ULTIMATE GUIDE TO WHERE TO INVEST YOUR MONEY

Where to invest

INVESTMENTS! Do you people remember what it is? No? Do not worry! Let us have a quick recap of it. They are to divide the funds in the current period to attain some gains in the future. Investment, therefore, has many meanings, and one can see it from distinct angles and sides; the two primary and vital features of investment. I can think of the present offerings it holds and the benefits that we can get in the future. Now, you might be aware of why a person invests/should invest their funds. Investing your funds is essential as it assists you in growing your wealth, accomplishing your long-term financial goals, expanding your business and many more.

When it comes to an investment in the Indian economy, every fellows’ perspective differs from one another. Senior citizens like to take an extremely conservative approach and do not want to risk anything. However, young blood is quite aggressive and dares to double their investments in no time. Every individual is dependent on the salaries they get from their jobs to meet their needs and wants. It eventually becomes tough to sustain the lifestyles after retirement when one does not have a source of income. There is always a piece of advice for everyone to invest some part of their income so you can ensure the smooth functioning of your lives after retirement. Now the question is where to invest?

INVESTMENT: WHERE TO INVEST?

INVESTMENT: WHERE TO INVEST?

A new investor can start investing in various areas, it is obvious to do so only after analyzing all tools properly. One can calculate the profits or losses that each machine will have in the future and can make investments in many forms like equity, preference shares, real estate and many more. Investing your funds in the share market can provide you with a significantly higher rate of returns when compared to the traditional investment tools like public provident funds, mutual funds and many more. It can help you in accelerating your wealth at a faster pace and within less duration of time.

Having found out the reasons to invest in the share market, the next obvious question which any individual, like you and I, will look for an answer for will be, Where to invest my funds? What are the returns that I can expect from my investments? These are the common questions that pop up in the head of every new investor. When an individual starts investing their money, he has to opt for an asset class that matches the individual’s risk-bearing level and return temperament. Now the question arises, What is an Asset Class? It is a category of investment with specified risks and returns features. Several asset classes come under the share market and are popular such as fixed income instruments, shares, real estate, commodities and a few more. Now, we will discuss these asset classes.

FIXED INCOME INSTRUMENTS

FIXED INCOME INSTRUMENTS

There are many traditional tools where you can invest your money, like fixed deposits or recurring deposits. These instruments are the safest place where you can invest because the returns are secured. These traditional tools will give you the returns in a mandated number of days. You will get a return in the form of interest. The returns can be paid in varied modes like quarterly, semi-annually or annually whereas, the capital amount is returned to the investor at the maturity period. Few examples of typical fixed-income investment are: 

  • Fixed Deposits offered by Banks.
  • Bonds issued by the Government of India
  • Bonds issued by Government related agencies such as HUDCO, NHAI and so on.
  • The bonds issued by corporations. 

Debt instruments are also kind of fixed-income instruments. The government or an organisation collects capital from the investors at an agreed rate of interest for a particular time. As per the data available till June 2014, the return from a fixed-income instrument varied between 8% to 11%

EQUITY INVESTMENT (SHARE MARKET)

EQUITY INVESTMENT (SHARE MARKET)

Investing your money in equities includes purchasing the shares of publicly listed companies in stock exchanges. The primary stock exchanges of India are the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). When one puts his/her money in equities, unlike fixed-income tools, there is no surety of capital. However, as an exchange, the returns that you get from the equity investment can be a handsome amount. As per the data, Indian equities have created returns near about 14%-15% CAGR, which stands for, COMPOUND ANNUAL GROWTH RATE in the last 15 years. Also, some of the best and well-run Indian companies have capitulated more than 20% CAGR in long-term investments. One can identify the opportunities likely with good analytical skills, hard work and also patience.

REAL ESTATE

WHERE TO INVEST IN REAL ESTATE

Investing in real estate includes two-way transactions, i.e., buying and selling of commercial and non-commercial land. A few instances of commercial and non-commercial lands include sites, apartments and buildings. Income generated from real estate investments can be in two categories. First, in the form of Rental Income. What is it? As the name suggests, it is the amount received from tenants for the usage of space. The second is in the form of Capital Appreciation. It defines the distinction between the acquiring price and the vending price of an investment. The procedure for transacting the land can be a little complicated because of the legal verification of the documents. The amount of cash involved in real estate investment is mostly quite large. But there is no authorised metric to measure the returns that you can generate by real estate investments.

GOLD, SILVER & OTHER COMMODITIES

GOLD, SILVER & OTHER COMMODITIES

Investing your funds in either Gold or silver is one of the most popular investment approaches in India. Gold and silver, undoubtedly, have been appreciated as long-term investment tools. Investing in commodities has gathered a CAGR return of roughly 8% in the last 20 years. Out of many ways to invest in bullion, one can choose to invest in the form of jewellery or exchange-traded funds. Now, you can invest in digital Gold as well as sovereign gold bonds. Digital Gold is very comfortable and price-effective and is a way of investing in gold online. Let us take a ride on both investments.

