Investing in lucrative options is a smart financial habit that can help individuals save more and accumulate wealth for their future. With more individuals becoming financially aware, the number of savings and investment plans available in India has also increased. However, while investment plans are designed to help investors grow their savings, not all options are suited for everyone.
To elaborate, different investment policies have different risk and reward components, which might vary from an investor’s risk tolerance level and their need to generate returns accordingly. This is why it is crucial to understand one’s risk appetite, investment goals, and tenure before picking any of the best investment plans in India.
Let’s discuss the best investment plan in India in 2023 and its key features in brief.
Types of Investment Plans Based on Investor’s Risk-appetite
A. Low-Risk Options
Conservative investors are often quite interested in preserving their saved-up capital and generating a more steady income stream. As a result, they are often more comfortable with investing in low-risk investment options
Some of the best investment plans in India with low-risk components include –
● Fixed Deposit Schemes
Fixed deposits (FDs) is one of the safest and best investment plan in India and is widely preferred by investors with a low-risk tolerance level. FD accounts are not really linked to the stock market, so they do not get affected by the prevailing market phase or volatility. The savings scheme helps FD account holders save up a corpus and build wealth over time while protecting their principal and helping earn interest at a steady rate.
FDs typically come with flexible tenures, so investors can pick a period that aligns perfectly with their financial goals. For example, individuals saving for their down payment on a new house might pick a 5-year FD, whereas investors saving for their retirement, might pick a 10-year FD.
● Public Provident Fund (PPF)
Public Provident Fund (PPF) is a government-backed savings scheme in India that offers accountholders guaranteed returns and exposes their portfolio to limited market risk. Interest on PPF is compounded quarterly and the rates are revised regularly by the government. Individuals who wish to put money into PPF can use an online investment calculator for free to determine the optimal investment principal to generate their desired returns.
● Money Market Funds
Short-term debt funds typically put assets in more than one money market instrument and the fund has an average maturity of a year. The fund offers high returns and has significant liquidity, making it a popular choice for individuals seeking a low-risk and steady investment option.
● Treasury Bills
Treasury bills are popular short-term debt options issued by the government to help raise funds from the public. These bills have a maturity period of 365 days and are widely considered to be a safe option for investors. Treasury bills help investors generate substantial returns on investment, but their earnings may not be higher than other popular money market instruments.
B. High-Risk Options
High-risk investors are individuals who plan to take on more risk to potentially earn higher returns on their investments. They usually have a strong financial standing and limited financial obligations, which enables them to stomach market losses that often accompany high-risk investment options.
Popular high-risk options include –
● Direct Equities
Equity shares are a popular type of investment option that enables investors to avail a percentage of ownership of a company equivalent to the amount they park money into the stock. The value of equity shares of a company is directly linked to its performance. As a result, the risk and reward of investing in them is quite high.
● Equity Mutual Funds
Equity mutual funds put assets primarily in the stocks of a company. Individuals can park money into equity mutual funds either directly or via a systematic investment plan (SIP), based on their prevalent financial situation. Over the long run, equity mutual funds can help generate returns on investment that beat inflation and promote capital growth. However, these investment options also carry a high amount of risk, making them most suited for experienced investors and those with strong risk-taking capacity.
● Hedge Funds
Hedge funds can be described as private investment partnerships that park resources in various markets and assets using suitable strategies. These funds are not subject to the same rules and regulations as mutual funds, making them riskier. Experienced investors often include hedge funds in their investment portfolios to diversify their chosen holdings and generate higher returns.
Medium-risk investors are known to be comfortable with investment options with moderate levels of risk primarily to generate higher returns compared to low-risk investments. These investors prefer to put money into instruments that help maintain a balance of risk and reward components in their portfolio.
● Dividend-Paying Stocks
Investors can park money into company stocks that have a record of generating high dividends for shareholders. This makes the investment option a popular means to invest in the company shares because they often offer a steady flow of earnings.
● Balanced Mutual Fund
This fund helps individuals invest in an ideal mix of debt and equity securities. This aspect exposes individuals’ portfolios to a moderate level of market risk. However, balanced funds also offer the potential to help generate significant returns, which can help investors grow their portfolio and their wealth.
● Debt Funds
Debt funds are a type of investment option that invests primarily in fixed-income securities, such as government treasury bills and bonds. They often come with a fixed lock-in period, which means investors are not allowed to withdraw their invested money for a certain period. However, debt funds are a decent way to generate a stream of regular income, as they pay out dividends monthly.
Exchange-Traded Funds
ETFs can be described as a basket of securities trading on the exchanges like stocks. ETFs are passively managed by individuals and they track a specific index or a particular market sector. These funds are typically more liquid than usual mutual funds, meaning they can be bought and sold easily.
Besides these, corporate funds are also a good investment option for those with mixed risk-taking capacity. However, regardless of the best investment plans in India and other available options investors should pick an option that ultimately matches their financial goal and risk-taking capacity.
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