“The individual investor should act consistently as an investor and not as a speculator.” — Ben Graham
There are various types of Investment options present in India at the moment. There is a pool of options available with low-medium-high risk factors involved. Majorly, investment is a means of wealth creation to achieve financial stability with a passive income. One can achieve their financial goals, live a luxurious life, fight rising inflation and have a secure retirement life. Generally, investment scares the majority of people in India due to the risk associated with it. But, with different investment plans nowadays, individuals can choose depending on their appetite for risk and returns.
“Over the past 4 years, 65 to 70 % of investors were from the younger age group.”
A remarkable boom in the financial market happened in the post-liberalization era. Two components of the financial market, the stock market and the credit market, impacted the growth significantly. So, the question arises of where to invest money in India. The stock market has larger and longer mutual effects on economic growth in India.
There are several reasons why investing your money is crucial. To support yourself in tough circumstances, in the event of a job loss, or for future prospects, you want to accumulate wealth. If you want to prevent your money from losing value over time, you should also reap the benefits of compounding while accounting for inflation.
Compound interest can be used to your advantage while investing. Compound interest is the interest you receive on the money you invest plus the interest from each previous period. Also, investment is crucial to helping you reach your goals if you intend to retire and stop working at some point.
Let’s discuss different types of investment that provide favorable financial returns in India:
Investing in stocks is one of the best types of investment in India. It is the most popular and easy investment option. It is also known as Shares or Equities. Varied types of investments in the stock market give different return outcomes. When a person buys a stock, they buy an ownership stake in that publicly traded company. Therefore, the investor hopes that the stock price will go up so that he can sell it at a profit. Stocks are the best option if investors are aiming for long-term benefits. Most investors consider it a high-risk type of investment. But, the returns offered are the highest compared to the other investment options available in the market. Also, it allows flexibility and managing risk according to the current stock market trends.
The stock market is about reading, analyzing, and managing risk. Investors need to time their entry and exit in the market, pick the right stocks and analyze a particular stock before investing. These certain aspects of investing in stocks are paramount. Individuals aiming for higher returns have to take risks in varied types of stock market investments for a long-term period.
The stock market is about reading, analysing, and managing risk. Investors need to time their entry and exit in the market, pick the right stocks, and analyse a particular stock before investing. Certain aspects of investing in stocks are paramount. Individuals aiming for higher returns have to take risks in varied types of investments in stock market for a long-term period.
When you purchase a stock, you are expecting that the price will go up so that you may sell it later on and make money. Of course, there is a chance that the stock’s price could drop, in which case you would make a loss.
Bonds are one of the safer types of investment options in India. The risk factor is pretty low in this investment choice. When an individual buys a bond, they lend money to an organization. The lender or investor gets periodic interest payments along with the returns on the investment. Bonds get issued by companies, municipalities, and government agencies. The companies issue corporate bonds, whereas local governments issue municipal bonds. Moreover, the RBI issues bonds on behalf of the central government in India.
The returns on this type of investment are lower compared to stocks. But, investing in bonds involves much lesser risks. As a result, it is considered one of the best investments in India. There is still some risk involved like the government could default or the company gets bankrupt. However, these bonds are considered the safest bet to invest in India.
The RBI bonds are taxable, have a duration of 7 years, and offer an interest rate of 7.75% per annum. These bonds are accredited to the Bond ledger account of the investor and granted in Demat mode only. Any Indian citizen can invest in this type of bond.
This type of investment is great for beginners. You can typically obtain better returns by lending money to businesses than you would on other kinds of bonds. It is preferable to purchase corporate bonds in a tax bracket for the majority of investors who fall into the moderate to upper tax brackets.
Interest payments are made to the investor or lender while the money is being borrowed. You receive your principal back when the bond matures, which means you’ve held it for the time period specified in the contract.
Mutual Fund is a different type of investment. It is an ideal investment option for investors seeking higher returns over a longer period. Generally, it is a pool of many investors’ money, widely invested in the stocks and bonds of different companies. Hence, it yields substantial returns on the investment over a longer duration. It is a market-linked investment plan which uses varied financial instruments like equity, bonds, debt, stocks, currencies, derivatives, and commodities to invest money. The risk associated with these types of investments is higher. As a result, the returns get generated according to the market performance of a fund. Furthermore, mutual funds offer two different types of investment options:
Mutual funds are a pool of many investors’ money, widely invested in the stocks and bonds of different companies. Investors should put more emphasis on their financial goals rather than letting appealing aspects and benefits of other Mutual Fund plans sway them. By doing so, they will be able to decide whether or not a specific investment strategy and its elements are advantageous for them. This is the best type of investment.
When the value of the stocks, bonds, and other packaged securities that the mutual fund invests in increases, investors profit from the mutual fund. The managing company and discount brokerages both offer direct purchasing options for them. You will, however, have to make a minimum investment and pay an annual fee.
