Investments can help grow your wealth. It is the primary reason the number of retail investors has grown
significantly in the past few years, showing a positive attitude towards investments as a suitable source of
However, investing money can be challenging due to market volatility. The only way to address the problem is to research extensively and find the best investment opportunities. No strategy can guarantee returns, but if you follow certain ways and diversify your portfolio, you can aim to increase your wealth. This article discusses various ways aiming for good return on investment.
Understand various investment opportunities
Before starting your investment journey, you must know various investment options. Some investment instruments are riskier than others but also have the potential to provide higher returns. Your choice will depend on your goals and risk appetite.
Equities mean shares of a company. You need to purchase them at a price listed in the market. Share prices vary based on demand and supply, a company's economic state, and other factors. Investors must study these factors for better chances of earning a good return on their investment.
You can invest in equities directly or through mutual funds. The latter is a better choice for investors with minimal market understanding.
2. Mutual funds
An asset management company (AMC) manages your funds and invests them in various stocks and bonds that suit your financial goals. The advantage of a mutual fund is that it is managed by professionals who diversify your portfolio with an aim to minimise losses and earn a return on investment.
However, remember that the funds are still dependent on the market performance and can be volatile. You can aim to minimise the risk in mutual funds by investing through a Systematic Investment Plan (SIP).
Bonds are a type of loan issued by large companies or government entities to collect funds from the public. The company or the government agrees to repay your share of funds in specific years. Till then, you receive interest on your investment. Since established companies and government entities back bonds, they are comparatively less risky. However, they may offer lower returns than equities.
4. Exchange Traded Funds (ETFs)
Like mutual funds, exchange-traded funds also hold a pool of funds from various investors. The only difference is that they are traded throughout the day like stocks. Also, they are purchased and sold for a price. The price of an ETF is usually lower than the minimum investment required for a mutual fund. Therefore, exchange-traded funds are viable for new investors or small-budget investments.
5. Real estate
Real estate investments also offer decent returns, although they might require massive capital. If you are ready to invest significant funds in land or properties, a little patience can provide you with substantial returns as property prices grow over time.
How to maximise returns on your investment?
There are no strict rules to get good returns on your investment. However, you can earn decent returns and minimise the risk of losses if you follow specific rules. Here are some proven ways to maximise returns on your investment:
1. Start your investment early
The power of compounding is hard to ignore. If you start investing early, you can put your investment to work for a longer duration and grow it exponentially through the power of compounding. You can start with a lower amount and increase your investment as you more income and confidence. Longer investment tenure can help you earn better returns on your investment.
2. Decide how much to invest
Depending on your financial capabilities, decide the amount you can invest consistently. When you outline your financial goals, choosing the right investment amount becomes easy. Invest the determined amount consistently into suitable assets to meet your financial goals.
3. Pick up an investment strategy
It is crucial to pick up an investment strategy and stick to it. The process varies from one investor to another and is based on their financial goals. If you have long-term investment goals, choose a less volatile option such as securities and bonds, mutual funds, or stocks with a proven track record to ensure good returns on your investment. However, you can invest directly in stocks and shares if you have a short-term financial goal.
4. Diversify your portfolio
Sticking to a single investment option can incur losses if the market underperforms. However, investing your money in different sectors lowers risk because not all sectors can go out of demand simultaneously. By diversifying your portfolio, you can get good returns on your investment and reduce the risk of losses.
5. Reduce your debt
By lowering your debt, you have reduced financial liabilities and can shift towards riskier investment opportunities that bring higher returns. However, do a proper search before investing in riskier investment options such as stocks.
As an investor, if you follow the steps mentioned above consistently and cautiously, you can aim to increase your returns on investments and grow your finances. However, there are always some losses in market-dependent investments, so choose your investment wisely that suits your financial requirements.
Mutual fund investments are subject to market risks, read all scheme related documents carefully.