Best Investment Instruments for Maximum Returns
Choosing the right investment avenues is not an easy task and the choice depends on a lot of factors. We all prefer investing in instruments that offer high returns, but with better returns, there is always an element of risk involved. Higher the returns, the more is the risk.
So, where should you invest your hard-earned money to enjoy high returns with minimum risk? Is there such an investment option in India? With gold and silver prices falling and the value of rupees appreciating, which are the best places to invest?
Here, we touch upon some of the best investment avenues for earning great returns, which should answer all these questions.
Invest in stocks
The idea of investing in stocks when the market is at its peak and there is a lot of risk associated with the same might sound absurd to you. You should know that you still can invest in the stock market, despite its conditions, and watch your investment thrive.
Look for stocks with low beta value. This value helps measure the volatility of a particular stock when compared to the Sensex. When you choose to invest in low beta value stocks, the risk reduces in regard to other stocks, especially when the market is at its peak.
Invest in mutual funds
Investing in SIPs is the best way to overcome volatilities in the market, which is why you should consider investing in top performing mutual funds to enjoy good returns. However, avoid investing a large sum of money through lump sum investments in case of equity mutual funds.
If you do have a large sum to invest, you can consider balance funds, liquid funds, debt funds, and ultra short term funds instead.
There is a class of equity mutual funds that helps in tax saving. These are a part of equity linked saving scheme (ELSS). By investing in these, you can enjoy tax benefits under IT Act, section 80C.
Other Tax Saving Options
Apart from ELSS, there are other tax-saving options you can consider as well. Some of these include Public Provident Fund (PPF), 5-year tax-saving Fixed Deposit schemes, and National Saving Certificates (NSCs).
PPF is the best investment option for small business owner and salaried people. PPFs are operated by the government and offer 99% security. NSC is popular in rural India as the minimum investment amount is Rs.100, and has a lock-in period of 5 or 10 years. The current rate of interest is 8.10%.
For eg: If you purchase an NSC worth Rs.100 now, you’ll get Rs.147.61 back after a period of 5 years.
If you’re above 60 years, consider opting for a Senior Citizen Scheme (SCS), the current interest rate of which is 8.6%.
Invest in Fixed Deposits/ Recurring deposits
While stocks and mutual funds have a lot of excitement associated with them, it might be wise to consider fixed income options like FDs. Fixed Deposit interest rates in India vary from institution to institution, and are higher than usual saving accounts. This method of investment is safe and, if you choose the best Fixed Deposit scheme, you’ll be able to earn decent returns too. The benefits of investing in Fixed Deposit are many, like:
– Most banks and NBFCS offer a wide choice of tenures, starting from 12 months to 60
– Some of these institutions offer partial withdrawal of your money and there is a loan facility available, where you can take out a loan of up to 90% of the principal amount
– You can avail the interest on a monthly, quarterly, half-yearly, or yearly basis, or choose to reinvest this amount in an FD and earn additional interests
Invest in gold bonds
Gold bonds have come into the scenario recently, and are yet another choice that you can invest in. These bonds are best for long-term investments. The value of gold bonds is directly linked to the rate of gold. Thus, you’ll get better returns when the price of gold escalates. Also, you’ll be eligible to earn interest on these bonds.
There is, of course, a risk of gold price fluctuations, but going by history, gold prices are likely to go up in the near future as prices tend to rise with inflation.
Invest in IPOs
This investment instrument is for people who have an appetite for high-risk ventures. In India, IPOs continue to be one of the most popular choices as they offer one of the best returns.
Whether you’re looking for short term returns or long term, it is important to diversify your investment portfolio. Diversification will help in negating the possibility of a big loss.
An equity laden portfolio can offer a high return but the risk of loss is also high. By investing in secured options like PPF or FDs, the loss in one can be neutralised by the gain in another, which is why you should make sure that you have a balanced portfolio to earn high returns.
Carefully research these different investment avenues and make your selection based on what suits your finances and risk appetite.
Aman Khanna is an experienced financial advisor who is well known for his ability to foretell the market trends as well as for his financial astuteness. He has written numerous pieces on various investment topics like Mutual Funds, FD, RD and many more.