Investing your hard earned money in the right product is as important as earning money. If you keep your money idle in saving bank account gives less than 4% return is not good idea when you have more options to invest. Explore the options and invest based on your risk level.
1.Bank Fixed deposits.
This investment is secure and it gives you 9-10% return. Remember this is not actual return from the product as it is taxable. So if you come under 30% bracket , you will get only 6-7% returns. If you dont want to take any risk on your investment, you can think about this option. This FD interest rate will varies from bank to bank and investment period.
We Indians love to invest in gold and we have emotional attachment to this product. Olden days we never saw this as investment option. But, now when there are ups and downs in stock market , we looked for other options and gold returns are tremendously increased. But, dont keep more than 5-10% of your investments in the gold as when we saw the gold returns from many years , it is not constant and high. So start investing in gold in regular basis through gold ETF or e gold or jewellery or coins.
This is best investment option to grow your money and beat the inflation. Start investing you money into mutual funds through Systematic investment Plan .the type if mutual fund you invest is depends on your risk profile. If you are new to this, you can start investing in balanced mutual fund where in exposure t o the equity will be less. If you have long term goals , then consider investing in equity diversified mutual funds where in the returns will be more than 15% in long run and its best option to beat inflation.
This option is very risky and needs lot of research and knowledge to invest in equity directly. So if you are beginner in investments better stay away from this option. As we are seeing many people who lost their money in stock market. Instead of this start in mutual funds wherein fund house managers will manage.
This is very good option, but we need to have huge amount of capital to invest. The returns are depends on the real estate market condition. Few years back cost of real estate increased drastically and difficult to have this asset. Need to remember liquidity is very less in this option, means you need to wait for many days to get your money when you need.
6.Public Provident Fund (PPF)
This is the best option if you don’t want to take any risk and gives 8.8% returns and also eligible to show in income tax 80c. But you cant withdraw amount for 15 years and after that partial withdrawals are possible. You can open PPF account in State Bank branches and post office and also recently icici bank also added to this list.
7. Voluntary Provident Fund(VPF)
This is also non risky investment, but its only for salaried employees. Besides EPF which is mandatory deducted by employer , you can also consider VPF option. In EPF your employer also contributes .But in VPF you only contributes.Current year 2012-13 , VPF interest rate 8.6 % which is less than PPF. But, since many years VPF returns are more than PPF.
8. Recurring Deposit (RD)
This is secured investment and no risk involved. Here you need invest some amount every month for the fixed time period. Returns on RD varies from bank to bank. You can consider banks or post office for opening recurring deposits.
9. Endowment policies
Most of the people in India are having these policies from LIC . This is traditional policies and which is combination of insurance and investment. If you pay X amount, some amount will be used for insurance and other is invested and at the end of the year company will declare Bonus , which will be payable at the end when policy is matured or in case of death of the policy holder. If you see the history of returns, only 6 to 7 % of returns can be expected from this product.
Unit Linked Insurance Plans (ULIPS) are very popular in last couple of years and many of the investors are into this product without understanding the complex structure of this . These are the most mis selling product since couple of years by agents saying that just to invest for 3 to 5 years and stop investing it. But fact is these products are for long term investments as in initial years most of the amount is for policy allocation and maintenance charges. So if you are looking to invest your money for many years around more than 10 years then you can try this products and returns are not guaranteed and you can expect 9 to 10 % in the long run. But you should avoid products which are having insurance and investment together in same product.
These are the different investment options to make your money grow and based on your risk level and time horizon for investment, you can opt them and keep different proportions in these products.
Let me know your onions on these investment options. Which of them you choose in your portfolio?