You managed to save money.
Now you want to invest that money to make more money for you. I will tell you some of the good investment options which are available to you.An investment is considered good only when it takes into account the safety of the principal amount. So I am listing the investment options from least risky options to more risky options of investments.Warren Buffet says risks comes from not knowing what you are doing.So the investment options that I am listing at the end which I am considering riskier can be taken only when you know what you are doing.For that, you should try to learn about the asset class.
- Post office Monthy Income scheme-This can be considered the safest investment with an assured return on Investment.Here the minimum investment time frame is 5 years.You will get 7.7%(as of 8 January 2017) yearly return on investment payable on monthly basis.Maximum money that can be deposited under this scheme is 4.5 lakh rupees for an individual account and 9 lakhs for a joint account.MIS can be considered the safest investment in India with an assured 8% return.The only problem in this scheme is that you will have to pay a penalty if you withdraw money before maturity.The penalty rates as of today are 2% if you withdraw money after 1 year and less than 3 years and 2% if you withdraw money after 3 years but less than that of maturity.
- Fix deposit schemes-This investment can also be considered the safest with a fixed percentage of return.The percentage of return depends on the tenure for which you are fixing the money.If you are fixing the money for longer duration then the return will be higher.It also varies from bank to bank.Some banks offer a higher rate of returns in order to attract customers.Typically the return varies from 7 to 9%.The returns can be paid by the bank on monthly, quarterly or on yearly basis depending on the scheme.
- Government Bonds-These bonds are safest as they are backed by the government.So there is a very little chance of their default.They can be very long term and they typically offer 8% interest annually.These bonds can also be sold on the secondary market.So you can dump them anytime you want.The interest is usually paid either half-yearly or at the end of the tenure.
- Senior citizens saving schemes for those who are above 60 years of age-This is safest and best investment option who are above 60 years of age.They offer 9% interest annually.The interest is paid every 3 months.The maturity of this scheme is 5 years.This scheme can be extended further by 3 years.
- Mutual fund-These is a bit risky asset considering the fact that the money is going in stock as well as the debt market.The good thing is that the money that you are investing in mutual funds are managed by professional people.So there is a little risk.But never put all your money in mutual funds in one go! The best way to put your money in the mutual fund is through SIP mode on a monthly basis.Why am I suggesting to put money in SIP mode?The reason being you will never be able to find a market bottom in a bear market or you can’t say the market will keep going up in a bull market.So it is very dangerous to put all you money in mutual funds in one go.If you put your money in SIP mode, it will provide you the advantage of money cost averaging.Mutual funds have two type of schemes.One can opt for dividend payout where people are paid regular dividends.And the other one is a growth plan where people are not paid any dividends.People who want a regular amount of money to fulfill their needs can opt for dividend option.Others who don’t need regular payouts from their investments should go for growth schemes.The growth scheme gives an advantage of compounding as the money made is being reinvested automatically.
- Investing in real estate-Investments in real estates can be a safe bet if you can find a deal at a very low price.There are people who are making a living out of real estate investments.Typically you can gain from real estate in two ways.The first one is price appreciation and the second one is you can get a rent from your properties.There are special situations in which the seller is at urgency to sell his/her property and you can get the deal at a very low price.You can sell the property immediately at a better price.Another thing that you can do is you can buy real estates and can leave them for a while(you can rent them too) and the price generally appreciates.Then you can sell them.You can rent them too to get a regular income.
- Investment directly in the Stock Market-This can be considered a bit risky as a beginner.If you are just beginning to invest directly in the stock market then you should diversify your portfolio as much as possible.You should always buy stocks which are a blue chip as a beginner in the stock market.Never buy stocks based on recommendations of others.Or you can consult a registered financial adviser to pick stocks for you.
- Gold investments-Gold as such is not considered investment by many.This is because when you buy stocks, you buy a part of business in the company.When you buy bonds, you get interests.But the price of the gold is totally dependent on demand and supply.It is considered as a hedge against investments by many.When the stock market goes down the prices of the gold generally goes up due to increased demand.You can diversify your assets by investing in gold.You can either buy physical gold to invest in it.The better option to have exposure in gold is buying Exchange Traded Gold Funds(ETFs).This is a far better option than investing in physical gold.
You can invest in any of the investment options depending on your risk taking abilities which are directly dependent on your age.The lesser is your age, the more you should take risks on your investments.While a person who is on the verge of retirement or already retired should take lesser risks and should invest in the schemes which are provided at the top of the list.
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