An increasing number of people in India have realised that if they want their money to grow, their savings account won’t give them the returns they need. A lot of them are looking at other financial instruments that can help them fulfil their goals and build wealth over time.
Before you even decide to invest, you need to make sure of three things:
- Do you have enough funds for your present?
- Do you have money saved up for emergencies? Most investment tools have lock-in periods.
- Is your debt under control?
Your present has to be secured if you are thinking of investing money for the future.
This means you don't have access to quick money in case of an emergency. An emergency fund is a safety cushion in case of financial emergencies. You need to have at least 3 to 6 months of living expenses in your emergency fund.
If your debt is spiralling out of control, it doesn't really make sense to invest when your whole focus should be on clearing off the debt.
If you have taken care of all three things, you are ready to move on to the next step. Start investing.
How to Decide Where to Invest Your Money?
Investing money for beginners can get quite confusing because most of the time, they don’t know where or how to begin. Below are a few factors you should consider before choosing the investment vehicle:
- Returns: Determine whether the investment product has guaranteed or market-linked return.
- Time horizon: The time horizon is a critical factor. Liquid and income-generating assets are good for the short-term, but long-term investments are ideal if you want growth.
- Cost: It is important to know the cost of investing in a product as it directly has an impact on the returns.
- Liquidity: You need to know how easily you can access the money when in need and what are the penalties for early withdrawal.
- Tax consideration: It's important that you know the taxes applicable when investing in a product. This will help you understand what will be your in-hand return and whether it's worth investing in or not.
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Where to Invest Money?
There are so many investment options out there, which can easily overwhelm you. If you’re wondering where to invest money, here are 9 best ways to invest money:
- Chit Fund
- Mutual Funds
- Stock Market/Share Market
- Real Estate
- Systematic Investment Plans (SIPs)
- Public Provident Fund (PPF)
- Initial Public Offerings (IPOs)
- Corporate Bonds/Debentures
- National Pension Scheme
The best place to invest money right now is the chit fund. This age-old saving tradition is now revamped with AI-driven technology. The MoneyClub is the best AI-driven online chit fund platform in India, where you can invest a certain amount every month in a chit scheme and earn high returns (much higher than most investment plans). If you want high liquidity, low risk, high returns and minimal paperwork, a chit fund is the best option.
For your long-term wealth creation goals like buying a home, equity mutual funds are a good option. These investment tools are known to yield high returns. But make sure you select the right mutual fund after analysing its past performances. Some mutual funds are risky investments. So take into consideration your risk appetite while selecting the investment product.
If you know how to trade, the stock market is the best place to generate good returns. Firstly, you'll need to identify which stocks are trading at a price lower than their actual value. Then, buy those stocks in small quantities and create wealth over time.
Real estate has always been an attractive investment strategy. It's a great long-term investment option, and with regulatory bodies like the Real Estate Regulatory Authority (RERA) in action, it has also become a safer and transparent option. There are also tax benefits if you take home loans under Section 80C and Section 24 of the Income Tax Act, 1961.
Systematic investment plans allow you to invest small amounts on a daily, weekly or monthly basis. By investing in equity mutual funds, you can create wealth in the long term.
The Government of India backs the Public Provident Fund accounts. You can purchase it at banks and post offices. It has a 15-year tenure, but you can make withdrawals from the 7th year onwards. The principal invested amount, the interest accrued, and the maturity amount are all tax-free. The interest rate changes every quarter and is based on government bond yields.
IPOs are when a company's shares are open to the public for the first time. Before you invest in IPOs, understand the company's business and its future prospects.
Corporate Bonds raise funds for companies from investors. The companies then pay interest on those bonds. However, the corporate bonds' returns are taxable and taxed as per your current slab rate. These investment vehicles are subject to risk, including interest rate risk, credit risk and liquidity risk.
This is a government-sponsored scheme offering different investment options suited for your goals and budget. NPS ensures a minimum pension for the subscriber. If you want great returns, you can consider the aggressive option where you can invest 50% of your investment amount into equity, 20% in corporate bonds and 20% in gilt funds.
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FAQ
Which is the best investment plan for 1 year?
If you’re investing for one year, you have a short-term time horizon. Some of the best investment options for 1 year include:
- Chit Fund
- Initial Public Offerings
- Stock Market/Share Market
Which is the best investment plan for 5 years?
With the best investment plan for 5 years, you can invest money without locking it for a long duration. Some of the best investment plans for 5 years include:
- Chit Fund
- Mutual Funds
- Stock Market/Share Market
Which is the best investment plan with high returns?
Below are the top 5 investment plans for high returns:
- Chit Fund
- Mutual Funds
- Stock Market/ Share Market
- Initial Public Offerings
- Real Estate
