Gone are the days when people could depend upon savings to ensure financial security. Money in savings accounts is secured, but its value remains the same. With an increasing inflation rate, it is challenging to fulfill your goals with savings. This is where investment comes into play. In investment, you allocate your money to different financial and non-financial asset classes to generate income and capital appreciation (increasing the value of your existing assets). Investing provides financial security and an opportunity to grow wealth with its inflation-beating returns.
What is Investment?
In simple words, investment is putting your money to work. Investing allocates your money in different assets such as bonds, stocks, real estate, gold, equity, etc. The returns generated become a source of income and help you grow wealth and reach your financial goals.
Additionally, investment also enables you to develop a financial discipline. Every investor wants to invest in the best investment option available. An ideal investment involves minimum risk and high returns. However, this is difficult as the returns are directly proportional to the risk. So, the goal should be to find an investment tool that provides risk-adjusted returns. A risk-adjusted return is used to measure the potential returns by evaluating the risk involved.
Before you begin to invest, you have to consider the critical factors such as:
- Budget
- Financial goals
- Risk-appetite
- Return on Investment (ROI)
- Time horizon
- Liquidity
- Market volatility
- Taxation
Now that you know the points to keep in mind while choosing the right fit, you can compare and select the best investment option. Here is a list of the best investment options in India:
1. Fixed Deposits
Fixed deposits are considered the most secure and stable option to accumulate higher returns. FD promises to provide guarantee returns with hassle-free renewal on an annual basis. In addition, you get the benefits of compounded interest in fixed deposits resulting in higher returns.
2. Mutual Funds
Mutual Funds involve a higher risk but also provide higher returns than Fixed Deposits. In market-linked investment, your money is invested in different classes such as equity, debt, or a hybrid scheme. A fund manager is allocated that helps you obtain a diversified portfolio resulting in minimized risk and higher returns, regardless of the market volatility. In addition, mutual funds offer transparency, flexibility, liquidity, the lowest lock-in period, and tax benefits.
3. Direct Investment in Equity
Investing in direct equity such as shares and stocks allow you to earn lucrative returns. With adequate knowledge and skills, you can potentially earn a handsome income and grow your wealth in the long run by capital appreciation. However, one must have a demat and trading account to begin investing in the stock market.
4. Unit-Linked Insurance Plan
ULIP is considered one of the best investment options in India due to its dual benefits of insurance and investment. A part of the premium is used to provide insurance cover, while the remaining is used to invest in different units. In addition, ULIP provides transparency by giving stable Net Asset Value (NAV) updates. The flexibility to pay premiums and switch funds help you to modify the plan according to your preferences. Also, the amount paid at maturity is tax-free.
Public Provident Fund
Public Provident Fund(PPF) is one of the best investment options in India for a long-term investment. The tenure of the secured money is 15 years, but you can extend the lock-in period for another five years. The amount you get is tax-free and includes compound interest. You can open a PPF account at the nearest bank or post office. Another advantage is using the PPF balance as security when applying for a loan.
Senior Citizen Savings Scheme (SCSS)
Senior Citizen Savings Scheme is the best investment option for people above the age of 60 years. This government-backed scheme helps you maintain the flow of income after your retirement. The policy’s tenure is 5 years but can be extended for another three years. The minimum investment amount is ₹1000, and the returns are usually higher than the savings and FD accounts. SCSS is a safe and reliable policy allowing premature withdrawal with an appropriate penalty.
Conclusion
It is crucial to accumulate and manage your wealth to secure your finances. Choosing the best investment option and investing wisely can help you achieve your financial goals and beat inflation. As an investor, you must modify your portfolio according to your preferences to get the desirable returns.
