Investment Opportunities: A Beginner’s Guide

Investment is the only means of wealth creation but the usually investors get confused by multiple schemes available in the market. People often invest their hardened money in risky investment plans for higher returns and blame the investments for eroding their capital. So to start investing we need to focus on our desired returns and risk appetite. Each investment option has its own rate of return and risk factor and a perfect portfolio consists of diversified investment avenues for optimum level of return. A million dollar question :


Here are some of the best investment options available in the market:

  1. Equity: Equity market is the most profitable and riskiest investment avenue present in the financial market. It requires fair knowledge and experience to make money in the equities since it depends upon domestic & international scenarios and investor must know the exact time to enter into and exit from the market. Otherwise capital can be swept off within minutes. The investor receives dividends (portion of company’s profit) while holding the shares and capital gains if the shares are sold at profit. Both are taxable.
  2. Debts: This is low risk low return asset class. Debt instruments are basically investment tools where large number of investors lend money to Government and corporate for a particular period of time. There are various types of debt instruments like Secured & Unsecured debentures, Government bonds & Corporate bonds, Treasury Bills, Non- convertible debentures, Fully or partly convertible debentures. The yield on investment varies from 6%-10% depending on the debt instrument. Longer tenure attracts high yield where as shorter tenure has lower yield. It’s also recommended to check the ratings of the debt instrument. Sovereign bonds or Government debts having good ratings have lower risk & low return whereas Corporate bonds has higher yield with higher risk.
  3. Mutual Funds: Mutual Funds are professionally managed investment funds which invest money in equities, debentures, bonds etc. There are different types of Mutual Fund Schemes – Equity Mutual Fund (investment in equities), Debt Mutual Fund (investment in debt-instruments), Hybrid Mutual Fund (mix of debt and equity) & Solution-Oriented Mutual Funds (devised for particular goals). The return varies depending upon the type and tenure of investment.
  4. National Pension System (NPS): This investment option is most suitable for those who want to plan for their retirement as it has been designed to invest the money in various asset classes- equity, bonds, government securities etc. and it matures the moment investor turns 60 years old. The investor can choose the Auto Choice option where assets are chosen on the basis of his or her age whereas in Active Choice option the ratio of asset classes can be decided by the investor. The returns are based on the corpus accumulated. It offers tax benefit under section 80C for maximum of ₹1.5 lakh and an additional tax benefit of ₹50,000 under section 80CCD.
  5. Public Provident Fund (PPF): It is widely used investment scheme having sovereign guarantee with a lock-in period of 15 years, currently offering interest rate of 7.6% p.a. (April-June 2018). It offers tax benefit under section 80C of Income Tax Act exempting interest earned and maturity amount.
  6. Bank fixed deposit (FD): Bank FD is another popular investment option offering fixed returns. One can easily invest in FDs by visiting the branch and or via net banking. State Bank of India is offering interest rate between 6.40% and 6.75% for tenures of 1 year to 10 years. There is an extra benefit of 0.50% for senior citizens. This interest amount is subject to tax deducted at source (TDS).
  7. Gold: It is one of the most ancient modes of investment in our country. But now we can buy it in paper and digital form as well. Although, the return on gold investment has gone down in recent years, it is still used to hedge risk in the portfolio. Gold is the most important asset class in your portfolio when markets are on bearish mode as it acts as a cushion against the market risk.
  8. Real Estate: Real estate is one the largest asset in a portfolio. The Real estate market in India is about to touch 180 billion by 2020 at an estimated CAGR of 11.2%. Usually, real estate investment is mistaken as purchase of house property but it also includes the land or building bought for commercial purposes.Total demand for housing is estimated at 4.2 billion by 2020 in India. In terms of costs and returns Real estate market varies from place to place. For example, housing demand in Delhi (NCR) is the highest in the country , the properties are sold like hot cakes due to scarcity of space. But the cities Hyderabad, Kolkata, Chennai & Noida still have around 45000 unsold homes either due to high prices or bad location irrespective of good demand. There are various other reasons behind variation in prices of properties. Thus it is always suggested to consult a real estate broker to crack a profitable deal.

Happy investing! Please feel free to contact us for any further clarification. We are happy to help.

Published by Sweta Sharma

I am a Research Associate working in an Equity Research Company having knowledge and experience in Equity Fundamental research.

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