Investing your money is very important as it provides financial security at the time of retirement. Investing grows your money and helps to achieve financial freedom. There are various investment options available to invest money, one needs to choose the right investment avenue based on their financial goal. In this Blog, I have written about the top 10 investment avenues available to invest. Let us go through each one by one
1. Stock Market
Stock market investing is the most common way to grow your wealth. By investing in the shares of the company one can be the partial owner of that company, where you can be the part of profit sharing of the company in the form of dividends and also earn from the capital appreciation of the shares. Stock markets can be volatile at times, but they provide better returns for the longer duration compared to most of the investment avenues.
In India, due to the increase in the number of finfluencers people are getting more attracted to invest in stock markets. It is also an investment avenue that can beat inflation and provide reasonable returns to investors. However, as an investor, one must do proper research before investing in stock markets.
To understand more about investment in the stock market read our blog
Bonds are issued by the government, corporates, and municipalities. Bonds are the debt instrument issued for the purpose of raising money. These are issued for fixed tenure and the rate of interest on these bonds is usually lower compared to the other investment avenues. Thus, Bonds are considered as less risky assets.
Bonds are considered safe because if the company goes bankrupt, bondholders are the first who must be paid before all the other stakeholders. There are different kinds of bonds in the market some of them are Fixed rate bonds, Floating rate bonds, zero coupon bonds, perpetual bonds, Inflation-linked bonds, convertible bonds, callable bonds, puttable bonds, etc. The rating of the bonds must be checked by the investor before investing in the bonds. The higher the ratings, the lower the risk.
3. Fixed Deposits
FDs are One of the safest and easiest to liquidate investment options. Fixed deposits are offered by banks, NBFCs, Post offices, and credit Cooperative societies at a fixed rate of interest for fixed tenure. FDs provide a reasonable return with less risk. Interest earned on fixed deposits is taxable in India if it is above Rs 10,000.
Various loans can be taken against FD some of them are educational loans, personal loans, etc. Investment in FDs cannot beat inflation. Investment in FD can be used as Emergency funds as it is easy to liquidate.
4. Real Estate
Real Estate investment will yield high returns if the investment is made for the long term. There are two ways to earn income out of real estate one is through renting out properties and another by appreciation in the value of property. Throw research must be done before investing in real estate, as there are various frauds happening around this industry.
Also, before investing in real estate charges such as stamp duty, Registration fees, taxes, etc. need to be taken into consideration. It is a risky investment asset class, and it is time-consuming to liquidate such an asset.
Gold acts as a hedge against inflation and the risk involved in investing in gold is low. Gold has a historical appearance in this world. Investment in gold can be done in many ways such as buying jewelry, coins, bars, gold mutual funds, Digital Gold, Gold ETFs, and Gold bonds. Investments in sovereign gold bonds are considered beneficial compared to other ways of investing in gold. As there is no GST chargeable at the time of buying and selling the gold investors receive an annual interest of 2.5% on the investment along with an increase in gold bond value. Gold investments are easy to liquidate.
6. Mutual funds
Mutual funds accumulate money from multiple investors to invest in multiple assets like equities, bonds, gold, etc. This diversifies the portfolio of the investor and reduces the risk of the investor. A fund manager manages the money of a mutual fund. The fund manager will have extensive investment knowledge. Working professionals who don’t have enough time to evaluate the stocks can invest in equities through mutual funds.
There are various types of mutual funds in the market – Debt, Equity, Hybrid, and many more. Based on your risk appetite you can choose one. Investment in mutual funds can be done in the long run as well as short run. There are certain mutual funds that can be used for tax exemption purposes, these funds will usually have a lock-in period of 3 years.
In recent years cryptocurrencies have gained popularity because of their high returns. With high returns come the high-risk, cryptocurrency market is highly volatile, and extensive research Is needed to be a profitable investor in cryptocurrencies. In a country like India, the tax rate on cryptocurrency is around 30% along with a 4% cess. So, you need to consider all these factors before investing in cryptocurrencies. Some of the famous cryptocurrencies are Ethereum and Bitcoin.
8. ETF-Exchange traded funds
Exchange traded funds are like mutual funds but the major difference in ETFs is they are traded on the stock market like other stocks and do not require initial minimum investment, They also have lower fees compared to mutual funds. There are various types of ETFs; some of them are stock ETFs, Commodity ETFs, Bond ETFs, Sector ETFs, and Index ETFs.
9. Public provident fund
A public provident fund is a long-term investment scheme popular for individuals, especially working professionals who want high and stable returns. Since the plan is designed and backed by the government, Investment in PPF provides various tax benefits to its investors. Public provident fund has a lock-in period of around 15 years.
A loan can be taken against a public provident fund. You can invest in such a scheme if you want to diversify your portfolio and have a huge corpus at the time of retirement. PPF is the safest investment option and the return on such an investment can yield up to 7-8% return.
10. REIT (Real estate investment trust)
A real estate investment trust is a company that owns numerous properties through which it gets income in the form of rental yield. These properties include office space, apartments, warehouses, shopping malls, hospitals, hotels, etc. In REIT the underlying asset is Real estate holdings unlike in mutual funds the underlying asset is Equity, gold, Debt, etc.
To own real estate, you need huge funds but to own REIT units one needs to invest Rs10,000-15,000 minimum in IPO as per SEBI. REIT is a new concept in India that has been recently introduced so one with a lower income can also own Real estate in the form of REIT units. Examples of REITs in India – Brookfield India Real Estate Trust, Mindspace Business Parks REIT, etc.
These are the top 10 investment avenues where you can invest your money. There are other investment options apart from these, but I feel these are the top 10 in the present market condition of India. Choosing the right investment option depends on your financial gold, Risk appetite, and investment horizon. To earn money, it’s difficult but to lose it does not require much time. Remember that all investment comes with some level of risk, so before investing do proper research, and seek advice from the investment advisor.