Understanding the investment landscape is paramount to the success of any investment plan. It is easy
to get
intimidated by the plethora of investment options available today. However, understanding these
options can
be your first step towards being a prudent and well informed investor. Here is a quick peek:
SAVINGS ACCOUNTS: These accounts are focused to help people save. They offer a low
rate of
interest of ~4% p.a.
BANK FIXED DEPOSITS: Undoubtedly, India’s preferred investment option, a bank
fixed
deposit offers fixed returns for tenure selected. The rate of interest is governed by the RBI.
Premature
withdrawals, usually attract a penal charge.
POST OFFICE SMALL SAVINGS SCHEMES: The Government of India runs various investment
schemes
through post offices including National Savings Scheme, National Savings Certificate, etc. The
returns from
these schemes do not attract any
TDS.
BONDS & DEBENTURES: These are debt instruments issued by a company to
raise capital
from the market for a fixed rate of interest. Investors can buy these debentures/ bonds
and earn
interest on the amount invested. It is important to understand that these investments
are not backed by
any assets. The amount is invested purely based on the creditworthiness of the company.
COMPANY DEPOSITS: Like a bank, many companies accept deposits from people
for a specific
term at a fixed rate of interest. These deposits are called Company Deposits. The
company’s
creditworthiness must be considered before investing in a company deposit.
MUTUAL FUNDS: A Mutual Fund is a pool of funds collected from investors
having similar
financial goals, managed by a professional fund manager and invests in assets that are
in line with the
predefined objective of the fund. There is a wide array of Mutual Funds to choose from and
you must
understand the investment objective of the fund clearly before investing.
LIFE INSURANCE POLICIES: Life insurance policies have evolved from just
offering life
cover to being a good investment option. Many people prefer this option as it provides
insurance, offers
tax benefits and offers decent post-tax returns. Experts advise to invest in life
insurance policies
only if you need the insurance and not as a standalone investment option.
EQUITY: A name that has become synonymous with investment, especially over
the last two
decades, Equity refers to the shares issued by a company. There is a huge primary and
secondary market
for investing in equities. Investing in equities needs a good amount of understanding of
the market and
is recommended to people who are willing to spend time researching before investing.
REAL ESTATE: Another hot favorite of Indians and people around the world,
real estate
has been round ever since humans started settling in colonies. It has the potential of
offering regular
rental income apart from the appreciation in the value of the property.
GOLD: It is one of the oldest type of investing and has been believed to be
an excellent
passive investment option by people for centuries.
These investment options have evolved over years to help people invest according to their
individual risk
preference, investment objective and the investment tenure. Defining the amount of risk
of capital that
you are willing to take can help you narrow down to the investment options that align
with your
investment objectives. Investing early in life plays an important role in investment
planning.
