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Top 10 Investments That Can Make You Rich

11 July 2022

Almost everybody has wondered for at least once in their lifetime– “How do I  get rich quickly?”

It is possible. But how many of us do what it takes to pursue the path to wealth?

To become rich, individuals need to build a comprehensive financial plan and need to learn how to invest. Once they learn to make their idle money work, they will be able to generate income to create wealth in the long run.

And one of the simplest ways to become rich is to invest early in life. The power of compounding takes care of the rest and leaves you with a juicy corpus.

Note that, you cannot become rich in just one way, you need to diversify your portfolio to get there.

Advantages of Investing Early

  • Greater Financial Security

Recession is bad for the economy, and when the economy goes down it brings down everything with itself, including your job! This is when being financially independence comes in handy. A corpus built through investment acts as a source of such independence.

  • Increased Purchasing Power

With regular investments, individuals can boost their income. It directly helps to increase one’s purchasing power, helps achieve their financial goals and facilitates them to improve their standard of living.

  • Retirement Planning

Investment planning is a proven way of building sufficient retirement corpus. It not only allows retirees to become financially independent but also continue to earn money from the investments made.

But How to Invest?

The first step towards investing is to find suitable investment options. Such options are not just the best investments to make you rich but the it is among top options to help you make profits on investments.

Here is a list of top 10 investment options that can help you become rich

  • Stock Market

To earn steady returns through investment in stock market, individuals should first try to understand the valuation of a stock. This can be learnt mostly via PE ratio. That is, price-to-earning ratio, which will indicate whether the price you invest in a share is not too expensive.

For instance, if price of share A Rs 100 and share B is Rs 150. The PE ration of both the companies are 12 times and 8 times. Then buying share A for Rs 100 is expensive when compared to buying share B for Rs 150. You can invest in share B. Why? The upside (increase in price) for the same is greater than that of share A.

The equity stocks have performed better than most asset classes over the years by delivering inflation-adjusted returns. Stocks are a volatile asset class and come with no guarantee in terms of generating returns, but individuals can cushion the blows of such risks.

Individuals can diversify a portfolio across different sectors and market capitalization as a way to reduce the risk burden of stock-related investments.

Individuals with a high or medium-risk appetite can route their investment in the stock market through shares. On average, investors are likely to earn 12%-15% returns per annum in equity market.

Those who have a high-risk appetite and wish to generate returns of 22%-30% per annum may want to invest in stocks that are high in risk but come with a longer investment horizon.

Individuals who wish to invest in direct equities can do so by opening a Demat account.

  • Mutual Funds

Currently, Mutual Funds in India are considered to be one of the best investments to make money.

Mutual Funds allow investors to choose from among a variety of categories with a varying risk level. And depending on their risk appetite and choice of fund option, investors can earn a return of around 12%-30% per annum.

With mutual fund plans investors also the opportunity to diversify their portfolio even with limited investment. Individuals can also avail several tax benefits by investing in tax-saver ELSS mutual funds.

Mutual Funds offer numerous avenues of investment with varied risk and returns. It is worth mentioning that risks and returns are directly proportional to each other. Those looking for low-risk can consider debt funds schemes. The returns in such cases will be relatively lower than equity mutual fund schemes (risk is slightly higher and return is also higher).

Note that, mutual funds are market-linked and thus carry a certain risk factor with them.

To reap maximum benefits from any mutual fund schemes, it is better to stay invested atleast for three years.

  • Post Office Monthly Income Scheme (POMIS)

The POMIS is regarded to be a feasible option for those individuals who wish to generate a steady income at a fixed rate. This investment option is best suited for those with no tolerance for risk.

The scheme comes with a term of 5 years, and accrues interest at the rate of 6.6%. Such benefits make it an ideal investment option for conservative investors.

Individuals can invest any amount between Rs. 1,500 to Rs. 4,50,000 in a single account. In a joint holding account, they can invest up to Rs. 9,00,000.

  • National Pension System (NPS)

This particular scheme is managed by the Pension Fund Regulatory and Development Authority (PFRDA).

It is a retirement-oriented investment scheme that is a mix of fixed deposits, equity, corporate bonds, government funds and liquid funds.

