In order to reap healthy returns on one’s hard earned money, their investments must be sound enough to meet the cash flow expectations of the person.
One needs to study the market in which he/she is planning to invest and do sufficient research to gauge the soundness of an investment. A good starting point are low risk investments such as bonds, mutual funds and retirement accounts.
There are multiple avenues for investment opportunities available for each class of investor, depending on their risk appetite and experience. The key thing one needs to remember is that wealth building takes time, so one needs to be patient with his/her investments.
There are multiple investment vehicles available in India. So, let us talk about them here:
Public Provident Fund (PPF)
If one is looking for savings-cum-tax saving instrument in India and a low risk investment, then a Public Provident Fund makes a lot of sense.
One can get good returns in such an investment as it is a tax saving one and offers medium returns. Moreover, PPFs are fully guaranteed by the Central Government.
Mutual Funds & Systematic Investment Plan (SIP)
A mutual fund is an investment vehicle made up of a pool of investments collected from multiple investors. The purpose of a Mutual Fund is investing in securities like stocks, bonds and the like.
Mutual Fund and Systematic Investment Plans are a good investment opportunity in India for investors who are looking for a good balance of risk and return as they are managed by professional money managers.
There are various types of mutual funds, which include small-cap, mid-cap and large-cap mutual funds. Such investments have good growth potential and make sense if one doesn’t have a short term financial goal (less than five years).
Investing in real estate is a low risk investment but it requires quite a lot of capital initially. The advantage of real estate investing is, once you have invested you can start getting returns really quickly in the form of rental income because the demand for residential housing remains on the higher side.
This can be a high return investment if one has invested their capital in a good locality for real estate.
This investment opportunity is dependent on the risk appetite of the investor and may not be the best option for investors who have just gotten started with investing. A strong understanding of the market coupled with market trends is a must if one wants to be a good stock market investor.
As with any investment, the company one chooses to invest in is the prime factor which will decide the kinds of returns one gets. Investing in a company which has a strong track record is key. Here, long term investing makes a lot of sense as most of the companies will pay a dividend to the investor if he/she holds the stock.
Initial Public Offering (IPO)
Once a company has completed its Initial Public Offering (IPO), its shares are tradable on a stock exchange. Investing in the business world comes with its own risks – it’s really hard to analyse the technical of an established company.
Therefore, investing in an Initial Public Offering or IPO can be a viable option only and only if one has done his/her due diligence. When a company gets listed, its stock value is almost guaranteed to rise. This option is good for the short term as well as long term.
Investing in the royal metal, in any form (gold bar, gold mutual fund, etc.) has historically yielded returns and will continue to do so for the foreseeable future. Gold will highly likely yield value in the long term. It is a wise decision to invest in gold. Such an investment can be regarded as a relatively low risk investment because the value of gold remains more stable as compared to other asset classes.
Moreover, a person can avail various gold related schemes such as gold loans and even overdraft facilities if he/she has gold.
Fixed deposits and Post Office Monthly Income Scheme
These are low risk investments. If one is looking for fixed monthly returns, one can invest in FDs and Post Office Monthly Income schemes. There is negligible risk in such investments.
Having talked about the above investments, it is always a better option to safeguard one’s investment and diversify one’s portfolio by keeping an optimal balance of risk and return, and not depend on a singular source of income.
Diversification will help protect one’s investment against market volatilities and fluctuations. It is said that one can never gain enough knowledge about investing. The more one can educate him/herself about investment opportunities, the better.
Always remember this quote by legendary investor Warren Buffet – The more you learn, the more you earn.