Table of Contents
Best Investment Options in India
Do you want to know the best Investment Options in India?
Want to invest money!
But confused where to start/invest, how to invest, whom to connect and how to find an advisor.
How much money should be invested and in which instrument you can invest in your money.
Usually all investors face these common queries.
Here is a complete and quick guide for Best Investment Options in India.
Within minutes you will know instrument available for investing as per your requirements.
Moreover this blog will make you understand and think why you want to invest your money.
So, presenting here a quick guide, about investing….
The instrument in which money can be deposited to earn profit or return:
- Fixed Deposit with Bank/ Financial institutions
- Post office saving schemes like NSC, KVP, SCSS (for senior citizens), Recurring deposits, SukanyaSamriddhiYojana( for girl child ), PPF.
- Life Insurance
- NPS
- Mutual Funds
- Bonds
- Stocks
- Real Estate ( Physical Property )
- Gold
- Precious metals
Now, for the first time investor it becomes very difficult to choose from and understand all instruments.
Like other you must have consulted to your friends, family or internet.
At last the award goes to…. I mean investment goes to whichever instrument comes last in notice and as friends suggests.
But this is not the right approach. If you want to invest money and you don’t understand your requirements in future.
Your investment vehicle should be decided on these parameters:
- Duration for which you want to stay invested
- Your age or your life phase
- Your Risk Bearing Capacity
- Need of money at what time
Below is a quick chart which will help you to understand above parameters in context of your investments:
| Deposit Time (Period of time for which you can stay invested) | Instrument | Rate Of Return ( approx.) | Risk ( Downside Risk) |
| Up to 3 month | Bank Account | 4% | Risk Free |
| Fixed Deposit | 5% -6% | Risk Free up to 1 L | |
| Liquid Mutual Funds | 6%- 7% | Negligible Risk | |
| 3-6 months | Fixed Deposit | 5% -6% | Risk Free upto 1 L |
| Ultra Short Term Mutual Fund( now low duration funds) | 6% – 8% | Slightly higher than liquid fund | |
| 6-12 months | Short Term Mutual Fund | 7%-9% | Slightly higher than low duration fund |
| Fixed Deposit | variable | Risk Free up to 1 L | |
| 1 Year – 3 years | Bank account | 4% | Risk Free |
| Fixed Deposit | 5% -6% | Risk Free upto 1 L | |
| Medium Term MF | 7%-9% | Slightly higher than Short Term MF | |
| Gold | 2%-8% | Depends on Gold Market | |
| More than 3 yrs | Fixed Deposit | 5% -6% | Risk Free upto 1 L |
| Recurring Deposit | 6%-7% | Depend where you invest
Risk free |
|
| Bonds | Depends on Govt. similar secuirty | Market Interest rate risk is there | |
| Long Term Debt Fund | 8%-10% | Little higher than medium term | |
| Real Estate | Varies largely | Highly risky | |
| 5 Yr or more | Fixed Deposit | 7%-7.5% | Risk Free upto 1 L |
| Post office NSC | 7.8% |
Risk Free as Backed by GOI |
|
| Senior Citizen Saving Scheme vs PMVVY | 8.3% | ||
| Post Office MIS | 7.5% | ||
| Kisan Vikas Patra | 7.6% | ||
| PPF | 7.8% | ||
| Bonds and NCDs | 7%-10% | Returns depends on many factors purchase time and duration and prevailing interest rate in market | |
| Life Insurance | 5%-6% | Traditional plans are least risky while ULIPs are riskier bet. | |
| Equity Mutual Fund
Or Debt Mutual Fund |
12% | Risk can be minimized through opting good funds and diversifying your investments. Regularly reviewing your investments. |
Apart from above told options one can invest in stocks, alternate investment vehicles, commodities, precious metals and other instruments also, but these options are very riskier investments.
You can lose all your money in these instruments or gain in multiples of invested amount.
Now we have covered two aspect of investment that is based on Duration of investment and your risk bearing capacity.
To know the best investment option for you, need to dig down deeper.
As each and every individual is different and so are the needs. The investment product which is good for me, may not be good for you.
Therefore before proceeding to make investment one should take notice of the following parameters:
STEP 1
- First of all you should ascertain that after how much time you require money.
- To know this you can relate your investments with any of your life goals such as your children higher education, your own retirement, your domestic or abroad vacation, your children marriage or purchase of any asset like car, house or any other gadget etc.
This exercise will help you understand WHY ? Of your investment.
Now if you relate your investment with your life goals. This will give you a clear picture of HOW LONG ?
You can invest or after how much time you require money.
STEP 2
- Once you know about the duration, now is the time to know your risk bearing capacity.
- Risk beating capacity mainly depends on duration you stay invested, liquid money you have and your life stage.
- Longer the duration, higher equity exposure can be taken.
- Higher liquidity you have (money for your basic expenditure and dependence on invested money), higher equity exposure can be taken.
- How younger you are, higher equity exposure can be taken.
- If above three parameters are not in your favor then you should keep low equity exposure in your portfolio.
STEP 3
- Now set equity: debt ratio for your investment.
- Diversify your investment.
- Diversification is just like buying vegetables for your consumption. Do you buy small quantity of 4- 5 vegetables or you buy one vegetable only for your whole week consumption. So you should invest your money in different category of funds or investments and those too different quantities.
- You can relate it to a pizza or a vegetable (Subzi). You know in cooked vegetables we put different quantity of each ingredient. Diversification is also same in financial investments.
- I mean you need to know after how much time you require money in future.
Conclusion:
Now based on above parameters namely duration, liquidity, your risk beating capacity and your life stage you can choose the best investment option for you, from above given investment options.
I hope that you must have got some insights from this article.
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