Where To Invest Money In India?

Investment simply means to purchase a monetary asset today, which will provide income in the future or, it will be sold for a higher profit. To create wealth and to secure your future you must invest in the right financial instruments at the right time.

However, not all investments provide substantial returns. But, if invested properly, the potential to earn money increases. The investment should be categorized wisely after looking into matters like the element of uncertainty, liquid assets, level of income, etc.

Let’s look at some of the options:

1. Mutual Funds

Mutual fund is a common pool of money where multiple investors invest in equities, bonds, and other market instruments. It is ideal for an individual investor who wants a balanced mix of risk and return and can’t follow the market regularly. It allows a professional to take care of your investments.

• It is a highly liquid asset as you can buy mutual fund units in any particular scheme and these units can be cashed based on the fund’s Net Asset Value (NAV).
• Through mutual funds you invest money indirectly in the market but the risk of market is not directly proportional to that of the mutual fund.
• The systematic investment plan (SIP) mode of investment helps in riding market instability because you invest regularly. An SIP can be started with as little as 500 every month and helps to build a staggered portfolio over a long-term.

2. Investing in Gold 

Gold is the oldest and most trusted form of investment in our country. The traditional way to invest in gold was to buy physical gold in form of bars, coins, or ornaments. But with time, the process has evolved. Gold deposit schemes, gold ETFs, gold mutual funds, etc have now come into the picture.

Features:

• It is highly liquid as gold has a huge market and can be sold very easily.
• It can earn returns in a short period of time as the value of gold increases quickly.
• It is considered to be a low-risk investment and acts as a hedge against inflation.

3. Investing in Real Estate

The real estate sector is one of the most attractive investment options. It plays a vital role in many leading sectors like commercial, housing, manufacturing, hospitality, retail, etc. Thus, it is still considered as a good investment option. You can use real estate as a part of your wealth building strategy if you have a huge sum of money to invest.

But when you buy a property with the sole purpose of investment, then other related factors like location of the property, related charges, ways to rent out or resell should be kept in mind.

Features:

• These types of investments carry low risk as the value of property usually rises every six months.
• It is good for a long-term prospect, as the appreciation in the value of land takes time with increasing urbanization and development of infrastructure
• Though it can be sold or rented, to find a suitable buyer or tenant takes some time which reduces its liquidity as compared to other investment options.

4. Public Provident Fund

PPF is considered to be the safest and most secure way of investment. A PPF account can be opened with any bank or post office. The rate of interest in PPF accounts is high compared to fixed or recurring deposits and they also take advantage of compounding. All these accounts are managed by the government and provide tax benefits.

Features:

• It is well suited for long-term investment, as it has a locking period of 15 years which can be further extended for the next 5 years.
• It is a fund which provides guaranteed returns which are fully exempt from tax.  Thus, it is termed as the safest form of investment.
• The money can be withdrawn from the PPF account only after 6 years of investment. Hence, it is not a liquid asset.

5. Equity Shares

Equities are the chief source of funding for any company that allows voting rights and claims to investors on assets. In equities, the shares are expressed in terms of face value, issue price, market value, etc.
Investment through direct equity or share purchase is for investors who know how to analyze a share stock before purchasing it.

Features:

• It can give high returns, but it comes with higher risk.
• It is a very liquid asset and can be traded for a long or short period of time. If the investment is for a long time, it is shown to earn higher returns.
• A proper homework is required to directly invest in equity. Knowledge of the company, the sector it belongs to, factors that affect them, government policy, market scenario, etc, have to carefully be studied before investing.

6. Initial Public Offering

Initial Public Offering is offered by companies to the public to buy their shares without listing them on a stock exchange. Since it is the first time the company is inviting public for investment, it is known as initial public offering. Companies initially issue their shares at a low rate, but when they get listed on stock exchanges, the prices go up.

Features:

• Once the company gets listed on any stock exchange, it becomes liquid.
• The risk of investment is same as direct equity.
• If you have a knack for investments, then IPO is worth your money.

7. Company Fixed Deposits

A fixed deposit is a financial instrument provided by various banks, NBFCS and companies where the investors can invest money for a certain period of time with good rate of returns. Even though a bank fixed deposit is governed by RBI guidelines, and it protects its investors, a company fixed deposit is considered to be better as there is a scope of garnering higher interest rates.

Features:

• This is a rigid option as the money cannot be withdrawn before the maturity period.
• There is also an amount of risk associated with it. Investing in good companies with proven track records will serve best to your goals.
• The investors should be willing to invest for a long term period.

8. Government Bonds

A bond is a fixed income financial asset where the investor loans money to an entity, company or government which borrows that fund for a certain period of time at a variable or fixed interest rate. If you are not confident of investing in the market, then bond is a good option which can fetch high returns.

There are many types of bonds issued by the government with different interest and principal payment structures, like zero coupon bonds, infrastructure bonds, etc.

Features:

• Bonds have a very low risk attached to it, as it is issued and regulated by the government
• These are long-term investments to build wealth over a period of time
• Adequate trading opportunities with continuing volatility make bonds easy to trade in the debt market.

9. Unit Linked Insurance Plans

A Unit Linked Insurance Plans (ULIPs) invests in debt and equity markets while offering protection at the same time. It is offered by insurance companies in which one portion of the investment is apportioned towards stocks and bonds chosen by the individuals and the remaining is maintained as a life insurance cover under a single integrated plan.

Features:

• It can be considered as a more reliable wealth creation source over a long period of time, in terms of returns, protection and tax saving.
• These too have a risk element attached to it. However, the risk is higher in equity investments than debt investments.

10. Post Office Savings Scheme

Post Office Saving Schemes is a government supported saving scheme. It does not have any risk factor but the interest is quite low. The monthly income plan for these schemes are suitable for retired people with regular income requirements.

Features:

• It is the safest option to park your funds here as it provides returns without any form of risk.
• It has a very short lock-in period and offers returns on a monthly basis.

So, before investing you must learn about the various investment options that are available. After knowing about the nature, risk and return patterns of various instruments, you should choose the one which suits your needs and requirements the best.

Happy Investing!

Disclaimer: the views expressed here are of the author and do not reflect those of Groww.