Where Should You Put Your Money For The Best Returns?

Before investing in a product, you must match your risk profile with the product's related hazards. Some investments have a high-risk profile but have the potential to provide larger inflation-adjusted returns over time than other asset classes, whilst others have a low-risk profile and hence lower returns. Here are some investment options that Indians consider when saving for their financial objectives.

Where Should You Put Your Money For The Best Returns?

The following are the top investment options:

1. Direct Investment

Stock investing may not suitable for everyone because it is a volatile asset type with no assurance of profits. Furthermore, not only is it tough to choose the appropriate stock, but it is also difficult to time your entry and departure. The sole silver lining is that, over extended periods, equities have outperformed all other asset classes in terms of inflation-adjusted returns.

2. Mutual Funds that Invest in Stocks

Mutual funds that invest primarily in equities are known as equity mutual funds. An equity mutual fund scheme must invest at least 65 percent of its assets in equities and equity-related securities, according to the Securities and Exchange Board of India (Sebi) Mutual Fund Regulations. An equity fund might be managed actively or passively.

3. Mutual Funds that Invest in Debt

Debt mutual fund schemes are ideal for investors looking for a continuous stream of income. When compared to equities funds, they are less volatile and so deemed less hazardous. Fixed-income securities such as corporate bonds, government securities, treasury bills, commercial paper, and other money market instruments are the primary investments of debt mutual funds.

4. System of National Pensions (NPS)

The Pension Fund Regulatory and Development Authority manages the National Pension System, which is a long-term retirement-focused investment product (PFRDA). The annual payment required to keep an NPS Tier-1 account active has been cut from Rs 6,000 to Rs 1,000. It includes, among other things, stocks, term deposits, corporate bonds, liquid funds, and government funds. You may determine how much of your money to invest in equities through NPS based on your risk appetite. Learn more about the Net Promoter Score (NPS).

5. PPF Stands For Public Provident Fund (PPF)

Because PPFs have a 15-year term, compounding of tax-free interest has a significant impact, especially in the later years. It is also a safe investment because the interest generated and the principal invested is backed by a governmental guarantee. Remember that the government reviews the PPF interest rate every quarter. More information on the PPF may be found here.

6. Fixed Deposit at a Bank (FD)

In India, a bank fixed deposit is seen as a safer investment option than stock or mutual funds. With effect from February 4, 2020, each depositor in a bank is covered up to a maximum of Rs 5 lakh for both principal and interest under the deposit insurance and credit guarantee corporation (DICGC) guidelines.

7. Savings Plan for Senior Citizens (SCSS)

The Senior Citizens' Saving Scheme, which is likely to be most retirees' first option, is a must-have in their financial portfolios. This program is solely open to elderly persons or early retirees, as the name implies. Anyone over the age of 60 can apply for SCSS through a post office or a bank.

Take Away

Some of the assets listed above are fixed-income, while others are related to financial markets. Fixed income and market-linked assets both have a place in the wealth generation process. Market-linked investments have a high potential for high profits, but they also have a high potential for high risk. Fixed income investments aid in the preservation of collected money to achieve the desired outcome. It's critical to use the best of both environments for long-term goals. Maintain a balanced mix of assets while considering risk, taxation, and time horizon.

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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.