Being a government-sponsored scheme, NPS is regarded to be a safe investment option. Individuals can decide the amount of money they want to invest in such a scheme based on their risk appetite.

Individuals can avail tax benefits up to Rs. 1.5 Lakh on their investment in this scheme under Section 80C, 80CCC and 80CCD. They are also entitled to claim an additional deduction of Rs. 50,000 under Section CCD (1B).

  • Public Provident Fund (PPF)

Though there are different ways to invest money, the PPF remains one of the most sought after ways of investing money in the market.

Individuals can open a PPF account in post offices and banks. Individuals can also open a PPF account online and opt for any leading bank to open the same.

Also the opportunity to invest as low as Rs. 500 in a financial year serves as an answer to – “How can I get rich with no money?”

The scheme comes with a tenure of 15 years, which offers investors the benefit of compounding their earnings.  On completion of 15 years, the tenure can be extended by five more years.

Individuals are entitled to avail tax deductions under Section 80C of the Income Tax.

The scheme accrues interest at the rate of 7.1%. The interest generated through the scheme and the proceeds earned on maturity is exempt from tax.

  • Bank Fixed Deposit (FD)

Bank fixed deposits have always been the go-to option for people who have been asking, “How to create wealth at low risk?”

A fixed deposit with a reputed bank or NBFC is considered to be a safe option of investment. This is because it comes with low-risk and provides guaranteed return of capital. Usually, FDs earn interest of around 6%-7% per annum. It appeals to conservative investors.

Moreover, under the DICGC rules, each depositor is insured up to a maximum Rs 5 lakh for both principal and its interest amount per bank.

  • Senior Citizen’s Saving Scheme (SCSS)

This scheme is specifically designed for retirees and the senior citizens aged 60 years and above. A person who has voluntarily retired at the age of 55 years can open an SCSS account within a month of availing their retirement benefits. In such a case, the investment amount should not exceed the corpus they received on their retirement.

The SCSS comes with a five-year tenure and it can further be extended by three years once it matures.

At present, the interest rate is at 7.4% per annum. Interest is payable every quarter. The interest accrued is entitled for tax exemptions under Section 80C. If the interest accrued in a year exceeds Rs 10,000, tax is deducted at source.

Individuals can invest up to Rs. 15 Lakh in one SCSS account and they have the freedom to open more than one account.

A rate of 1.5% is levied as a penalty on premature withdrawal of deposits after a year. In the case the premature withdrawal, penalties will be levied.

  • RBI Bonds

The RBI bonds are one among the different ways to invest money. They have tenure of 7 years and accrue interest at the rate of 7.15%.

The RBI Bonds may be issued in Demat form and credited to the Bond Ledger Account (BLA) of the investor. Certificate of Holding is provided as proof of investment.

The fixed and assured returns bring along the element of safety, which as a catalyst for the drawing the interest of the conservative investors towards this investment option.

There is no maximum limit of investment, and any resident Indian can invest in this scheme either individually or jointly. Parents and guardians can invest in these bonds on behalf of a minor.

  • Real Estate

Putting money in the real estate sector is one of the best investments to make money. The investments made in real estate sector tend to deliver returns in two ways – capital appreciation and rentals.

Individuals who have been wondering how to get rich in a short time may opt for this investment option and put their investment on rent.

Depending on the location and the prospects of price appreciation, investors may expect as much as double returns on their investment.  Also, the real estate venture is highly liquid.

Individuals who are looking for a venture to invest in for the long-term should pick the real estate sector.

If investment of such large amount is not feasible, you can also consider Real Estate Investment Trust (REIT). Embassy Office Park REIT, Mindspace REIT and Brookfield REIT.

While REITs are similar to investment in mutual funds, REITs are traded in equity markets. Right now there are three REITs in the market offering yield of around 6-6.5%.

  • Gold

Gold has always been among the best investments to make money since time immemorial. It had served as a haven for investors even at times when the economy was war-hit.

Besides investing in solid gold and gold coins, investors can also opt for a cost-effective alternate by investing in paper gold or gold ETPs.

Gold ETFs are open-ended Mutual Fund schemes that invest the money collected from investors in standard gold, and the holding is denoted in units.

Weigh your options well!

Disclaimer: The views expressed in this post are that of the author and not those of Groww.

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