Investment is the process to allocate money in different financial instruments in expectation of some benefit/return in future. It is primarily owning an item or asset with a goal to generate income from them or grow the value of investment.
Most of the investors are keen on making investments in such a way that they get sky-high returns in the shortest span of time without the risk of losing the principal amount.
Investment can generate income for you in two ways, one, if you invest in a saleable asset, you may earn income in the form of profit. Second, if investment is made in a return generating plan, then you will earn income via accumulation of gains.
Why Should You Invest?
Taking a portion of your income and saving it each month can create a reserve fund which might come handy at the time of an emergency, while by investing money you can actually build wealth and achieve your life goals.
Factors to Keep in Mind Before Investing.
1. Analyze your financial situation, risk tolerance and investment objective.
2. To maintain the right balance between Risk and Returns, make sure you diversify your investments.
3. Decide a time frame for your investment/s. There are different investment instruments available for different types of investors.
4. Since funds are influenced by market forces, it is important that you closely monitor them periodically.
Investment Objective.
Different people may have different investment objectives. Before we actually jump on to starting to invest, let’s spend some time to figure out your investment objective. The individual objectives for investment may vary from one investor to another. These could be:
1. Capital Preservation
2. Wealth Generation
3. Alternate Stream of Income
4. Reduce Tax Burden
5. Meet Long Term and Short Term Financial Goals
Now, that we have a clear objective in mind, let’s look at the top 10 investment avenues that might yield healthy returns in 2021 – 2022.
1. Stock Market – Investing in the stock market is easy but not as simple as it appears to be. To invest in the stock market one must be able identify the right stock, entry and exit points to be able to successfully invest in the stock market. Stock Market has been able to deliver higher than inflation – adjusted returns compared to all asset classes over a long period of time.
2. Equity Mutual Funds – Equity Mutual Fund schemes invest in equity stocks. As per the current SEBI’s Mutual Fund Regulations, an equity fund scheme must invest at 65 per cent of its assets in equity or equity - related instruments.
3. Debt Mutual Funds – These are suitable for investors who want steady, less volatile and less risky returns. These funds generally invest in Corporate Bonds, Government Securities, and Treasury Bills etc.
4. National Pension System – The NPS is a long term retirement – focused investment product managed by PFRDA. It is a combination of Equity, FDs, Corporate Bonds, Liquid Funds and Government Funds etc.
5. Gold – The different ways on investing in gold are, buying gold jewelry (typically attracts making charges), buying gold coins, investing in Sovereign Gold Bonds and investing in gold ETF’s
6. Pradhan Mantri Vaya Vandana Yojana – PMVVY is for senior citizens aged 60 years and above to provide them an assured return of 7.4 per cent per annum.
7. ULIP – Unit Linked Insurance Plans are types of investments that provide both investment and Life Insurance benefits.
8. Public Provident Fund – It is a government offered saving scheme that invests your funds for a specific period and helps you earn returns on the same.
9. Bank Fixed Deposit – A bank FD is considered a comparatively safer choice for investing in India. As per the need, one may opt for monthly, quarterly, half-yearly, yearly interest options.
10. Real Estate – Owning a property other than the one used for self-consumption is considered an investment. The location of the property is the single most important factor that will determine the value of your property and also the rental it can earn. Real Estate investment can deliver returns in two ways
· Capital Appreciation
· Rental
However, unlike other asset classes, real estate is highly illiquid.
Some of the above investment options offer fixed returns while the others are linked to financial markets. A good mix of fixed and market linked options can help you generate wealth over a long period of time, thus making you financially independent.
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