The current state of the economy in the post-COVID world highlighted the need for saving money and investing it properly. But the big problem here is finding the secret to the right investment option.
If you’re someone who wants to start building their financial portfolio, you might have these questions on your mind:
- What is the best way to invest money?
- What are the returns?
- Where do I invest money?
Do you want to take risks and get a chance of higher returns or make safe investments and get a stable but lower return?
6 Smart Investment Tips To Maximise Your Returns
Here are some tips you should follow if you want to invest right and have financial stability in the future:
First things first scrutinize your investment options
One of the first things you need to do when you want to organize your finances is understanding the type of options you have for investing your money.
Study about mutual funds, bonds, gold bonds, stocks, fixed deposits, and understand what sort of financial commitment they involve and if it matches your idea of financial stability.
Automate your savings
If you are someone who has a set source of income every month, you should make sure a certain amount of money from your income goes towards your savings account.
And now, thanks to technology, if you lack the willpower to do it, there are many applications that can help you do the same.
Chime offers a savings account that automatically sets aside a percentage of your paycheck every month, Acorns puts money into several low-cost ETF portfolios, and Plum helps you manage your finances when you’re in overdraft.
You can also check with your bank about its apps and work out a way to automatically transfer funds from your salary accounts to those suited for investment.
Deal with your debts
Before you start investing, you need to deal with and finish paying off your debts. For example, if you have high-interest debts like student loans and credit card debts, you should work on paying them off before making any investments.
Invest your tax refund
If you find it hard to save money when you get your paycheck at the end of every month, here’s a tip — set aside the whole or a part of your tax refund as an investment option.
Build an emergency fund
After living through the pandemic, we all know how important emergency funds are. Building an emergency fund with your savings is important, and a little can go a long way here. You can put a little of your monthly paycheck towards your savings, and build a little nest that you shouldn’t touch until it is absolutely necessary.
Get a personal financial audit
A personal financial audit can help you assess your financial situation in an organised manner. It can help you scrutinize your finances and understand if you’re on the right path or whether you’re at risk for a financial downfall. You can understand the weak spots in your financial portfolio and learn what you can do to strengthen them.
8 Smart Investment Options To Get Maximum Return
Once you’ve done your research and understood these smart investment tips, here are the types of investment that you can consider:
Save towards your retirement
One of the biggest goals of investing from an early age is to have a worry-free retirement where you can take care of your expenses.
If your employer has an Employee Provident Fund (EPF), take full advantage of it and try to match your employer’s contribution. These little steps will become a significant amount by the time you retire.
Or you can consider a National Pension Plan (NPS) that is open to all but mandatory for all government employees. You can choose to deposit a minimum of Rs 500 for every paycheck per month or choose to invest a yearly amount of Rs 6000.
Think of Long-term Investments like PPFs
Since the Government of India backs investments like the Public Provident Fund, it is a safe bet to invest your money for a longer-term.
Plus, it also offers tax benefits that make its interest income exempt from being taxed.
Invest in Government Bonds
Government bonds are relatively risk-free and offer a fixed rate of yearly interest. The advantage here is the borrowing entity refunds the investment amount after the maturity period is completed.
Invest in Equity Linked Saving Schemes
Equity-linked saving schemes are diversified equity funds where you invest in the equity market by purchasing equity stocks of companies that are listed on the stock exchange.
Equity Linked Saving Schemes help you save tax and provide good returns on long-term investments.
Add a Systematic Investment Plan (SIP) to your investment portfolio
Equity mutual funds provide highly efficient results when they’re invested for a long duration, and a great smart investment tip would be to invest in equity through the SIP route, which makes sure the cost of your units is averaged out and your returns are less affected during the volatile financial market.
Diversify Your Portfolio With Chit Fund Investments
Peer-to-peer lending is an age-old tradition in India. Community lending or chit fund investment models can help you diversify your investment portfolio and protect it from the volatile stock market. The plus side of this method of investing is you can withdraw your investment anytime, and you get a higher return on your investment in a shorter period of time.
Invest in Unit Linked Insurance Plans
The advantage here is that ULIP provides the benefit of insurance and is a great way to invest their money.
Get Annuities as they Help Stabilize Your Portfolio
Annuities are investment products offered by the insurance company where the insurer takes the investment capital and provides a guaranteed return on the sum. Different types of annuity plans are available, like fixed annuity plans (with fixed returns), variable annuity plans, and equity index annuity (where returns depend on the stock market’s performance).
While investing can get complicated as a beginner, if you know the basics, you can build a solid financial portfolio even if you are investing a relatively small amount.