Invest today for better tomorrow: Best investment options.
Most of us have a single source of income and there are various needs that are immediate, medium and long term. If we move from one goal to others with our savings, we would be left with nothing for our long-term goals. This is why it is important not just to keep money in savings but use the money to make investments and multiply your savings. This will help you create wealth in the long run. If you start your investments early, the time and compounding interests will leave you in a pleasant surprise. Your investments will multiply your wealth beyond imagination over a long period. If you invest in a disciplined manner and give your investments plenty of time you can achieve goals without much pain, such is the power of compounding interest. But most investors want to make money as fast a possible without risk. In reality risk and returns are inversely related, which means higher the risk higher the returns. So while investing you must look at your risk appetite.
The income that comes from investing can come in different forms like financial profit, interest earnings or appreciation of an asset.
Here are a few smart ways of investment for the long term.
- Direct equity: Investing in stocks is not a cakewalk for everyone. It is highly volatile and there are no guaranteed returns. Also, it is important to pick up the right stock at the right time. However, over long periods, equity has been able to deliver higher returns compared to all other assets classes.
- Equity mutual funds: Equity mutual funds predominantly invest in equity stocks. Equity schemes are categorized according to market capitalization or the sectors in which they invest. You can expect 15 to 20 % returns.
- Debt mutual funds: This type of investment is ideal for investors who want steady returns. They are less volatile and hence less risky. They primarily invest in corporate bonds, government securities, etc. The current market return is around 8%.
- National Pension Scheme: NPS is a long term retirement-focused investment option. The minimum amount to invest is 1,000. It is a mix of equity, fixed deposits, corporate bonds, government bonds, etc. Based on risk profile you can decide how much to invest in equities through NPS. The current market return is up to 11%.
- Public Provident Fund: The PPF is one product a lot of people turn to. Since PPF has a long tenure of 15 years, the impact of compounding of tax-free interest is huge. This one makes a safe investment. One can double the investment after 15 years. The current rate of interest is 8%. The minimum amount to keep active is just Rs 500 and the maximum amount to invest in a financial year is Rs 1.5 lakh. The PPF can be extended for another 5 years without any fresh contributions. This is also a tax saving option.
- Bank fixed deposit: A bank fixed deposit (FD) is a safe choice for investing in India. As per the need, one may opt for monthly, quarterly, half-yearly and annual investment. Currently, it stands at around 7.25 percent per annum for tenures ranging from 1-10 years across banks. Senior citizens get an extra 0.25-0.5 percent per annum depending on the bank.
- Real estate: The house that you are living in is for self-consumption and not investment. If you do not intend to live in the second property you buy can be your investment. The location of the property will decide the value of the property and its rental income. Investment in real estate delivers a return in two ways, as capital appreciation and rentals. The only drawback is that real estate investment is highly illiquid.
- Gold: For many, this is the most likable investment option because of its high liquidity. During inflation, gold offers a much more stable investment than cash. Moreover, in times of increasing demand, the price of gold can be higher. Still, this is not my favorite option due to its disadvantages. The only return you expect when the gold price goes high. Gold needs physical storage and there is always risk attached.