1. Investment in Equities
Equity markets are considered the best type of investment to gain maximum returns from the money invested. Analysis also suggests that equities provide the highest returns as compared to any other investment. But high returns are always associated with higher risks. While the chance of a stock doing well in the equity market is high, so are the possibilities of its downfall. The risk can be minimised by investing in a mix of high and low risk options.
Things to Keep in Mind While Investing in Equities:
- Doing good research before investing in a scheme is prime. Don’t follow the herd mentality, find out which one works best for you.
- When investing, keep the long-term future in mind. Having a vision of 10-15 years down the line is your best bet on getting maximum returns on your investment.
- While the stock market is known for its high and quick returns, it’s is equally risky. Thus make sure that no more than 50% of your savings in the stock market. Focus on diversification
- Before you start investing, ask for advice on the stocks that have been doing well. Keep an eye on their performance before you decide to invest your own money in it. Never make the mistake of investing in random stocks of unknown companies.
2. Investment in Mutual Funds
While stock markets are known for their volatility, mutual funds are renowned for their risk-return balance. The advantage of a MF is that one can have a diverse investment portfolio across many securities.
Mutual funds give you the option of investing in equities belonging to different sectors like finance, healthcare, technology to reduce overall risk. In the event of one sector not performing well, there will be others in your portfolios which are in profit.
Systematic investment plan is the most efficient and convenient way of investing in mutual funds. In an SIP, a fixed sum of money is deducted from your account every month and is it invested in a mutual fund. The invested amount doesn’t have an upper limit, and it can be increased or decreased at any time.
3. Investing in Real Estate
Real estate has always been India’s go-to investment option. It is also one of the fastest growing investment sectors. The pattern and purpose of realty investments has changed over the years. Previously, people would purchase homes, plots or commercial property for their own use. Due to a change in the trend, real estate investments are being made with the goal of making a higher profit by sale of the property in the future.
Key Points to Keep In Mind While Investing:
- Unlike any other kind of investment, there is no minimum or maximum limit for investing in real estate. One can own any number of properties of any cost, as long as they are financially capable.
- Due to high demand, price are usually manipulated and artificially driven up. Look carefully before purchasing.
- Tax exemption cannot be availed for real estate investments.
- The resulting profit on sale of the property is fully taxable.
One has to be wise while investing. If you choose to buy a plot in a remote area, then you should be wise enough to judge if the property will develop in the coming years. Or else the price of the land will either depreciate or remain stagnant. On the other hand, if the area is tauted to develop drastically, one can make a steep profit from the investment.
4. Investment in Public Provident Fund
The PPF or the public provident fund is an investment plan offered by the government of India. It is the most secure long-term tax saving investment plan available in India.
Whether you are a salaried individual or a businessman, a PPF must be included in your investment portfolio. It not only balances out your other high risk options, but also helps you save on income tax under Sec 80C of the Income Tax Act.
A public provident account can be opened in any nationalized and authorized bank and a few specific private banks as well as the post office. A deposit in the PPF must be done every year.
Key Points of Public Provident Fund:
- A PPF is a long term investment, whose period is 15 years. It can be extended a further 5 yars at every renewal.
- The minimum amount that must be invested is Rs 500 and the maximum is Rs. 1,50,000 for it to be still free of income tax deduction.
- PPF offers a high interest rate of 7.8% which even surpasses that of a fixed deposit.
- Compound interest is earned on your investment, resulting in high returns.
- You are not allowed to withdraw your account before it completes six years.
5. Recurring Deposit Investment
A recurring deposit is the ideal option for those who are looking for monthly or quarterly investment in a security plan. It isn’t a suitable option for those looking to do a lump sum investment. A recurring deposit is opened for a fixed time-period, during which the investor has to deposit a certain sum at a pre-determined interval. The interval maybe monthly, quarterly or even yearly, depending upon the terms of the deposit scheme.
Recurring deposits are offered by a bank as well as the post office. Allbanks and post offices across the country offer RD schemes.
(i) Bank Recurring Deposit
Key points of Bank RD:
- The minimum tenure of an RD in a bank is 6 months and the maximum is 10 years.
- The minimum amount that has to be deposited each month is Rs 1000.
- There is no fixed interest rate, as different banks offer different rates. The rates range between 7% and 9.25% per annum.
(ii) Postal Recurring Deposit
Key points of postal RD:
- The tenure of postal RD is 5 years.
- The minimum amount that must be deposited is Rs 10. Higher amount deposits can be made in multiples of 5. There is no upper limit for deposit amount.
- The current rate of interest is 7.4% per annum which is compounded quarterly.