Do you wish to see your money work for you while you work on other aspects of life? Investing your savings is a sure shot of way of building a corpus for your future. Here, we give you the best investment options available in India for your short-term as well as long-term investment goals.
Why Should You Invest?
Before you enter the vicious cycle of giving into your extravagant habits, falling short of money, and ending up in debt, it is important to think of the future. When we compare ourselves to the older generations, things have changed drastically.
The following are some of the most important reasons for you to start investing now:
- Grow Your Wealth
If you know where to invest money in India, you can easily grow your wealth. Instruments like a certificate of deposit, stock or bonds offer good returns in the long run. This helps in building your wealth over time.
- Save for Retirement
There’s nothing wrong if you believe in living in the present. However, that doesn’t mean you should not safeguard your future.
If you do not have a financial cushion for your post-retirement years, you may have to lower your standard of living and compromise at different fronts. This is why it’s best to invest in retirement plans according to your risk tolerance and use the returns to lead a comfortable life as you retire from your job.
- Earn Good Returns
To grow your money, you must put it in a place where it can yield returns. The higher return you get, the more money you’ll make. Investment instruments offer the chance to get higher returns than a savings account.
The dream of having a car in the 20s, a house in the 30s and walk the globe before turning 40 has completely changed the financial dynamics. That’s why you should start investing as early as possible.
Where to Invest Money in India?
Now that you know why to invest money, the next thing to focus on is where to invest. You can choose a suitable investment vehicle from numerous options available to grow your wealth over time.
Let’s look at the top investment options in India:
Direct Equity & Stocks: High Risk-Return Ratio
Individual equity stocks listed or unlisted on the stock exchange is known as direct equity – stocks. When you invest in direct equity, you earn capital gains or dividends. Plus, you also get partial ownership of that company.
However, you must have enough time and market knowledge to make the most out of your investment in direct equity.
For investing in direct equity, you also need to have a demat account and a bank account. Also, you need to have a high-risk appetite if you want to benefit from stocks.
Mutual Funds: Moderate Risk- Good Returns
If you look for where to invest, you’ll surely get mutual funds as an option. Mutual funds are gaining popularity among investors and for all the right reasons.
Mutual funds pool investments from numerous investors and institutions with a similar objective. A fund manager takes care of the pool of investment, so you don’t need to spend a lot of time.
Remember, returns are not guaranteed with mutual funds as it depends on the market movement.
Fixed Deposit: Minimum Risk – Guaranteed Returns
If you are looking where to invest money in India, let us tell you that three things are very common here – street food, festivals and your parents urging you to invest in FDs.
A fixed deposit is a traditional form of investment and part of every investor’s portfolio. Wondering why it’s a common investment instrument?
A fixed deposit is a safe investment vehicle as market fluctuations do not affect the interest rate you receive. If you don’t have any appetite for risk and want decent returns, FD is a great option.
However, FD comes with a fixed lock-in period. This means that you cannot withdraw money before the maturity period.
Recurring Deposit: Affordable – Guaranteed Returns
Like a fixed deposit, a recurring deposit is another fixed tenure investment option allowing investors to invest a fixed amount every month.
A recurring deposit helps you earn a fixed interest rate and build a corpus over time. When investing in a recurring deposit, you must compare the interest rates across banks to get the best possible returns.
Public Provident Fund: Govt. Backed – Safe – Fixed Returns
If you are on the lookout for a long-term tax saving investment option to cushion your IInd innings, Public Provident Fund is a great option to consider.
Public Provident Fund is offered by the Government of India. PPF interest rate (7.1%) gets revised on a quarterly basis. The corpus you withdraw at the end of 15 years is tax-free.
Employee Provident Fund
Another retirement scheme for salaried individuals is the employee provident fund. It helps you save tax as per section 80C of Income Tax.
An EPF deduction is a percentage of an employee’s monthly salary, and the amount is matched by the employer.
National Pension Scheme
The National Pension Scheme is a relatively new investment option offering high returns with moderate risks. Investors who invest in NPS will stay locked in until retirement and can earn high returns as their deposit money is invested in capital market by the govt. approved fund managers.
How to Invest Money Wisely?
To invest your money wisely, you need discipline, planning and continuity. Here are some important points to consider to invest wisely:
- Know Your Financial Goals
Before investing your money, especially in long-term investment instruments, you must have a holistic view of your financial goals. Make a list of your goals to estimate the amount you need to achieve your long-term goals.
2. Start Investing Early
If you begin investing early, you can get the maximum benefit from the power of compounding. It helps you accumulate a large corpus by multiplying the wealth. Also, many investment plans like a ULIP or life insurance policy comes with lower premium when you invest in your 20s as compared to your late 30s or 40s.
3. Steer Clear of Market Noise
When you enter the market, you’re bound to hear a lot of opinions. Suddenly, everyone around you will become an expert. But if you’re investing your money for the long term, you should get professional advice, preferably from your CA or someone with a good knowledge of capital market.
4. Diversify Your Portfolio
It’s never a good idea to put all your eggs in one basket. Thus, you must diversify your portfolio by investing in different investment instruments, such as bonds, equities, EPF and PPF etc.
Where to Invest Money: Key Takeaways
- Investing money in the early years can provide a financial net for the future.
- It’s important to know where to invest to earn high returns.
- You can invest money in direct equity, NPS, EPF, PPF, fixed deposit and recurring deposit.
- Make sure to invest in different investment instruments to cut down the risk.
Where to Invest Money: FAQs
When it comes to investment, the sooner you start, the better it is. This is because investing early allows you to benefit from the power of compounding.
You can invest your money into several investment instruments. Some of the best instruments to grow your wealth in stocks, mutual funds, fixed deposits, employee provident fund and National Pension Scheme.
One of the best investment instruments to get good returns is direct equity. It outperforms other investment vehicles. However, it comes with a risk as returns depend on market fluctuations.