Before investing in any instrument, you must know if you want to invest in a high risk high return products or in low risk low return products. If you are not too comfortable with sharp changes in your investments, then you must opt for low risk low return products.
Low Risk Investments
The low risk investment options are as follows:
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Fixed Deposits:
This is an ideal product for the risk averse investors. You get capital safety and assured returns.
Credit profiles helps the investor determine if the company will honour the interest and capital payment. If the FDs have a higher AAA or FAAA rating, then those must be preferred. Do not compromise on the interest rate. Look around in the market for a provider offering you the best rate. The interest is paid out either on a monthly, quarterly, annually or on a one time basis. If you choose the one-time payment at the end of the maturity, you can get the highest return as the amount gets compounded.
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Public Provident Fund:
PPF is a government sponsored retirement and savings planning investment. This is ideal for those who don’t have a structured pension plan.
The interest rate offered ranges from 8 – 9%. PPF account can be opened at post office and banks run by the state. Few banks also offer online PF account opening facility.
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Life Insurance:
Endowment plans with profits offers life cover along with savings. The policyholder will get pay out if he survives the term or not. If you are buying a life insurance policy online, you get to compare the products offered from various companies.
High Risk Investments
The high risk investments are ideal for those who have an appetite for risk. They revolve around equities. The high risk investment products are as follows:
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Direct Equities:
Investing directly in stock market requires skill and time. One must study the company, various sectors and economic factors and must have considerable resources. Not everyone can invest directly in the stock market.
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Equity Funds:
The best way to go about investing in equities is through mutual funds. The Mutual Funds are handled by fund managers who have an expert understanding and choose the right companies to invest in.
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ULIPs:
Unit Linked Insurance Plans are endowment plans that links investments to stock markets. Those having a higher risk appetite can select products suited to their risk profile. ULIPs have many options and individuals can consider investing based on their risk appetite.
It is best that you invest in a mix of assets across low and high risk to meet your financial goals. Other investments that you can consider are:
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Post Office Schemes:
Post office offers NSC, PPF, Post Office Monthly Income Scheme, Post Office Time Deposit and Kisan Vikas Patra. These are ideal for long term investment and they have various tenures, interest rate and tax implications.
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Bonds:
Bonds work just like FDs. Consider the credit rating, interest rate and compounding frequency before taking a bond. Infrastructure bonds offer tax benefits as well.
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Bond Funds:
This is a fixed income securities like government securities, corporate bonds, money market instruments, etc. Bond funds are offered as mutual funds or life insurers. The bond funds have greater flexibility, high liquidity and better tax benefits when compared to bonds.
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Sukanya Samriddhi Account:
This product is for parents with a girl child who is less than 10 years old. The deposits can be made to meet the future requirements of educating or marrying off the girl child. The minimum deposit allowed is Rs.1,000 and the maximum deposit allowed is Rs.1,50,000.
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Tax Saving Fixed Deposit:
Every Indian public and private sector bank offers Tax saving FDs. A fixed amount is to be deposited once which gets locked for 5 years. The interest earned is taxable. The interest rate varies for different banks.
