Investing is a way of making your money work for you. Disciplined investment, over a long-term can help one create wealth. Know more on Investment Options that can't be ignored in India such as Gold / e-Gold, Land, Plots, House, Apartment, FD, RD, Equity, Derivatives, Bonds, Currencies, Antiques.
There are several investment options available and what you choose will depend on factors like how much risk you want to take, how far your goal is and so on. We look at some of the investment options and what you need to know about each of them.
Gold is a good investment in India because it has high liquidity and provides a hedge against inflation. Gold prices generally tend to go up when the markets are volatile. While one can buy physical gold in terms of coins, bullions or jewellery, they are not easy to store safely.
e-Gold is gold in electronic form and reflect the physical price of gold. You can invest in lower denominations as compared to physical gold. E-gold can be bought and sold through the National Stock Exchange ( NSE) and can also be converted to physical gold. One can also encash E-gold units. When buying E-gold, one does not need to make sure that the gold is pure or worry about its safety.
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An investment in land / plots or house / apartment are real estate investments. Lands invested in good locations can be a great investment as the value can appreciate substantially over time. It can also be leased and provide a regular income.
Another way of investing in real estate is to buy a house or an apartment. They are a good investment, since they have the potential to appreciate over time. A house or an apartment can also give you regular rental income. However, investment in real estate is not liquid and requires a large investment amount.
Fixed deposits (FD) are one of the most popular investment options because they give guaranteed returns, and you can choose the term for which you want to invest your money. However, returns from fixed deposits are taxable (apart from 5-year fixed deposits) and considering inflation, the effective returns are lower.
Recurring Deposit, (RD) allows people to make regular deposits and earn an interest on them. One can choose the period of the deposit and the amount deposited on a regular basis. When a RD matures, the deposit, along with the interest is paid to the depositor.
Equity is an investment where one buys share or stock of companies listed on the stock exchange. Investing in equities have the potential of high returns and hence also comes with risk. Hence, one needs to have deep understanding of the stock market before one can invest in equities.
Retail investors can invest in equities through the mutual funds route, where a pool of money from several investors are used to buy stocks and such money is managed by professional fund managers.
Refer What is a Demat Account & how to Start one? to start trading in equity markets.
These are assets which derive their value from an underlying asset or a benchmark which can be stocks, bonds, commodities, currencies and so on. Future and options are examples of derivatives. However, investment in derivatives can be risky and requires expertise on part of the investor.
Past performance is an indication of future results
Not always true. In many cases, particularly in the equities, commodities more than real-estate. It is important to understand the perspective in which you are investing but not based on past performance.
These are fixed income instruments and are used by governments and corporations to raise money by borrowing from the general public. They are mostly long-term investment options with maturity period that ranges from 5-40 years. While government bonds are the safest, some corporate bonds can be risky.
The price of currencies fluctuates on a regular basis, so buying and selling different currencies in the foreign exchange or forex market is an investment option. However, the currency market is volatile, and these investments are not suitable for the retail investor.
Antiques refer to rare or old items or works of art whose value may increase over time, sometimes substantially. Investment in antiques is an alternative investment and not a regular investment choice. Though they can provide good returns, it is not a suitable investment for the regular retail investor.
Both National Pension Scheme (NPS), Employee Provident Fund (EPF) are designed as pension cum investment schemes for the citizens of India. While investment in to NPS can be done by any citizen, only employees can investment in to EPF. As these schemes are government backed, it's safer investment compare to others and potentially help during the retirement times.
Refer a comprehensive article on Best Income Tax Saving Investment Options in India
Typically, friends and family are the main source of funding for small businesses or a Startup, but these days investing in small businesses are getting popular though the business is away from the family. 98% of Indian businesses are Small Businesses. Tata Group is also started as a Small Business at its inception. Hence, identify the right business, right founder to invest a small stake with a long term horizon is the key. Sure that this is one of the risky but most involved, satisfying investment that could make a difference in giving jobs, and for a larger societal impact.
Refer Small Business Help Center for a comprehensive list of articles related to Small Businesses or Startups.
While it is important to understand the features of each investment option before investing in them, it is also important to spread one's investment across different asset classes. Disciplined investment, over a long-term can help one create wealth.
Having all assets in a most favourable investment
While you are the best person to understand your portfolio and perspective, it is very risky to keep all eggs in one basket.
Make sure you have a balanced portfolio and re-balance the same from time to time based on market and geo-political conditions.