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What Are The Different Investment Options Available In India?

Published On Aug 10, 2021

While most people think that saving money is difficult, in reality, experts believe that investing money wisely is the most challenging task. The sheer number of the numerous investment options in the market makes it tough to make the best investment decision. And you might spend a lot of time analysing investment choices that you will decide not to invest in. Or even if you do invest, it might be because of all the wrong reasons. Hence, you must invest intelligently to make your hard-earned money work for you and become a passive source of income. So, let us take a look at the best investment options available in India.

What Are The Different Investment Options Available In India?

Here is the list of different investment options that are available in India. 

1. Direct Equity Investments

When you buy shares in a firm directly, suggesting that you have a stake in it, it is known as equity investment. Direct equity investments have the potential to create massive profits, but they also come with a greater risk profile because they can be notoriously volatile. This sort of investment is volatile because the returns are tied to the market, i.e. they rise and fall in tandem with market performance. It is best suited for investors with a larger risk appetite or some investing experience. Picking the correct stock, entering and exiting at the right times, and market dynamics are all important elements in deciding the returns made by direct equity.

2. Equity Mutual Funds

In the previous two decades, the mutual fund business has expanded dramatically. Equity mutual fund schemes are quite popular among investors who want to invest in equities since they invest in numerous companies' equity stocks. To qualify as an equity programme, the Securities and Exchange Board of India (SEBI) requires that at least 65 per cent of the total capital be invested in shares. Depending on the scheme, equity mutual funds can be managed actively or passively. A mutual fund scheme's minimum investment could be as low as Rs 500.

3. Debt Mutual Funds

Aside from equities mutual funds, debt mutual funds can be used to invest in mutual funds. Bonds, government securities, treasury bills, commercial paper, and money market instruments make up the majority of the assets held by debt funds. Without taking the risk of equity funds, one can invest in debt funds and benefit from the safety and greater returns of traditional debt instruments.

4. Real Estate

Real estate has always been regarded as one of the most profitable investment options since it generates returns in two ways: rental income and capital appreciation at the time of sale. The property's location and the development in its immediate surroundings are crucial factors in determining real estate profits. Real estate, on the other hand, is a very capital-intensive venture and an exceedingly illiquid asset class. People are becoming more aware of this truth, and with the growth of financial markets over the previous two decades, not many people are choosing real estate as an investment. However, it's perfect for investors who have extra money and don't need it for a long time.

5. Gold

In times of economic uncertainty, gold is regarded as one of the safest investment options. Due to the decorative value linked to gold, it has long been one of the most popular investments among Indians. However, gold is one of the most volatile assets, and investing in actual gold carries significant risk, as does storage. Aside from that, gold in the form of jewellery has high manufacturing costs and lower total returns. Gold ETFs and sovereign gold bonds are cost-effective ways to invest in the option.

6. Public Provident Funds (PPF)

The Government of India's Public Provident Fund (PPF) is one of the safest and oldest investment alternatives available. It can be opened at any nationalised or private bank and post offices. PPF accounts can be started for as little as Rs. 500, and investments up to Rs. 1.5 Lakh are tax-free every year. The interest rate on PPF accounts is compounded annually, and it is updated every year. PPF is a good alternative for conservative investors searching for a risk-free long-term investment.

7. National Pension Scheme 

The Pension Regulatory and Development Authority (PFRDA) manages the NPS, which is a voluntary long-term retirement plan. Depending on the risk appetite of the investor, NPS investments can be made in funds in various asset classes such as equities, real estate, and so on. Interestingly, Section 80C of the Income Tax Act exempts investments up to Rs. 1,50,000 lakh from taxation. Additionally, under Section 80CCD, investments of Rs. 50,000 are tax-free, bringing the total exemption to Rs. 2,00,000. For retirement planning, NPS is an excellent long-term investment. It must be noted that premature withdrawals from NPS are not allowed, and withdrawals are partially taxed when they reach maturity.

Take Away

All of the plans listed above can be considered when making an investment. To gain the most rewards, it's also a good idea to choose your investment avenue after carefully considering your financial objectives, risk appetite, liquidity requirements, and investment horizon.

You may also like to read - How Can Term Insurance Be Used As A Retirement Plan?

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Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.             

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