Investment is a necessity to grow your money for the future. Investing your money is as important as earning an income. But you might be wondering how to invest money. While there are various types of investment options to choose from in India, one should keep in mind their age and their requirements for investment.
This includes deciding whether
- To invest long term or short term
- To invest in risky or risk free investments
- To check liquidity requirements in case of financial emergencies
You need to take into consideration these factors while selecting your investment avenue.
There are 2 buckets of investment options to invest in India in 2021
- Financial Assets that can be further segregated into
- Market linked products like stocks and mutual funds.
- Fixed income products such as Public Provident Fund and Bank Fixed Deposits
- Non Financial Assets that include physical gold and Real Estate
While choosing an investment plan from the various investment options, it is critical to match the risk profile of the investor, that is, you with the related risk of the product.
The most known and famous ways of how to invest money in India are as follows
Equity (Stock) Market
Investing in stocks directly is a high-risk investment. The stocks are a highly volatile asset class. There is no guarantee of return over a certain period of time as it is difficult to time your entry and exit in the stock market. You need to have a lot of research and skills to understand the behavior of the stock market to predict patterns and to buy the right stocks. Investing in stock is therefore not everyone’s cup of tea. The only good part about investing in stocks is that they are able to deliver higher than inflation-adjusted returns compared to all other asset classes.
Public Provident Fund (PPF)
Public Provident Fund (PPF) is a retirement savings scheme offered by the Government of India with the aim of providing a secure post-retirement income. PPF has a long tenure of 15 years and interest is huge especially in the later years. Provident fund does make a safe investment but your money is locked for that period of time
Mutual funds are an investment option where a fund manager manages your account by investing your money in stocks and bonds based on their experience. In an actively traded Mutual Fund, the returns are largely dependent on the ability of the fund manager to generate returns by investing the client’s money in equities and bonds.
Real estate investing is investing in a house that is not used for self-consumption. This means the house you live in is not a real estate investment. The location of the property is one of the most important factors that determine the value of your investment. The return on investment is delivered through two key areas, rentals, and capital appreciation. However, real estate as an investment is highly illiquid and cannot be liquidated for emergency purposes.
Gold is another investment option in India in 2021. Possessing gold in the form of jewelry comes with its own risks such as safety as well as high cost including the charges for making gold. Although, nowadays investing in paper gold is a cost-effective investment yet a volatile and risky one.
Last but not least is one of the most important investments. A bank Fixed Deposit is considered a safe investment option with the least amount of risk and highest form of liquidity. A fixed deposit is an investment of your savings to earn a higher FD return than a regular savings account. It is offered by banks and NBFCs (Non-Banking Financial Companies). A fixed deposit has the lowest risk in the portfolio of investment. Money is invested in a fixed deposit with a lock-in period and interest is given either at the end of the maturity date or as a regular payout. Investing in Fixed Deposit is a very smooth process and can be done at the tip of your fingers. You need to go through Fixed Deposit schemes of different banks and select the one as per your needs and requirements. Bajaj Finance Fixed Deposit is said to have one of the highest returns with an interest rate of up to 6.75%.
There are various other ways to invest in India which include but are not limited to
- Commodities and derivatives
- Foreign exchange
- New Class of Assets
- Insurance Plans
- Senior Citizens’ Saving Scheme
- Pradhan Mantri Vaya Vandana Yojana
These are one of the best investment options in India in 2021. To grow your money with easy liquidity and guaranteed returns with less risk, a Fixed Deposit is the best investment option of all.
Gaurav Khanna is an experienced financial advisor, digital marketer, and writer who is well known for his ability to predict market trends. Check out his blog at Highlight Story.