With different investment options available in the market, it has become easy for an investor to choose the plans that suit their requirements. However, one should pick an option as per his/her risk appetite, investment horizon, age and financial goals, say experts. It is always better to invest with a long-term perspective, they say. From fixed income instruments like fixed deposits (FDs) and recurring deposits (RDs) as well as mutual funds - there are various options which can help in wealth creation.
Points to keep in mind before planning your investment:
The tip to successful investment is planning and long-term commitment, say experts. Navin Chandani, chief business development officer, at BankBazaar says, "Before you start investing, map out goals and the investment timelines. Start small but be consistent with your investments."
According to Dr Joseph Thomas, head of research, Emkay Wealth Management, the investor must also go through a risk profiling process with the help of a professional advisor before starting the investment process. "The risk profiling exercise will give the investor an idea about how much investment can be taken, what is the level of awareness of the products, and also broad psychological disposition towards markets, products and their performance," he said.
In case of women investors, an additional factor should be considered as part of their financial plan, experts say. According to Sandeep Bhardwaj, chief sales officer at Angel Broking, "Most women take a few years off when their children are growing up. So, when you start your financial planning, make provisions for this period, when you will not be working," he said.
Here are 10 investment options that you can consider:
1. Fixed deposits (FDs): Fixed deposits (FDs) are fixed income instruments that guarantee returns. According to experts, FDs are probably the most popular savings tool. "If you are completely intolerant to taking risks, FDs should probably be your first choice of investment," said Mr Chandani of BankBazaar.
According to Mr Bhardwaj of Angel Broking, investors can look at long term bank deposits in bank FDs and post offices with a maturity of above five years. "These deposits have a rate of interest that is at par with the normal bank FD rates. But such deposits qualify for Section 80C exemption, although the interest is taxable," he said.
2. Recurring Deposit (RD): RD is a kind of investment plan that allows investors to save a fixed sum every month and earn an interest income on the same. All major financial institutions across the country offer the facility of opening an RD account. An investor can choose from a variety of terms - or maturity period to set up an RD account
3. Public provident fund (PPF): PPF account offers an interest at the rate of 8 per cent and comes with a lock-in period of 15 years. According to Mr Chandani, PPF is one of the most popular investment vehicles majorly because of two fundamental reasons. "Firstly, the investment qualifies for Section 80C of tax exemption. Secondly, the interest and the maturity proceeds is entirely tax free," he said.
4. Mutual funds:Mutual funds are one of the best options as the fund is managed by experts, who have knowledge about the equity markets. According to Priti Rathi Gupta, MD of Anand Rathi and founder of LXME, investment in mutual funds (MFs) gives a balanced portfolio with equity and debt schemes with a much higher return. "You can choose to invest in equity mutual funds for your long-term goals," she said.
"Even if you are not formally employed, you can start small with SIPs (Systematic Investment Plans). SIPs allow investors to literally invest as little as Rs 500 every month in Mutual Fund schemes," added Mr ChandanI of BankBazaar.
5. Fixed Maturity Plans (FMPs): FMP (or Fixed Maturity Plan) is a closed-ended debt mutual fund. "For the conservative portion, investors can also consider FMPs with 3-year lock in period which can be structured for double indexation with a view to enhance post-tax yields," said Mr Bhardwaj of Angel Broking.
6. National Pension System (NPS): NPS, introduced by the government, allows individuals to contribute towards building a pension corpus throughout their working life. At the time of retirement, NPS subscribers can withdraw up to 60 per cent of corpus in lump sum, while the remaining 40 per cent of corpus can be used as annuity.
7. Insurance policies: One should also consider buying life insurance and health insurance policies for self and family. "These insurance products help in planning for the future and acts against exigencies, a very important component of our term financial planning that we tend to ignore," said Dr Thomas of Emkay Wealth Management.
"One can take low-cost medical cover and also get assets and liabilities covered by insurance, preferably through term policies. Insurance is a hedge which actually enhances risk taking capacity," added Mr Bhardwaj of Angel Broking.
8. Investing in equities: Equity investment is also a vital investment avenue. According to Rachit Chawla, founder and CEO, Finway, one single share shouldn't, however, constitute more than 10 per cent of an investment portfolio. "Invest in different stocks instead of glueing to one single stock. You should consider investing in equities early, as you can take more risk when you are young," he suggests.
9. Gold and gold-related investments: Gold is also a common investment for investors. "Seeing the rising gold prices, it is suitable to have 10-15 per cent allocation given towards gold or gold funds," said Dinesh Rohira, founder and CEO at 5nance.com. Instead of buying physical gold, one can also invest in gold bonds as it pays a fixed interest.
10. Investment in bonds: Investments into good quality bonds and debentures also ensure fixed returns and thereby facilitate greater stability to the portfolio performance, according to financial experts.
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