Public provident funds, mutual funds, unit-linked investment plans or ULIPS, tax shelter plans and fixed deposits-which is the best option for you? Real estate, commodity trading or the share market and so on, many times we are overwhelmed by investment options available in the market. ET Wealth estimates that cost of raising a child in India is roughly Rs. 55 lakh from childhood to college. What child savings plan can you invest in apart from fixed deposits and traditional insurance plans? Investing depends on the financial goals and the tenure you are looking at.
First build your savings. Avoid credit cards overdue and pay yourself first to start a savings pool of funds. Savings can be then invested either in ownership of assets or loaning your savings to someone else. Ownership of assets can be buying stock (shares) of a company and getting partial ownership or buying real estate or buying gold and precious metals etc. Loaning your savings could be investing in debt instruments like government bonds or fixed deposits etc. Diversify your investing portfolio and include some money in debt instruments like Fixed Deposits that are giving safe and guaranteed returns but offer slight protection against inflation.
Investment in equity or share market requires you to do an analysis of company performance over quarterly results and then getting a good broker and a demat account. Find wise and trust worthy professionals from the broker to the insurance agent but don’t let them decide products for you. Listen to their recommendations with some research. For long term investment, look into equity or the stock market. Ideally you must be investing for more than 5 years here. Buying shares of blue-chip large-cap companies is a low-risk and low-return option. Also look at mid size companies that is on a growth trajectory and might give a superior return . Pick good companies and do not try predicting markets. Stock market investment might result in wealth creation over long period of time but there is an element of risk as well depending on the economy.
Real estate is a good investment option but many of us are small savers. So we need to use investment to give us a net return over time for our various needs. A mutual fund is one vehicle where thousands of small investors’ pool in their money and the fund is then invested by a fund manager in various investment schemes, leading to small gains due to diversification and small losses as these gains and losses are spread across all the investors. This gives long-term steady returns.
Some options one should avoid are tax saving unit linked plans that many times put your money for seven to ten years in funds that do not yield good returns. Do not choose an investment just because it saves in your tax calculation. It should give a slow but steady increase in your returns.