no time. If you have an existing account with the branch then it makes it all the more easier. The money that you invest in FDs should be that amount which you dont need in the immediate (read less then 1 to 1.5 years)future. I recommend that one should invest in the FDs of reputed banks rather then lesser know cooperative ones since their reliability is always questionable. The management of cooperative banks are also not always above par. One source of security while investing in banks is that they are bound by RBI guidelines.
3. Public Provident Fund (PPF) - PPF is a type of investment which is overseen by the Government of India. The lower and the upper limit of investment in a financial year is Rs. 500 and Rs.70000. PPF accounts can be opened at select post offices around our country and in certain branches of public sector banks like SBI. The account matures for closure after 15 years. Hence, this is a long term investment. You can withdraw your depositis prematurely every year after completion of 5 years from the end of the year of opening the account.Government backed investment option; hence it is considered to be one of the safest and rish is lowest. You can have a PPF account in your/ spouse or children’s name. Imagine the impact if you start saving for your child when he/ she is 3. You will have a corpus of funds ready when your child turns 18. This is an option for all those people who do not have the Provident Fund component in their salary. In case of Provident Fund some part of your basic is deducted form your salary and saved in your PF account. Your employer also contributes the same amount. When you leave your company you can either withdraw your PF amount or get it transfered. Getting it transfered makes more sense since the longer the money remains in the account, the more interest it earns.
4. National Saving Certificate (NSC) - is another Government of India sponsored investment option. The lock-in period is around 6-7 years. The lower limit is Rs. 100 and there is no upper limit of investment.
NSC investment is also liable to Income Tax rebate if it is under Rs. 100,000.

5. Gold - Yes, gold but not in the form of jewellery but pure 24 carat coins or biscuits if money permits. Some part of your investment should be in the form of gold. It helps in diversifying your investment basket. Investing in gold does not mean buying ready or custom-made jewellery. Why? Because they dont have the requisite resale value. Why? Because the gold in jewellery is normally 18 carats since it has to be reinforced with other metals to make it strong otherwise gold is basically a malleable and ductile metal. Pure gold strips can be easily bent. Gold coins come in pure form and have excellent resale value. The best place to buy these coins are from your trusted jeweller. There are lot of advertisement of certified gold sold by banks like ICICI and HDFC. These gold are much more expensive due to a slew of taxes paid at different stages. But if you dont know a good jeweller then it is recommended that you buy the gold from the back. You will be given necessary certificates to prove its purity.
6. Stocks - Last but not the least is the most riskiest option - shares and stocks. You can buy/ sell stocks from the market through your shares agent or from sites like www.icicidirect.com or www.sharekhan.com. All these sites will charge you some amount for the transactions. You will need a demat account with a depository participant in case you wish to deal in stocks. Many companies come out with IPOs (Initial Public Offering). You can invest some amount at that time and see if you are alloted some shares. This is a risky option where the market sways with lot of heresay and emotion. Critical news about companies can make stocks shoot up or bomb. If you do not understand the share market or do not have the requisite time and discipline to follow it then do not enter into stocks and shares.

Please ensure that you check your tax liability in case of each of
these investment options. It can vary from person to person based on age, income, investment and gender. All types of investments come with some amount of risk but then this whole life is about risk.
Money will not grow by itself, it is you who has to nurture it properly like a plant. Save regularly and follow a discipline.