DIGITAL GOLD

Gold used as CURRENCY ages before. Although, we can still use it as MONEY. Yes, you read it correctly! Money and Currency are not the same, but people use them interchangeably. MONEY is what we cannot smell and touch but, we can observe in terms of numbers. CURRENCY is a promissory note and coin which represents money. Gold, for over 3000 years, has been a store of value. It is much longer than any currency all over the globe. In India, Gold is considered God’s Money, and one can find it in holy temples. It is offered to temples on almost every auspicious occasion. This results in India is the largest importer of Gold around the globe in today’s time.

Despite being amid a global pandemic, Indians have found a new way to invest in gold, also known as yellow metal, DIGITAL GOLD. Buying and selling of gold digitally. One doesn’t need to store it as it’s available online and trade on according to him/her.

SOVEREIGN GOLD BOND (SGB)

What is this new concept? Who issues the SGB? These are government-owned securities and denominated in grams, one of the best alternatives for physical gold. If you invest in the SGBs, you have to pay the issue price in cash, and you can only retrieve the bonds in cash on the maturity date. Now, to answer the question, who issues them, the Reserve Bank of India issues them on behalf of the Government of India. You might be wondering why I should invest my funds in the SGBs? What are the benefits this tool holds? The reason is, you will receive the on-time market value at the time of retrieval/ premature redemption. There are no risks associated, and also the cost of storage is eliminated. One can be free from the issue of the purity of gold in jewellery form.

WHERE TO INVEST IN MUTUAL FUNDS?

WHERE TO INVEST IN MUTUAL FUNDS?

Many investors consider Mutual Funds a sustainable pool for money. Here, the investors also referred to as unitholders, collect a handsome amount and then invest in other tools. The profit is generated here and then distributed to the investors according to the total units held by them.

  • EQUITY MUTUAL FUNDS: If you plan to invest your funds for five years or longer, you should pick Equity Mutual Funds. An equity mutual fund is a mutual fund that initially invests in stocks. One can manage it in two ways: actively and passively. 
  • ELSS OR TAX PLANNING FUNDS: When you are an aggressive investor and want to save your tax charges on shares, the best option available for you is ELSS or Tax Planning Funds. ELSS stands for Equity Linked Savings Scheme. These funds have a mandatory lock-in period of 3 years. It is advisable to invest in them only when an investor can wait for more duration if the market gets into a bad situation.
  • AGGRESSIVE HYBRID SCHEMES: If you are a new investor, you should consider one or two hybrid schemes. They invest in a combination of equities (minimum 65%) and debt. They are less fraught as compared to pure equity shares. It is because the debt part offers comfort in times of volatility. 

DERIVATIVES

DERIVATIVES

Derivative: a financial contract whose value is analysed based on underlying assets. The underlying assets can be of various types. A few of them can be a currency, stock, commodity or securities. One can use these derivatives to alleviate a few risks. Commonly, they consist of forwarding, futures, options, and swaps. Mostly, stock exchanges do not exchange derivatives, whereas other institutions use them to safeguard risk or guess the price change in the aforementioned underlying assets.

AUTHOR’S LAST WORDS

AUTHOR’S LAST WORDS

I believe that investing in the share market is the smartest decision one can take for their funds. It is because of the various options and returns on them, which the share market can offer you if invested for the long haul. In today’s time, the great thing about investing is that plenty of avenues are available for investors to invest their money in. The foremost step is to start saving your money to get investment as your habit. People keep their money in savings accounts and leave it untouched for years. Due to this, the capital loses its purchasing power and value. Instead, start investing in various other investment instruments to get higher returns in no time. But remember one thing, do not invest all of your savings in one asset or one tool. Diversify your funds to play a safe game.  

In the share market, a youngster may dare to take a higher risk. As a young professional, a person has more time and number of years to invest their funds. Young investors should allocate approximately 70% of their investable amount in Equities, 20% in Bullion, and the remaining in Fixed-Income investments. However, a rational and retired person could invest around 80% of their savings in fixed income as these are the safest options, 10% in equities and the remaining 10% in bullion. It might not be the case with everyone. The ratio may vary in which one can allocate the funds. It depends on the level of risk an investor can handle.

Do not wait and start investing your funds!!! Firstly, know about the tool you are investing your money in. Know about the procedure which you have to follow, to begin with investing. Look for the reasons to invest. Analyse and calculate the profits and losses which each instrument can provide you with and Yey! Happy Investing!!!

Thanks for Reading!!!

Disclaimer: This article is issued for general informational and educational purposes only and does not intend to give investment advice. Any references to an investment’s past or potential performance should not be construed as a recommendation of any specific outcome or profit. 

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Composed By: Aarushi Jain

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