When it comes to investing, many first time investors want to jump right in with both feet in the field. Unfortunately, very few of those investors are successful; most of them lose money. So, I researched and decided to share the best investment options in India to start with.
Investing in anything requires at least a basic knowledge about that. There are a lot of investment options are available at the present time but it is important to keep in mind that some of these investment options come with a huge risk of losing your money!
So, before you start investing your money, it is always better to do research and should focus on learning about investing.
Along with gaining knowledge about Investing, I always recommend you to define your investing goals before choosing the best Investing opportunity.
Define Your Goals for Investment
Before you invest a single rupee, really think about what you hope to achieve with your investment. Knowing what your goal is, will definitely help you to choose better investment options and will also enable you to make smarter investment decisions along the way!
It is safer to invest your money in such investment options that will give you returns slowly over time and can be used for your future goals like retirement, a child’s education or child’s marriage.
Your goals might be different from above mentioned few and you can choose the investment asset accordingly.
But here, I want to share my personal concern and that is the goal of getting rich overnight.
Too often, people start investing money with dreams of becoming rich overnight. This is impossible. am I wrong?
It is really a very bad idea to start investing in hopes of becoming very rich overnight.
However, if your investment goal is to get rich quickly, you should learn as much about high-yield, short-term investing before starting with investments. You should keep in mind that higher returns come with higher risk.
Next in the article, I going to discuss the investment assets available in India to start with.
Type of Investment Options in India
Before you start investing, it is also very important that you learn about the different types of investment options in India. You should also, understand the risks involved in a particular investment, and pay attention to the past performance of a said investment.
Overall, here are the major investment options in India:
- Bonds and
Sounds simple, right? Well, unfortunately, it starts getting very complicated from there. Because each type of investment has numerous types of investments that fall under it.
You need to learn in deep about each different investment type to get the best return out of it.
Every investing segment has its own advantages and disadvantages. Also, their risk profile and returns vary according to your expertise, like the stock market can be a big scary place for those who know little or nothing about it and can be very fruitful for experts.
So, instead of going too deep in investing, I am going to list handpicked and most reliable investing options in India for better and safe investment.
Best Investment Options available in India
Here are the best investment options available in India:
- Direct Equity
- Equity Mutual Funds
- Debt Mutual Funds
- National Pension Scheme
- Public Provident Fund
- Bank Fixed Deposit
- Senior Citizens’ Saving Scheme
- RBI Taxable Bonds
- Real State
1. Direct equity
Investing in stocks may not be everyone’s cup of tea as it’s a volatile asset class and there is no guarantee of returns either. Further, not only is it difficult to pick the right stock, timing your entry and exit is also not easy as well. The only silver lining is that over long periods, equity has been able to deliver higher than inflation-adjusted returns compared to all other investment asset classes.
At the same time, the risk of losing a considerable portion of capital is high unless one opts for the stop-loss method to curtail his losses. In stop-loss, one places an advance order to sell a stock at a pre-specified price. To reduce the risk to a certain extent, you could diversify your capital across sectors and market capitalizations. To invest in direct equities, one needs to open a Demat account through Broker.
I’ve listed all Stock Brokers with their features and trading platforms. You can find a list of Best Brokers in India here.
Presently, the 1, 3 and 5-year stock market returns are around 13 percent, 8 percent and 12.5 percent, respectively.
2. Equity mutual funds
Equity mutual funds mostly invest in equity stocks. As per the present, Securities and Exchange Board of India (SEBI) Mutual Fund Regulations, an equity mutual fund scheme must invest at least 65 percent of its assets in equities and equity-related instruments. An equity fund can be divided into two types one is actively managed and the second is passively managed.
- Actively Managed Fund: In an actively traded fund, the returns are mainly dependent on a fund manager’s ability to generate better returns.
- Passively Managed Fund: Index funds and exchange-traded funds (also called ETFs) are passively managed funds, and these track the underlying index.
Note: Equity schemes are also categorized according to market-capitalization or the sectors in which they invest. Further, they are also categorized by whether they are domestic (investing in stocks of only Indian companies) or international (investing in stocks of overseas companies).
Presently, the 1, 3 and 5-year market return is around 15 percent, 15 percent, and 20 percent, respectively.
3. Debt mutual funds
Debt funds are ideal for investors who want steady returns with less risk. They are less risky compared to equity funds because Debt Mutual Funds are less volatile. Debt mutual funds mainly invest in fixed-interest generating securities just like corporate bonds, government securities, treasury bills, commercial paper and other money market instruments.