A certificate of Deposit is a very low-risk investment choice for investors. They lend banks a sum of money for a specific duration of time. When the period is over, the investors get their principal back with a pre-agreed interest rate on the amount. Hence, the longer the loan duration higher the final sum and interest rate will be. It is a short-term negotiable money market instrument. A negotiable instrument assures the repayment of the initial principal amount and the interest generated at the pre-agreed interest rate.
Certificates of Deposits (CDs) get held with a SEBI-registered depository. Moreover, RBI governs this type of investment, and only authorized banks issue CDs to an investor. There is no major risk associated with this type of investment. The only thing to keep in mind is severe penalties get charged for early withdrawals.
Investment experts view certificate of deposit (CDs) as very low-risk options. You lend money to a bank for a fixed period of time, and you get interest on it. Investors should be familiar with some of the essential characteristics of a certificate of deposit before making an investment: Certificates of deposit can only be issued by a few banks or other financial institutions.
With a CD, you profit from interest accrued over the course of the deposit. For long-term money savings, this type of investment is a strong option. You must ensure that you won’t require the money throughout the CD’s term because early withdrawals are subject to severe penalties.
Real Estate is one of the fastest-growing sectors in India. It holds exponential prospects and guarantees excellent returns. Buying a plot of land or an apartment is the best investment option available in India. Out of other types of money investment, Real Estate is the most effective and suitable option to invest money. Besides, the risk exposure is pretty low due to the rate of the property expected to rise within six months. It is due to certain other aspects of the money market. Hence, the investment in plots and apartments is considered an asset due to the guaranteed higher valued returns over a longer term.
Examine your existing financial situation. Even though you may be physically, intellectually, and emotionally prepared to invest, your financial situation may be telling a different tale. Out of other types of investment, real estate is the most effective and suitable option for investing money. Besides, the exposure to risk is pretty low due to the rate at which the property is expected to rise within the next six months.
For big returns on their investments, investors have the choice of investing in commercial or residential buildings or even real estate mutual funds. When thinking about real estate investments, timing is a key factor. It is important to keep in mind that real estate investments can be very volatile.
Fixed deposits are a financial instrument where a lump sum of the investor is locked in for a specific period. As a result, the interest accumulates on this sum of money consistently through the years. The interest rate is pre-decided by the bank and the investor. Moreover, this type of investment is unaffected by market forces, so the investor gets guaranteed returns. It is an ideal investment tool for risk-averse investors. But, investors with a high-risk appetite also choose to invest in FDs.
FDs offer fixed returns over a tenure pre-decided. The profit amount is payable monthly, quarterly or yearly, according to the bank’s rule. There are two options of investment in FDs, depending on the banks, cumulative and non-cumulative. In the non-cumulative investment option, according to the underwriting, the interest is paid, and it will be re-invested as well. The sum gets paid at the maturity of the term within the cumulative option. Hence, this makes it one of the best investment options in India.
Renewal of investments enables compounding to proceed and work in your favour to expand your corpus. Take steps to renew your bank FDs for a reasonable tenure whenever they are about to mature and you do not instantly need the money.
One can make a good amount of money through this type of investment. You can browse through several possibilities while opening a fixed deposit online and select the bank that is providing the greatest rate of interest and, consequently, the best returns. You can manage your investments such that the interest rate is maximized by examining how the interest rates change for various deposit amounts and tenors.
A public provident fund is a government-backed scheme of investment for the citizens. The sum invested, interest earned, and maturity amount are all exempted from tax. Thus, making it one of the best and most secure types of investment options in India. The money invested is locked in for a fixed period of 15 years. Moreover, it is a long-term tax-free investment.
Individuals can open their PPF accounts in a bank or the post office. Moreover, the investors can earn compound interest on the accumulated money. The only drawback of this type of investment is that individuals can withdraw their money only after the end of the 6th year. A loan is applicable to the balance of the PPF account when money is needed during a crisis.
A public provident fund is a government-backed scheme of investment for citizens. The amount invested, the interest earned, and the maturity amount are all exempt from tax. Deposit as much cash as you can afford into your PPF. If you make annual PPF contributions of Rs. 1.5 lakh for 15 years, your capital will mature at a massive Rs. 22.50 lakh.
Individuals can open their PPF accounts at a bank or the post office. Moreover, the investors can earn compound interest on the accumulated money. The only drawback of this type of investment is that individuals can withdraw their money only after the end of the sixth year. A loan is applicable to the balance of the PPF account when money is needed during a crisis.
NPS is a government-backed scheme offering pension alternatives to investors. The investor decides where the funds will get invested, like in stocks, bonds, government securities, or other alternative investments. The investor’s age determines the lock-in period. Because the scheme does not mature until the investor turns 60 years of age.
There are two options in the NPS type of investment, auto, and active investment. In auto investment, the funds are automatically invested in different assets. On the other hand, active investment allows the individual to invest in assets of their choice. In this scheme, tax exemption applies to the total interest accumulated.
An individual can participate in a combination of equities, government debt, alternative investment funds, and corporate debt through NPS, which are low-cost pension plans. The allocation to equity is capped at 75% until the age of 50, after which it slowly decreases as the proportion to debt rises.
