Want to invest in India? Here are the best top 10 investment options in India available to park your money!
Every investor wants to enjoy ultra-high returns by undertaking ultra-low risk. However, this possibility is non-existent in reality. The risk-reward equation says that one has to experience more trouble to get high returns.
So, a sound risk-reward analysis must reap the highest possible benefits before choosing an investment. India is the land of possibilities. The Indian economy is growing at a great pace, with a vast population dividend to reap.
With India’s ever-expanding infrastructure, high level of competitiveness with the other major global economies, and very significant economic influence, India will be a powerhouse of economic growth in the future.
For you to become a part of this growth journey and increase your wealth in the meantime, we’ll tell you about ten ways to invest in India.
There are two categories of investments in the broad aspect
- Financial investment
- Non-financial investment
Financial investment includes stocks, bonds, and different bank products, whereas non-financial investment assets include gold and real estate
Top 10 investment options in India
1. Equity shares
Among all the investment products listed here, direct equity investment offers the highest returns in a combination of stock appreciation and dividends.
Equity markets often tend to be considerably volatile in the short run but give better inflation-adjusted returns when a long-time horizon (10 years and beyond) is taken into account.
You can directly buy and sell shares of companies listed on the BSE (Bombay Stock Exchange) and the NSE (National Stock Exchange).
You can take different types of trades like intra-day trade (buy and sell on the same day), swing trade (buy and sell over a week or a month), and invest for the long term.
You can diversify your portfolio by purchasing stocks of companies from different industries – thus, taking into account the growth in various sectors of the economy.
Because of the unpredictability of the world markets and the possibility of sectoral turbulence, equity is the riskiest asset class (not considering cryptocurrency here) out there to invest in.
There always remains a chance of potential capital wipe-out when the markets crash during challenging economic scenarios.
2. Equity mutual funds
Equity mutual funds are packages that invest in inequities. For example, instead of purchasing individual stock from a particular industry, you can purchase a mutual fund that encapsulates the growth of that industry, these are less risky because of their diversified nature.
According to SEBI rules, an equity mutual fund invests more than 65% in equity. An equity mutual fund may either be managed actively or passively.
The returns on these mutual funds also depend on the fund manager’s expertise.
3. Debt mutual funds
As the name suggests, debt mutual funds invest most in debt securities – these funds appeal to investors with a low-risk appetite with the request for steady returns.
Debt mutual funds make investments in government bonds, corporate bonds, treasury bills, and other money market instruments.
Low risk does not mean any risk. Debt mutual funds bring along credit risks and interest rate risks that you need to study well before investing in debt mutual funds.
4. Fixed deposits (FD)
A bank FD is safer than almost all investment options out in the market. With a high degree of safety come meager returns.
FDs are a way to keep your money (the returns are often so low that they do not even match inflation figures), not an instrument to grow your money.
In the case of bank default, the depositors get insurance for up to Rs 5 lakh each (under the Deposit Insurance and Credit Guarantee corporation).
5. Bonds
Bonds are fixed-income securities representing a loan advanced by a borrower to the investor. When governments or even listed companies want to raise money in debt, they issue bonds to the public. You can purchase these bonds in the bond market.
Bonds offer fixed interest payments to the bondholders (a variable interest payment system is also there). Prices of bonds and the rate of interest move in the opposite direction.
At maturity, the entire principal has to be paid back. There are different types of bonds, like government bonds, corporate bonds, and municipality bonds.
The risk of investment in bonds also arises from potential inflation outstripping the rate of interest on the bonds. Furthermore, when you buy bonds that are not well-rated, there remains a chance of default, wherein you might lose out on what you lent out.
6. Pradhan Mantri Vaya Vandana Yojna (PMVVY)
This investment instrument is for senior citizens (age > 60 years). PMVVY provides a guaranteed return of 7.4% per annum.
The payout offered is pension income payable either monthly, quarterly, bi-annually, or annually, with pension amounts ranging from Rs 1000 to Rs 9250.
The upper limit for the investment amount is Rs 15 lakh, with a tenure of 10 years. The senior citizen (or the nominee in case of the senior citizen’s demise) receives the maturity amount.
7. National Pension Scheme (NPS)
This is a retirement-oriented investment instrument managed by Pension Fund Regulatory and Development Authority (PFRDA).
It is a mixture of equity, debt, fixed deposits, and liquid funds. You can decide the proportion of your investment according to your risk appetite. You can invest in this for as low as Rs 1000.
There exists a risk factor here as well – it comes from the underlying assets that the scheme invests in; depending upon the exposure to equity and debt (etc.), the risk is determined.
8. Public provident fund (PPF)
PPF is a 15-year-long tax-free (interest) instrument. The interest on PPF accounts is reviewed by the government every quarter.
A minimum of Rs 500 every month also works for a PPF account. A sovereign guarantee backs the interest earned here, and thus, PPF is a very safe investment.
9. Gold
Gold is often known as a haven for investors. Gold will act as a hedge in your portfolio. Historically, gold has been a winner in times when the economy is in the doldrums.
In the long run, the increasing price of gold makes it a good investment.
You can buy digital gold, sovereign gold bonds, gold ETFs, and physical gold. It is also a very liquid asset to possess.
10. Real estate
Real estate investment is a humongous task for the general public. The real success of the investment depends on the type, location, and possible rental yield of the property.
Also, the houses you reside in are not investments, because they do not generate positive cashflows.
The profits in real estate are generated through the price appreciation of the property and the rent that it yields. A suitable property can overhaul all negative returns in your portfolio, while a bad one can block your capital with no growth possibility.
With the high investment amounts, asset illiquidity, and many regulatory approvals, real estate remains a less popular investment choice among the commoners.
Use your risk-reward analysis to choose the best option for you.
FAQs
How to choose the best investment options?
To choose the best investment options, you need to first understand your goals, when you want to achieve them and the cost required. For example, your goal is to send your daughter to the UK to study abroad. You may have a time span of 10 years- 12 years (assuming your daughter is in school). This means you need 50-60 lakhs to fund her education and maybe more considering inflation.
Once, you know your goal, you can now approach a financial advisor or explore yourself to figure out your investment options to get the amount.
What types of investment options in India are suitable for an average person?
There are many investment options in India that are suitable for the average Indian. They can go for Mutual funds, ETFs, Indian stocks, US stocks, Bonds, Gold, Digital Gold and much more.
The investment options depend upon the short-term and long-term goals that the investor has set for themselves.
Why should I check my risk tolerance before investing money?
Risk tolerance refers to how much risk one is willing to take and how much money are they willing to expose. Markets are volatile by nature and are driven by multiple factors that can affect your investment.
Understanding the risk involved and ensuring measures to minimize the impact allows you to check your risk tolerance.
What do you mean by a diversified investment portfolio?
A diversified investment portfolio gives you exposure to different investments. For example, investing in stocks, mutual funds, ETFs and US dollars can bring diversification to your portfolio.
Diversification does not mean taking on different types of investments, it means seeking a balanced portfolio and exposure to different investments. It is important to consult a financial advisor for a diversified investment portfolio.