Presently, the 1, 3 and 5-year market return is around 6.5 percent, 8 percent, and 7.5 percent, respectively.
4. National Pension System (NPS)
The National Pension System (NPS) is a long term retirement-focused investment instrument managed by the Pension Fund Regulatory and Development Authority (PFRDA). The minimum annual (April-March) contribution for an NPS Tier-1 account to remain active must be Rs 1,000 which has been recently reduced from Rs 6,000. It is a mix of equity, fixed deposits, corporate bonds, liquid funds and government funds, among other instruments. Based on your risk appetite, you can decide how much of your money can be invested in a different type of instruments like equities/FD through NPS.
Presently, the 1, 3 and 5-year market return for Fund option E is around 9.5 percent, 8.5 percent, and 11 percent, respectively.
5. Public Provident Fund (PPF)
The Public Provident Fund (PPF) is one product a lot of people turn to from starting. Since the PPF has a long tenure of 15 years, the impact of compounding of tax-free interest is big, especially in its later years. Further, since the interest earned and the principal invested is backed by a sovereign guarantee, it makes it one of the safest investments.
Presently, the interest rates on PPF is 8.5% per annum on actual contribution towards PPF.
6. Bank fixed deposit (FD)
A bank fixed deposit (FD) is a safe choice for investing in India for most of the peoples. Under the deposit insurance and credit guarantee corporation (DICGC) rules, each depositor in a bank is insured up to a maximum of Rs 1 lakh for both principal and interest amount of FD.
As per the need, one may opt for monthly, quarterly, half-yearly, yearly or cumulative interest options in Fixed deposits. The interest rate earned is taxable & added to one’s income, which will be taxed as per one’s income slab.
7. Senior Citizens’ Saving Scheme (SCSS)
Probably the first choice of most retirees in India, the Senior Citizens’ Saving Scheme (SCSS) is a must-have in their investment portfolios. As the name suggests, only senior citizens or early retirees can invest in this scheme as per existing rules.
SCSS can be availed from a post office or a bank by anyone above the age of 60 years. SCSS has a minimum of five-year tenure, which can be further extended by three years once the scheme matures. The upper investment limit is Rs 15 lakh for this scheme, and one can open more than one account.
Presently, the interest rate that can be earned on SCSS is 8.3% per annum, payable quarterly and is fully taxable.
8. RBI Taxable Bonds
The government has replaced the erstwhile 8% Savings (Taxable) Bonds 2003 with the 7.75% Savings (Taxable) Bonds. These bonds come with a minimum tenure of seven years. The bonds can be issued in Demat form and credited to the Bond Ledger Account (BLA) of the investor and also a Certificate of Holding will be given to the investor as proof of investment.
9. Real Estate
The house that you bought for a self living can not be considered as an investment. If you bought it with no intention to live in, then it can be considered as an investment.
The location of the property is the single most important factor that will determine the value & return of your property and also the rental that it can earn. Investments in real estate can deliver returns in two ways – capital appreciation and rentals. However, unlike other investment asset classes, real estate is highly illiquid. The other huge risk is with getting the necessary regulatory approvals, which has largely been addressed after coming of the real estate regulator.
Having gold in the form of jewelry has its own concerns like safety and high cost. Then there’s the ‘making charges’, which typically range between 6 to 15 % of the cost of gold and may go as high as 25 percent in case of customized orders & designs. For those who would want to buy gold coins, there’s still an option for good returns. One can also buy ingeniously minted coins in India.
The best way of owning paper gold in a more cost-effective manner is through gold ETFs. Such Gold investment (buying and selling) happens on a stock exchange (NSE or BSE) with gold as the underlying trading asset. Investing in Sovereign Gold Bonds is another better option to own paper-gold.
I’ve mentioned the best and safe investment options in India. The above-mentioned investment options are proved to be the best investment options in India with the time.
Direct Equity, Equity Mutual Fund and Debt Mutual Funds are best investment options in India available with highest profits.
National Pension Scheme, Public Provident Fund, and Bank Fixed Deposit are the safe investment options in India available with the lowest risk and moderate profits.
Senior Citizens’ Saving Scheme, RBI Taxable Bonds, Real State, and Gold are the best investment options in India for the long term with great returns.
Cash Equity and Derivatives are the best investment options in India for short term with high risk and high profits.
Thank you for reading.