Investing for a Secure Future and Good Returns
Where to invest?
Where to invest? When it comes to investing, we have to choose an asset class (Asset Class) that is conducive to risk and better returns.
An asset class in which we can take into account the special risk and return characteristics.
👉The following are some popular asset classes (Asset Class):
- Means of Fixed Income (Fixed Income Instruments)
- Equity (Equity)
- Commodities (precious metals) Commodities (precious metals)
- Real Estate (Real estate)
- Means of Fixed Income (Fixed Income Instruments)
These are investmentable instruments with very limited risk and the return is paid as interest to the investor which is based on a special fixed income instrument. Interest can be paid quarterly, half-yearly or annually.
At the end of the deposit period, (also known as maturity period), the capital is returned to the investor.
Fixed income investment includes the following:
- Term deposit scheme proposed by banks
- Bonds issued by the Government of India
- Bonds issued by corporates sector
- Government bonds issued by concerned agencies like NHAI (NHAI), HUDCO (Hudco) etc.
- Employees Provident Fund (EPF)
- Personal Provident Fund (PPF)
- Small Savings Schemes
Mutual Funds
Equity (Share)
Investments in equity include buying shares of publicly listed companies. We can invest in some good select stocks. The shares are traded in both the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).
However, investment in equity is not a capital guarantee contrary to the fixed income instrument. But returns from equity investment can be extremely attractive. Indian equities have returned close to 14% – 15% CAGR (compound annual growth rate) in the last 15 years.
Investing in some of the best and well-run Indian companies yields a return of more than 20% CAGR in the long run. Identifying such investment opportunities requires skill, hard work and patience.
Equity investments held for 365 more days are taxed at 10% under Tax-Paddy, if the profit exceeds Rs. This is comparatively lower rate of tax than other asset classes
Commodity – Bullion (Commodity-Bullion)
Investments in gold and silver are considered to be one of the most popular investments. The price in gold and silver has been appreciated in the long term.
Investment in these metals has yielded cagr returns of about 8% in the last 20 years.
There are many ways to invest in gold and silver. We can invest as jewelry or exchange traded funds (ETF).
Real Estate (Real Estate)
Real estate offers the best investment opportunity for investors. Property prices are rising with every passing day Real estate (Real Estate) investments include commercial and non-commercial land transactions (buying and selling).
Specific examples include transactions in sites, apartments and commercial buildings. There are two sources of income from real estate investment – rental income, and increase in capital of invested amount.
The process of transaction can be very complicated which includes legal verification of documents. Cash outlay in real estate investment is usually quite large. There is no official metric to measure the returns generated by real estate, so it will be a little difficult to comment on.
Investing in equity at an average rate of 15% per annum, corpus will be Rs 4.5 crore.
Investing in bullion at an average rate of 8% per annum, corpus will go up to Rs 3.09 crore.
Clearly, we get the best returns in equity (Share Bazaar), especially when we have a long-term investment approach.
Important information about investment
There should be a strong mix of all asset classes (Asset Classes) in deliberate investment. It is smart to diversify your investment among different asset classes. The technique of allocating funds in property classes is called 'asset allocation'.
For example, a young professional may be able to take more risks given his age and years of investment available to him.
Usually the investor should allocate about 70% of his investable amount in equity, 20% in precious metals and the rest in fixed income investment.
With equal justification, a retired person can invest 80 percent of his income in fixed income, 10 percent in equity markets (Stock Market) and 10 percent in precious metals. The proportion in which investment is allocated in asset classes (Asset Classes) depends on the investor's ability to take risks.
What to keep in mind before investing
Investment is a great option, but before you invest, it's good to be aware of the following:
Risk and return (Risk &Return) can also come by hand. The risk is more and the return is also high. If the risk is low, the return may also be reduced.
Investing in fixed income is a good option if you want to protect your original amount.
It is relatively less risky. However, when you adjust the returns for inflation Inflation (inflation rate), you are at risk of losing money.
For example – a fixed deposit that gives you 9% when inflation is 10% means you are losing 1% per year.
Fixed income investment is best suited for investors with ultra risk
Investing in equity (Share) is a great option. It is known to beat inflation over a long period of time.
Historically equity investment has generated returns close to 14-15%. However, equity investment can be risky
Gold and silver are considered safer but historical returns on such investments are not very encouraging.
Real estate
(Real Estate) investment requires a large outlay of cash and cannot be
done in small quantities.
Liquidity with real estate investment is another issue – you can't buy or sell whenever you want. You will always have to wait for the right time and the right buyer or seller to transact with you.
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Investing in the stock market without knowledge can be risky. All the information provided through this blog is for Education Purpose, please consult your financial advisor before making any investment.
Hi , This is Pramod Choudhary from Nagaur Rajasthan India. I an student and I would like to share my positive thinking with everyone that's my passion . Thank you
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