If you’re like most people, you’ve heard the old adage that “money doesn’t grow on trees.” And you know that money is one of the most important things in your life. But it’s not just about making money. It’s also about investment you do so that money can grow.
The problem is, most people don’t know how to invest. They either don’t have any money or they don’t know what to do with their money. For many, investing is a very complex topic, which can often cause them to avoid it altogether.
However, investing in the right place at the right time can make a huge difference to your financial future. With this in mind, we’ve put together a short guide with top investment options in India to help you decide if it’s something that you should be considering.
1. Investment in Equity: Very High Risk
Equity refers to the value of the company or stock. If you buy shares in a company, then you own a part of the business. Investing in equity gives you the opportunity to gain profit from the investment and increase your wealth quicker than any other investment. For e.g., In India, the return on equity investment in 2021 was 21.5%. Based on 87 countries, the global avg. in 2021 was 32.21%.
If you invest in equities, you will own shares of the company whose stock you have bought. If the company makes a profit, you’ll make a profit as well. If the company loses money, you will lose money too. It is also important to remember that the stock market can be volatile, and you might lose your entire investment if the share price drops below what you paid for it.
2. Investment in Bonds: Low Risk
The bond market consists of debt instruments issued by governments, companies and other firms. These securities are called bonds. A bond is a contract between two parties – the investor (the borrower) and the issuer (the lender). The investor agrees to pay the issuer a fixed amount of interest on a periodic basis in exchange for the use of funds provided by the issuer.
A bond is used as a safe place to save your money for long term investments. Most bond investments involve long-term debt, and there are different types of bond investments: government, corporate, municipal and international. Investment opportunities in bonds are available from banks, mutual funds and insurance companies.
3. Investment in Public Provident Fund (PPF): Low Risk
The Public Provident Fund is a tax-exempt investment option offered by the Government of India to its citizens. PPF offers you the flexibility of making an investment choice, with both fixed and variable interest rates. This is very low risk, as the risk is capped at 2.5% per annum, whereas most investment options in the market may involve higher risks.
Many people keep their money in bank accounts, but you should consider investing your money in PPF schemes. The primary reason is that the interest rate offered by the PPF schemes is higher than that of the bank. However, the drawback is that the PPF schemes have a minimum investment of Rs.1,000 and there are other restrictions that you need to follow.
4. Investment in Bullion: High Risk
Gold and silver have been around for thousands of years, and it’s easy to understand why they are regarded as safe stores of value. Such investments have become popular these days. A lot of people decide to buy bullion as an investment option, instead of just buying it as a jewellery.
There are many benefits of buying bullion as an investment option over the traditional stock markets. One benefit of bullion is that it has a longer history as a store of value. They are used by human beings for thousands of years and still remains a solid store of value. Bullion has the highest liquidity factor. You can sell it whenever you want to.
5. Investment in Mutual Funds:
Investing in mutual funds gives you the chance to earn interest on your money. In order to do this, you have to put your money into the fund. When the fund makes a profit, the fund manager will distribute the profit to its shareholders.
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Investment in Fixed Income Mutual Funds: Low Risk:
In a Fixed Income Mutual fund, bonds or other debt instruments are often the main investments. Although the sum payable is not assured, it may change, and it may even be nil, fixed income funds normally aim to pay a dividend on a clearly delineated basis.
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Investment in Equity Mutual Funds: High Risk:
Equity mutual fund invests primarily in equities and equity-related assets with the long-term goal of delivering investment returns. For stakeholders with an extended investing perspective, such funds are suitable.
6. Investment in Forex: Very High Risk
Investing in Forex is also known as foreign exchange trading. This involves buying and selling currencies from one another. The spot and the futures market are the 2 main types of Currency market. Spot markets occur when buyers and sellers meet. Futures markets involve contracts between traders. These contracts allow traders to trade on an agreed date in the future.
There are different kinds of contracts. You may be asked to purchase or sell a currency against a specific future date. This can be done using currency pairs. For example, if you wish to buy dollars against Indian Rupee, you would enter the currency pair of USD/INR.
7. Investment in Fixed Deposit (FD): Very Low Risk
FDs are instruments that you can use to save money and grow it over time. You may be familiar with bank accounts. A fixed deposit account is an account that gives you a fixed return on your money. You make deposits into the account and get interest on the money deposited into the account.
The rate of interest is fixed and it remains the same while the investment is active. This means that every year, you will receive a fixed amount of interest on your savings. FDs can be opened for 1 month to Multiple years.
8. Investment in Real Estate: Moderate Risk
One of the best ways to save is by investing your money in real estate. The returns may vary depending on the real estate property that you invest in. The market for real estate has grown substantially over the years. Real estate is in a growing market currently.
Investors can buy real estate properties to turn them into commercial or residential buildings. These properties are also referred to as income properties. You can buy property, develop it, and then sell it to others or lease it out. This is a great business opportunity that can lead to great profits.
9. Investment in Education Plan: Low Risk
Education is a great investment. If you have a child, you should consider investing in child education plans in India. This is a wise decision that can help you to increase your savings. You can save for their future by making an investment in their education.
You will see the benefits when they grow up. They will be able to learn new skills that will help them to gain a high paying job. This can help you to get the financial independence that you want. It is also an excellent approach to plan for retirement.
Conclusion
Investing is a smart way to grow your money, it is a way of making a steady income, and it is a way of building wealth. Investment actually helps you in doing retirement planning in India the correct way.
However, you need to be aware that there are many risks associated with investing. It’s cannot be guaranteed that you will always make a profit on your investment. However, it is guaranteed that you will lose money if you don’t invest. All the best!!