Comment Synopsis Here are the top 10 investment avenues that you can look at while saving for your financial goals.
ThinkStock Photos In reality, risk and returns are inversely related, i. Related The best investments for daughter's education and marriage Most investors want to make investments in such a way that they get sky-high returns as quickly as possible without the risk of losing principal money.
This is the reason why many are always on the lookout for top investment plans where they can double their money in few months or years with little or no risk. However, a high-return, low-risk combination in a investment product, unfortunately, does not exist.
Maybe in an ideal world but not at present. In reality, risk and returns are directly related, they go hand-in-hand, i. While selecting an investment avenue, you have to match your own risk profile with the associated risks of the product before investing.
There are some investments that carry high risk but have the potential to generate higher inflation-adjusted returns than other asset class in the long term while some investments come with low-risk and therefore lower returns.
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There are two buckets that investment products fall into and they are financial and non-financial assets. Financial assets can be divided into market-linked products like stocks and mutual fund and fixed income products like Public Provident Fundbank fixed deposits. Non-financial assets - many Indians invest via this mode - are the likes of physical gold and real estate.
Here is a look at the top 10 investment avenues Indians look at while saving for their financial goals. Direct equity Investing in stocks might not be everyone's cup of tea as it's a volatile asset class and there is no guarantee of returns. Further, not only is it difficult to pick the right stock, timing your entry and exit is also not easy.
The only silver lining is that over long periods, token client has been able to deliver higher than inflation-adjusted returns compared to all other asset classes.
At the same time, the risk of losing a considerable portion or even all options from 10 your capital is high unless one opts for stop-loss method to curtail losses. In stop-loss, one places an advance order to sell a stock at a specific price.
To reduce the risk to certain extent, you could diversify across sectors and market capitalisations. To directly invest in equity, one needs to options from 10 a demat account.
Banks options from 10 allow opening of a 3-in-1 account.
Here's how you can open one to invest in shares. Equity mutual funds Equity mutual fund schemes predominantly invest in equity stocks. As per current the 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 equity and equity-related instruments.
An equity fund can be actively managed or passively managed. In an actively traded fund, the returns are largely dependent on a fund manager's ability to generate returns.
Index funds and exchange-traded fund ETFs are passively managed, and these track the underlying index. Equity schemes are categorised according to market-capitalisation or the sectors in which they invest. They are also categorised by whether they are domestic investing in stocks of only Indian companies or international investing in stocks of overseas companies. Read more about equity mutual funds. Debt mutual funds Debt mutual fund schemes are suitable for investors who want steady returns.
They are less volatile and, hence, considered less risky compared to equity funds.
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Debt mutual funds primarily invest in fixed-interest generating securities like corporate bonds, government securities, treasury bills, commercial paper and other money market instruments. However, these mutual funds are not risk free. They carry risks such as interest rate risk and credit risk. Therefore, investors should study the related risks before investing.
Read more about debt mutual funds.
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It is a mix of equity, fixed deposits, corporate bonds, liquid funds and government funds, among others. Based on your risk appetite, options from 10 can decide how much of your money can be invested in equities through NPS.
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Read more about NPS. Since the PPF has a long tenure of 15 years, the impact of compounding of tax-free interest is huge, especially in the later years. Further, since the interest earned and the principal invested is backed by sovereign guarantee, it makes it a safe investment.
Remember, interest rate on PPF in reviewed every quarter by the government. Read more about the PPF here.
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