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Different Types of Investments in India

Types of Financial investment

Investing is not about getting rich quickly, but rather a way to continually grow the wealth you already have. With several types of investment schemes available, you don’t have to have a lot of wealth to begin investing.

There are different types of investments depending on the investor, their net worth and profile, varied investment opportunities can be carefully chosen and a long term plan charted out to achieve maximum returns.

Let us have a look at types of investment in India :

1. Public Provident Fund: It is considered the safest and most secure long -term investment product amongst others which is the best available investment options. It is completely tax-free. The account can be opened either in a bank or a post office, and there is a lock-in period of 15 years. The interest rate is at 8% per annum tax-free.

2. Mutual Fund: A mutual fund enables an individual to invest in a balanced portfolio of equities and bonds to stabilize the risk to return of the investments. The new market trend these days is investing in the stock markets through a mutual fund. They allow small investors to invest in funds through systematic investment plans or systematic transfer plans which do not burden the investor for a lumpsum investment. Through this investment plan, the investor can expect an enhanced return as compared to any other investment option in the market.

3. Direct Equity or Share Purchase: the share price should be analysed before purchase. This kind of investment is preferable for a long term lock-in period of 10 to 15 years which would ensure higher profits.

4. Real Estate Investment: It is considered one of the fastest growing sectors in India where investment is concerned. It is not only restricted to residential property but also an investment in commercial, retail and other projects are fast catching up. The risk is manageable since over some time property price only increases.

5. Gold: It is one of the oldest and most assured investment options in India. You can either buy physical gold in the form of a biscuit, necklace, etc. or invest in different gold formats like gold deposit scheme, gold ETF, gold mutual fund, etc.

6. Company Fixed Deposits and Bank Fixed Deposits: The company fixed deposits provide a higher rate of interest as compared to bank fixed deposits. However, the lock-in period is for a long tenure of a year plus. The returns payable are monthly, quarterly or annually as per the bank guidelines for bank fixed deposits. However, interest on these deposits is taxable.

8. Unit Linked Insurance Plan: also known as ULIPs. They invest in debt and equity. They are not a very popular choice of investment with investors.

9. Senior Citizen Saving Scheme: it is a risk-free, tax saving scheme for individuals above 60 years. The scheme offers a tax-free interest calculated annually. The current rate is 8.6%, which is subject to change. However, the maximum amount one can invest is Rs 15 Lacs. Though the tenure is 5 years, it can be extended by another 3 years.

10. National Pension System: this is an initiative by the Government to provide pension solutions. This scheme invests in equity, bonds, government securities, etc. The scheme matures when the investor is 60 years of age. The interest accumulated in this scheme is tax- free. If the investor avails a lump sum payment upon maturity, then 40% of the amount is exempted from tax.

11. Sukanya Samriddhi Yojana: this scheme is to promote the welfare of the girl child. The tenure of this scheme is until 21 years of age and can be opened with an amount as low as Rs 1,000. The current rate of interest is 8.6% which is compounded annually and paid monthly. This scheme offers Triple Exempt Tax benefits. The rate of interest can change according to government legislation.

12. Recurring Deposits: it is one of the most appropriate investment options. This deposit can be created at a bank or a post office. The interest options are either monthly, quarterly, half yearly or cumulative.

13. Bonds: they are a safe bet for investments, with fixed interest rates which are relatively high. Since they are regulated by the Government there are no fluctuations present in this type of investment.

The types of financial investment options listed above are either short term or long term. An investor can opt for the most appropriate investment opportunity as per their needs, budget, and plans.

Knowledge, Acceptance, Diversification, and Timeframe are the four main building blocks which an investor required to reduce their exposure to investment risk. It is advisable to stay invested for a more extended period in a variation of products which provide utmost comfort, as the saying goes don’t put all your eggs in one basket.