Top investment options in India

investment options in India
Artwork by Sayali Ranade.

At the point when you know your objectives, choosing investment options turns out to be simple. In a sense, you realize the profits given by each option and the sort of investment you need to pick to accomplish your objectives.  You should know why you need to invest; it tends to be anything from making a retirement corpus, marriage, purchasing a house, or an expensive vehicle.

Realizing your objectives assists you with arranging all things considered and keeps you committed on your investment track.  Your investment choice ought to rely upon the risk factors and your risk-taking capacities. The two components vary from one individual to another.  Investments ideally ought to have a solid blend of all asset classes. It is keen to broaden your investment among the different asset classes.

Here’s a list of investment options you can have a look at-

Equity

Investing in equity is quite possibly the most alluring investment choice because of its exceptional return potential. Equity investments have higher risk and, subsequently, can produce higher returns. 

(You can expect a yearly return of 10% – 12% from stocks if you know the craft of putting resources into the perfect stocks at the perfect time.)

To start investing in stocks, you need a Demat account. Safer ways to invest in equities can be investing in index ETFs or index mutual funds.

Mutual Funds 

Mutual funds are the most convenient way of putting resources into the stock market when you don’t have the time to research the market and expertise. 

The investment in mutual funds can be a lump sum or monthly SIP for a sum as low as Rs. 500.

Cryptocurrency

Cryptocurrency has become another asset class. It has been around for longer than 10 years. One can buy digital currencies in portion also. Numerous exchanges permit their clients to purchase cryptocurrencies with a base investment as low as Rs 100.

Real Estate

Real estate requires an enormous amount of money and is impossible with smaller sums. Liquidity is another issue with it – you can’t buy or sell at whatever point you need. You generally need to sit tight for the ideal time and the correct purchaser or vendor to transact with you. There are two types of revenue from real estate investments in particular – Rental pay and Capital appreciation.  

Real estate investment trust

A  REIT operates income-generating real estate. It is modeled after mutual funds. It gives dividends to individual investors by pooling their capital and investing it into real estate. REIT investments are regulated by SEBI. Most REITs are traded on an open market like stocks, which makes them exceptionally fluid (compared to actual RE investments). 

Commodities 

Throughout the years,  gold investments have given steady returns of around 10%. A better method to put resources into Gold is through a Gold mutual fund, Gold ETF, and Gold bonds. Gold and Silver are likewise known to be generally more secure. It is ideal to allocate 2-10% of your portfolio to investments in precious metals.

Bonds

Bonds are investment options where a person loans cash to an organization or a government for a set timeframe in return for regular interest payments. The bond issuer returns the money to the investor once the maturity period is reached.

Organizations offer bonds to fund operations, acquisitions, and projects. Governments sell bonds to supplement income from taxes.

Debentures 

Corporations and governments issue debentures to raise funds. It usually has a maturity term greater than 10 years and is not backed by collateral. Debentures are only backed by the creditworthiness of the issuing authority. Debentures issued by governments are low risk because of having the backing of the government issuer. The rate of interest (6-8%) by the issuing authority is determined and is paid regularly. It can either be fixed or floating. 

Debt Funds

Debt funds generate returns for investors by putting their money into fixed-income securities and bonds issued by the government or corporates. It comes with a lower degree of risk than equity funds. Debt funds are highly liquid, and one can withdraw their money any day. The returns are subject to market risks.

PPF

PPF investment can be claimed as a deduction under section 80 C of the IT act. Therefore, investing in a PPF account can save you some tax. The PPF account can’t be closed before 15 years. And only after the completion of 6 years is it possible to partially withdraw the amount. 

Fixed Deposit 

If you need safe investment options without agonizing over market fluctuations, choose the tax-saving FD of any bank or post office. 

FDs offer higher returns than a savings account and are one of the most secure investment options. The returns are taxable, and there is also a lock-in time of 5 years. You may be charged a penalty if you liquidate it prematurely. The interest rates fluctuate from one bank to another and range from 5% to 7.25%. 

The value of money decreases over time. This is known as inflation. It is reflected in a general increase in the prices of goods and services in an economy.

The power of compounding helps us beat inflation in the long run. Investing in Gold, real estate/REIT, value stocks, commodities are considered an ideal hedge against inflation. Gold mitigates losses in times of market risks as well. 

Your investment options should also be categorized to your risk preference. An individual’s risk preference depends on their age, goals, financial state, etc. Government and high-rated corporate bonds are low in risk but have foreseeable returns.

Generally, the investment options that have low risk also offer the lowest returns. Real estate, equity mutual funds, growth stocks, high-income debt are medium-risk investments that offer a stable return along with capital appreciation in the long term.

High-risk investment options are speculative. They may yield high returns, but they may also yield high losses. Also, the returns from such risky investments may not always be high and depend on many factors. Common stocks and cryptocurrencies are some examples of high-risk investments. 

Liquid funds are preferable if you have an investment goal of 3 months to 1 year.

Identify your objectives as well as the investment time limit and invest in a balanced portfolio accordingly. 

About the Author: Ishita Jha is a 2nd-year student at Manipal Institute of Communication.

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