The minimum annual contribution is Rs. 500, but you can deposit any amount you wish in your NPS account. In contrast to typical pension schemes, which have an upper limit on the gross pay that may be made, there is no upper limit on the amount you can deposit, giving you the chance to amass a much greater sum by the time you retire. Your monthly pension through NPS may therefore be much higher than the monthly income you receive from conventional pension plans.
ULIP is an investment plan that offers the dual benefit of insurance and investment in one scheme. One part is an investment that fulfills the long-term goals, and the other is the life cover that financially protects the family in case of a crisis. As a result, it is one of the top investment options in India at the moment.
ULIP is a tax-exempted scheme, so its worth is more among investors. The lock-in period offered in this scheme ranges from 3-5 years. A part of the premium in ULIP is used for insurance coverage, and the remaining sum is invested in shares, bonds, and other alternatives. It is a long-term investment that reaps maximum returns for the investor. Also, it is a flexible scheme that allows investment depending on the risk appetite.
The financial benefits of ULIP plans are among their most important features. Under Section 80C of the Income Tax Act, you are eligible for premium payment reductions of up to Rs. 1,50,000. The maturity amount you obtain is also excluded under Section 10 (10D), provided the annual premium is less than Rs. 2.5 lakh. Any claim resulting from the death of the insured will always be exempt from taxes.
The growing potential of unit-linked insurance plan (ULIP) is one of the factors contributing to their continued popularity as an investment choice. These plans give you the option to expand your money by investing in market instruments like debt and equity funds. Your earnings may be able to assist you in reaching your long-term financial objectives. This investment in India is a great option for everyone.
The SCSS investment plan is risk-free and gets a tax-saving option in India for seniors above 60 years. It is the ideal investment option for senior citizens as it provides them with a steady and regular income. The interest rate of 7.4% is excellent, which makes it an outstanding investment option for them.
The scheme is available in banks and post offices. The maximum limit to invest in this scheme is 15 lakhs. It is generally a long-term saving option for retirees. The scheme duration is five years. But, another three years extension period is applicable.
Section 80 C of the Income Tax Act of 1961 allows senior citizens to deduct up to Rs 1.5 lakh from their taxes for investments made in SCSS. Nevertheless, this tax benefit is limited by the aggregate yearly maximum of Rs. 1.5 lakh that is now in place for all transactions made under Section 80C.
This type of investment in India is basically for senior citizens as the name states. The SCSS interest rate was raised to 8% in December 2023. With the current SCSS interest rate, high transfer limit, and tax savings under Section 80C of the Income Tax Act of 1961, here’s how senior citizens can make the most profit from the SCSS scheme in FY23–24.
Earning substantial profits from investment requires proper research and knowledge of the market. A good practice is to read the current market trends before investing. There are various types of investment tools for investors. The most suitable choice for an investor should depend on his financial goals, growth, and risk levels. With more experience and market skills, the Returns on Investments will grow eventually. Thorough research and analyzing the investment tool are important before investing.
The market-linked investments give substantially higher returns. Investing in such instruments is rewarding if investors are ready to risk their surplus funds. On the other hand, if risk appetite is low, individuals can use financial tools unaffected by the financial market. Investment is a means to generate more wealth. Hence, people should first know all types of investments available to them. Then according to their needs, invest in different tools. Anyone interested in hustling and earning through a side job or likes answering questions can apply as a freelancer in Chegg. It has the flexibility to work as per convenience. To gain corporate exposure and enhance knowledge, enrol in the hiring process. All you have to do is sign up!
The three main investment types in India are Stocks, Bonds, and Real Estate. These three options are widely popular among investors. The risk factor associated with these types of investments ranges from high to medium.
There are various investment ideas available in India to invest extra money. Individuals can open a Demat account and start investing in stocks and equities or open a PPF account in a bank. Other options can be Real Estate, government bonds, or investing in mutual funds through a financial expert or mobile application.
Beginners should analyze and read the different investment types and current market trends of all types of investments. A beginner ready to take more risks than an average individual starts investing in stocks, bonds, and high-risk mutual funds. But, it is favorable to have intricate knowledge about the market and the types of investment tools available to them.
There are varied monthly investment schemes available for such investors. The best way to invest money monthly is to invest in Mutual Funds with Monthly Income Plans (MIPs). Also, some options are the Monthy Income Fixed Deposits Scheme, Post-Office Monthly Income Scheme, Senior Citizen Savings Scheme, and many more.
The best option is to invest in Stocks of well-known companies to earn money daily. These companies provide stability, and the risk factor is low. So, daily earnings are a possibility in this type of investment. Other options to are ETFs, Mutual Funds, Bitcoin, and Real Estate investing apps.
If we consider the whole world, the safest investment option is US Treasury Bonds. The US government has never defaulted, so it is a highly secure investment option. On the other hand, as far as India is concerned, CDs, PPF, Bank Fixed Deposits, NPS, and ULIP are the most secure and safest investment options.
The safest way to invest is to go to a Bank and post office to open a PPF or SCSS account. These are nice and secure investment options. In addition to this, a fixed deposit account is also considered a safe way to invest money.
Got a question on this topic?