How to earn money by investing and where to invest so that you can save a good amount for later years is a dilemma that many individuals encounter.
There are numerous options, and an individual needs to choose the best-suited investment plan to grow their savings.
We will look at some of the most popular investment opportunities to help investors understand “How to earn money by investing”.
Some investment options to earn money
1. Debt Mutual Fund Schemes
Debt Mutual Fund Schemes are fixed-income generating securities with a fixed interest rate and maturity date. These are good options for short and medium-term investments and ideal for risk-averse investors who are looking for good returns and stable investments.
The gains from the Debt Mutual Fund Schemes are eligible for indexation benefits after three years and are taxed at 20%.
Some of the important Debt Mutual Fund Schemes are Certificates of Deposit, Commercial Papers, Treasury Bills, Corporate Bonds, Government Securities, etc.
There are different types of Debt Mutual Funds, like Liquid Funds, Money Market Funds, and Corporate Bond Funds and investors must choose the right option.
Open an account on the Edufund App and start investing in Direct Mutual Funds with no hidden costs.
2. Equity Mutual Fund Schemes
Equity Mutual Fund Schemes are the preferred investment tools of investors who are ready to take high risks for higher returns. The fund manager has to invest 65% of the assets in equity shares of different companies and the balance in any other money market instruments.
The Equity Mutual Fund Schemes can be actively managed by the fund manager by handpicking the stocks or passively managed by tracking the market index like the ETFs.
These schemes are categorized based on investment strategies like the Sectoral Funds, market capitalization like the Large Cap Funds, or tax treatment like the ELSS Funds.
3. Investment in Gold
Investment in actual gold, like bars, coins, or ornaments, is one of the traditional investment options, but it has several drawbacks like safety and higher cost. Gold ETFs and Sovereign Gold Bonds are comparatively safe and cost-effective investment schemes.
4. Equity Shares
Investing in equity shares is not for faint-hearted investors as the risk is very high, and there is no guarantee of returns.
Over the years, equity shares have delivered higher returns compared to other asset classes. Hence investors should invest with care.
5. Bank Fixed Deposits
Bank Fixed Deposits have been the most common choice for investors who are looking for safe and secured investment options and assured returns. FDs can be for short, medium, or long periods depending upon the individual choice.
Banks offer a 5% to 7% rate of interest depending upon the tenure, although senior citizens are granted better interest rates than the general population.
The Government of India has recently increased the limit of insurance cover on Fixed Deposits for both the principal and interest in case of bank failure to INR 5 Lakhs from the previous amount of INR 1 Lakh for each depositor in a bank.
6. Sweep-in Fixed Deposit
The Sweep-in Fixed Deposit allows the investor to enjoy the interest rates of a regular bank FD with liquidity and flexibility features that the FDs do not enjoy.
For such a scheme, the account holder of a savings or current account gets his account linked to an FD. He has to specify a certain amount, above which the additional amount must be converted into an FD without any hassle. It is easy to withdraw the amount without penalties.
7. Post Office Schemes
The Post Office Schemes are government-backed safe, and secured investment options. Some of them also offer tax-savings benefits U/S 80C of the Income Tax Act.
The interest rates are generally set by the government at the start of every quarter of the fiscal year.
Prime examples of Post Office Schemes are National Savings Certificates with 6.8% per annum interest compounded annually, Sukanya Samriddhi Account with 7.6% per annum interest compounded annually, and Kisan Vikas Patra with 6.9% per annum interest compounded annually.
