The best investment options don’t just come by; investors need to look for them.
The market is flooded with new and innovative investment options, but to make the best choice, it is imperative to know how these options work.
Any seasoned investor is also well-acquainted with the importance of diversification and vigilance, when trying to make good profits off their investment(s).
Investments primarily fall into two categories, these are
Knowing the mechanism of both of these allows investors to find what suits them the best.
Here are the top investment options to invest your money in, this year, certainly depending on your risk appetite and capital.
Mutual Funds are perhaps the most popular vehicle for investment in the present times.
They not only offer substantial results, but they are also extremely easy to invest in since they offers SIPs (Systematic Investment Plans), which have very affordable lower limits for investment.
They are managed by professional who diversify investments across platforms to gain best possible returns and reduce the risk involved.
Moreover, Mutual Funds also offer immense liquidity of the funds of the investor.
Mutual Funds are of two types, Equity Mutual Funds and Bond Mutual Funds.
As per guidelines by Securities and Exchange Board of India (SEBI), Equity Mutual Funds must invest at least 65% in equity-related instruments.
These funds can be maintained actively or passively as per the desires of the investor, and a Demat account is also not required to operate these funds.
Equity-based Mutual Funds may be Index Funds or Exchange Traded Funds, and may be investing in Domestic or International markets.
Debt funds are relatively safer than equity based Mutual Funds since they do not invest in stocks but in bonds offered by governments and corporate.
These invest in securities, treasury bills, commercial paper and other market instruments, which offer steady returns, as they generate a fixed interest.
They do not involve as much risk as equities and therefore, are preferred by those with lower risk appetites, and those looking for a regular income.
Direct investments in equity can be quite daunting due to the volatility of the market and no guarantee of returns.
However, the risk involved with investing in equity has a huge potential of paying off. This is the only reason that such huge investments are made in the stock market despite its volatility.
The more risk one takes, the higher are the chances of receiving returns. But, one must plan their investments carefully and know the right time to buy or sell a particular stock. Investors also need a Demat account to deal in equities.
It is advisable to diversify across sectors and market capitalizations to reduce the risk involved and improve the chance for better returns.
Compared to other vehicles of investments, equities have been able to provide much better results, which are better suited to inflation.
Real estate investments are those that are made in land/property other than the house you live in.
These investments are based on two factors:
(i) How much rent a property can generate for you, and
(ii) How much does the price of the property increase over time, which depends on the location of the property and how well the real estate market performs, which is linked to other factors.
However, investors must also keep in mind that real estate is far from liquid, unlike other investment vehicles. Selling property can be hindered by several factors, and one may also be unable to sell their property due to government regulations or stay orders.
Gold is definitely one of the most popular and relied upon investment options in India. Not only does gold have high liquidity and demand, it also has social and religious relevance.
However, most of the gold investment is in the form of jewelry, which often requires the payment of heavy making charges, ranging anywhere between 7% to 25% (in case of special designer jewelry).
To buy gold purely for investment purpose, it is advisable to invest in bullion, which is, mostly, gold coins. Corporates and huge investors may also opt to invest in Gold bricks.
Further, investments can be made in gold via buying stocks which are based on gold, crypto-currency, which is backed by gold, ETF’s dealing in gold, and sovereign gold bonds. Together these are called paper gold.
The various investment options offered by Banks and government schemes are perhaps the most reliable and least risky ones. Moreover, the credibility of Banks and the Government is least likely to be questioned in relatively Westernized societies.
There are various options offered by Banks and the Government for the public to invest in.
(i) Fixed Deposit
One of the most common and oldest investment options in India is Bank Fixed Deposit (FD), which offers high interest on a fixed amount of money in their bank account.
The investor can opt from the various interest options- monthly, quarterly, half-yearly, yearly or cumulative interest option.
The interest earned is added to the investor’s income and is taxable.
(ii) Public Provident Fund (PPF)
Public Provident Funds (PPF) is a favorite of the common people in India. The minimum tenure of a PPF investment is 15 years after which it can be extended for 5 years.
The interest earned on PPF is compounded annually, which allows for great returns, and the interest is even tax-free.
In case one needs, they can also take a loan against PPF.
(iii) National Pension Scheme (NPS)
National Pension Scheme (NPS) is a product managed by the Pension Fund Regulatory and Development Authority (PFRDA) and aims to provide retirement solutions to the investors.
It is a long term investment and invests in a mix of equity, fixed deposits, corporate bonds, liquid funds and government funds, and more, while allowing the investors to make the calls as per their risk appetites, respectively.
(iv) Senior Citizens’ Saving Scheme (SCSS)
Senior Citizens’ Saving Scheme (SCSS) is a scheme only for senior citizen and early-retirees, those above the age of 60.
SCSS are easily available at banks and post offices, and have tenure of 5 years, after which the scheme can be further extended by three years.
The scheme offers interest in the range of 8% which is payable quarterly. However, the interest is also taxable.
(v) RBI Taxable Bonds
This scheme offered by the government has tenure of 7 years, and offers an interest of 7.75% per annum.
These bonds are issued in demat form and are credited to the Bond Ledger Account (BLA) of the investor. A Certificate of Holding is given to the investor as proof of the investment.
These are the most popular and reliable investment options available in the market in 2018, and one can make the best of them if vigilant and well-informed.
While some of these are market linked, others offer fixed income. This way, there is something for everyone, to meet their short-term as well as long-term goals.
A well-balanced mix of diverse investments, therefore, can enable one to make great returns with the help of the tax benefits and high interest rates that are offered by some of these plans.