Investing in financial instruments provides you with the opportunity to build your wealth over time. By investing, you may easily reach your financial goals, such as establishing a new business venture or saving for your retirement. However, it is necessary to invest in those financial vehicles that have the potential to earn strong rates of return. By investing in various top-performing instruments, you may not only enjoy portfolio diversity but also reap good returns in the long run.
With a plethora of investment options available in the market, determining the right mix often becomes a cumbersome task. You may explore the following six best investment options and choose the ones that are well-suited to your financial needs.
- Mutual funds
Among the numerous investment options in India, mutual funds are one of the most attractive options. It is advisable to make these a part of your wealth-building portfolio. A mutual fund is an avenue that helps you invest in numerous market-linked instruments. Based on your risk appetite, you may choose from among various types of mutual fund schemes, such as debt funds, equities, or balanced funds. Debt funds are best-suited for the risk-averse. Some popular debt mutual fund options include corporate bonds, bank fixed deposits, post office savings, and money market instruments. Equity funds, on the other hand, are a very popular option if you are willing to take a higher risk. A variety of equity fund options are available, such as small caps funds, large cap funds, mid cap, and multi-cap funds. Alternatively, you may opt for balanced funds, which are a hybrid of debt funds and equity funds. Balanced funds are ideal if you wish to earn higher returns but do not wish to take on equity-related risks.
- Life insurance policy
A life insurance policy provides the much-needed financial security in of the case of the death of the policyholder. The insurance provider is required to pay the sum assured for the benefit of your loved ones. This amount may be used to fulfill their financial obligations. The amount may be used to pay any outstanding debt, such as credit card bills, home loans, and an auto loan, among others. It also acts as an income replacement, especially if you are the breadwinner of the family. Investing in a life insurance policy provides the peace of mind that your family needs. It assures them that they will be taken care of financially in the event of your demise.
- Public Provident Fund
Public Provident Fund (PPF) has always been one of the most popular and long-term investment options in India. It is the safest and most secure investment product, and is completely tax-free. You may open a PPF account at a bank or a post office. The minimum amount that can be invested in one fiscal year is INR 500. The amount is capped at INR 1,50,000. The invested amount is locked for a period of 15 years, thus enabling you to earn compound interest from the account. PPF accounts offer a good return on investment, as the rate of return is higher than that of recurring deposits or fixed deposits. However, it is important to note that invested amount in the PPF account may be withdrawn only at the end of the sixth year and not before that.
- Real estate investment
Another attractive return on investment option is real estate. It is one of the fastest growing sectors in India. It also holds attractive prospects in sectors like hospitality, housing, retail, and manufacturing, among others. Thanks to the stability and flexibility of the real estate sector, you may consider such an option to earn good returns. Real estate is a long-term hold and generally appreciates with time.
You may also consider investing in Real Estate Investment Trust (REIT). A REIT is an entity or a company which owns, controls, or finances income-producing real estate. The amount received from many investors is invested in real estate properties such as shopping centers, residential homes, office premises, and warehouses, among others. Investors are eligible to receive dividends from the capital gains received from the sale of the assets.
- Equity shares
Equity shares is an excellent long-term investment option. Through the purchase of shares, investors become members of the company and may exercise their voting rights. The two-fold benefit of investing in equity shares is that you may receive capital gains as well as regular dividends. Capital gains arise due to the increase of the market price of shares over time. Additionally, the higher the profitability of the company, the greater your dividends will be. Therefore, it is imperative to do your due diligence and invest in profitable companies.
- National Pension Scheme
National Pension Scheme (NPS), a government-backed scheme, is indeed one of the most popular investment options in India. Only citizens of the country, who are able to comply with Know Your Customer (KYC) norms, are eligible to invest in such a scheme. You may invest a certain amount on a monthly basis or through a systematic saving plan during your working years. After retirement, you may use the accumulated corpus to meet various financial obligations. NPS acts as welfare system to help you meet your expenses during your golden years, which is when you stop receiving your regular income from a job. You may therefore invest in this scheme and in the future reap the numerous benefits it has to offer.
Every individual invests according to his/her own goals. While some wish to secure their family’s financial needs in their absence, some invest to live a relaxed and stress-free retirement life. Therefore, it is necessary to identify your specific goals and choose the right investment vehicle based on those goals. You may make your choice from the aforementioned list of best investment plans and enjoy financial security in the long run.