1. Why investments? Investments in India
Investments in India- Investments are significant because, in today’s world, just making money can not be an end goal. You work very hard for the money you earn; however, this may not be enough for you to lead a comfortable lifestyle or achieve your dreams and goals. To do this, you need to make your money work really hard for you as well. That is why you are investing. Stagnant money in your bank account is a lost opportunity. You must invest this money very smartly to get comfortable returns from it.
2. Types of Investments in India
Investors have a number of options from which they can choose. Some of them are traditional methods that have been used across generations, while others are relatively newer options that have become more popular in recent years. Let’s talk about some common investment options available in India.
Stocks, also known as company stocks, are perhaps the most famous investment vehicle in India. When you buy the company’s shares, you buy ownership in that company that allows you to participate in the company’s growth. Shares are offered by listed companies and can be bought by any investor. Stocks are the ideal long-term investment in India. But investing in stocks should not equate to trading in the stock market, which is a speculative activity.
Mutual funds have been around over the past few decades, but they have only gained popularity in the past few years. These are the investment vehicles that raise the funds of many investors and invest them in a way to gain optimal returns. Various types of mutual funds invest in different securities. Mutual funds invest in stocks primarily in stocks and equities related to stocks, while mutual funds invest in debt in bonds and securities. There are also hybrid MF that invest in stocks as well as debt. Mutual funds are flexible investment vehicles, where you can start and stop investing at your convenience. Aside from tax-saving mutual funds, you can recover investments in India from mutual funds at any time as well.
Fixed deposits are investment vehicles designated for a pre-defined and predetermined period of time. It provides complete capital protection as well as guaranteed returns. It is ideal for conservative investors who stay away from risks. Fixed deposits are offered by banks for different time periods. Interest rates on fixed deposits change according to economic conditions and are decided by the banks themselves. Fixed deposits are usually locked in investments, but investors are often allowed to take advantage of loans or overdraft facilities against them. There is also a variable tax saving from fixed deposits, which comes with a lock-in five years.
A repeated deposit (RD) is another investment in a fixed tenure that allows investors to place a specified amount each month for a predetermined period. Recurring deposits are offered by different banks and post offices. Interest rates are determined by the institution that provides them. It allows investors to invest a small amount every month to build a group during a specific time period. RDs provide capital protection plus guaranteed returns.
Public Provident Fund
Public Savings Fund (PPF) is a long-term investment vehicle for saving taxes that comes with a 15-year lock-in period. Investments made in the public-private partnership fund can be used to earn tax exemption. Every three months, the government of India determines the rate of public-private partnerships. The group withdrawn at the end of the 15-year period is completely tax-free in the hands of the investor. It also allows public-private partnership loans and partial withdrawals after certain conditions are met.
Employee Provident Fund
The Employee Savings Fund (EPF) is another retirement-oriented investment vehicle that receives a tax exemption under Section 80C. The emergency fund discounts are usually part of the monthly salary of the breadwinner, and the employer also matches the same amount. Upon maturity, the group drawn from the contingency fund is completely tax-free. The government of India also decides the emergency fund rates every three months.
National pension system
The National Pension Scheme (NPS) is a relatively new option for investing in a tax economy. NPS investors remain imprisoned until retirement and can achieve higher returns than PPF or EPF since NPS offers plan options that invest in stocks as well. The benefit package of NPS is not completely tax-free, and part of it must be used to purchase the annual premium that gave investors a regular income.
3. Where should we invest our money?
As there are many types of investment vehicles, it is natural for an investor to flood. A new person to invest in is not going to invest where their money is. Making the wrong investment option can lead to financial losses, something nobody desiour . Due to this reason, you should keep in mind the following factors to determine how and places to invest the money.
Younger investors usually have fewer responsibilities and a longer time horizon. When you have a long working life ahead of you, you can invest in vehicles with a long-term outlook and also continue to increase your investment amount as your income increases. This is the reason why equity-oriented investments such as mutual funds in stocks will be a better option for young investors, compared to what looks like FD. But on the other side, older investors can choose safer ways like FD.
Investment goals can be for the short-term or for the long-term. To achieve a short-term goal, you must choose a safer investment and use the dividend yield potential to achieve long-term goals. The goals can also be negotiable and non-negotiable. For non-negotiable goals such as educating children or down payment for a home, a guaranteed return investment would be a good option. If your Goal is negotiable, which means that it can be delayed for a few months, then investing in mutual funds or stocks can be beneficial. Plus, if these investments in India are really good, you can even achieve the Goal ahead of time.
Now, while when choosing an investment option in your profile. Factors such as how much you earn and how many financial dependants you have are also crucial. An investor with a young age a has a lot of time on hand may not be able to take equity risks if he also takes responsibility for caring for his family. Likewise, an older person without dependents and a steady source of income can choose to invest in stocks to earn higher returns.
This is only the reason when it comes to investments; one size does not fit all. Investments should not only be carefully chosen but also properly planned.
4. How should you plan your investments?
The first step in planning your fund or investment is finding out the right investment that best suits your profile and needs. Here are some points you should keep in mind when planning your investments:
• Choose investments carefully after conducting adequate research
• Do not fall into fast buck charts that are high returns in a short time
• Reviewing investments in stocks and mutual funds periodically
• Consider the tax effects on the returns you earn on your investments
• Keep things simple and avoid complex investments that you do not understand