10 best investment options available in India

Investing isn’t all that easy. You need to identify the right asset, evaluate whether it is in line with your personal goals, and then build a strategy to generate good returns. To make it easier for you, we bring you the best investment options to choose from.

Best Investment options

Everybody wants a secure future with a comfortable financial cushion. But, how do you go about building one? How can you earn more without having to work 24×7? You make your money work for you. That’s what investment is all about. The best thing money can buy is more money – you need to be investing to get to your financial goals. Now investing isn’t all that easy. You need to identify the right asset, evaluate whether it is in line with your personal goals, and then build a strategy to generate good returns. But don’t stress out. To make it easier for you, we bring you the best investment options to choose from.

1. Public Provident Fund

If you are looking for a long-term investment option, a public provident fund, popularly known as a PPF, is the safest option for you. The best part about investing in a PPF is that you aren’t required to pay tax on the interest you earn from PPF.

When you open a PPF account in a bank, the money you deposit gets locked for a period of 15 years. You earn compound interest on this locked money. If you are happy with the returns, you can even go for an extension of another five years.

The only drawback of investing in a PPF is that you cannot withdraw the money before the completion of at least 6 years. In case you need the money, you can borrow a loan from the bank on the balance in your PPF account.

2. Equity Shares

 

best investment options

When you invest money in equity shares, historical data should suggest that you will earn higher returns than that of many other assets. The risk is directly proportional to the returns, which means that there is a high amount of risk involved.

The shares are expressed in terms of face value and market value. Before investing in equities, you should know how to perform a thorough analysis of the company or sector you’re choosing to pick. This is to make sure that the expected returns align with your personal wealth goals. If you are planning for long-term investment i.e over 5-10 years, you’re likely to generate a good amount of returns in the equity market, making this an attractive option.

3. Mutual Funds

Mutual Funds are highly popular, and arguably the best long-term investment options. They are a common pool where many investors put their money in equities and shares.

This offers 2 advantages:

  • Automatic diversification: By diversifying your capital across multiple securities or even asset types, a Mutual Fund significantly reduces your risk and helps deliver more stable, less volatile returns.
  • Intelligent Investing: Mutual Fund schemes are run by fund managers with extensive experience in the markets. These fund managers research and study the markets before taking investment decisions for the schemes. This helps individual investors avoid the stress of trying to time or study the market too much.

As an investor, you can buy any number of units of these mutual fund schemes at their prevailing rate – called the Net Asset Value (NAV). These can later be cashed out at higher Net Asset Value (NAV) for a profit, provided market conditions have been favorable. Most mutual fund schemes have no minimum investment period. which makes them quite popular among investors.

4. Gold

One of the oldest investment options, gold has historically been a very popular asset. The simple reason is its consistently increasing price over time. While it isn’t performing nearly as well as it used to, the markets have evolved to offer customers many new ways in which you can invest in gold – like gold deposit scheme, gold ETF, gold bars and gold Mutual Funds. Starting from 3 months, the investment period can go up to 5-10 years as well.

5. Post Office Schemes

If you are looking for a short-term investment plan, consider post office schemes. One of the best schemes provided by Indian Postal Service is the monthly income scheme. It offers very high returns with minimal risk. The returns are given on a monthly basis at a rate of 8.5% per annum.

6. Real Estate

best investment options

In India, investing in real estate is considered one of the safest bets by investors. Over the recent years, real estate investments have gained in value rapidly. While there are concerns of a ‘bubble burst’ by some sections of investors, many still continue to believe in real estate assets.

7. Initial Public Offerings (IPO)

Also known as a stock market listing of a company, initial public offerings are offerings by which new companies invite the public to buy their shares before they get listed on exchanges. As the initial rates are low, investors tend to keep an eye out for promising companies that are likely to have their stock value inflate over time once they are listed.

 

Once the company gets listed in a stock exchange, its stock price changes subject to market conditions, which factors in the company’s performance, future potential, management, and other factors. With the right companies, it could arguably be considered a low risk and long-term investment option. However, IPOs do come with a different set of risks associated with them, which you should look into before jumping in.

8. Company Fixed Deposits

Bank fixed deposits do not offer a lot of returns. But a different kind of fixed deposit – called a company fixed deposit – offers the same model, but with higher returns. The money invested in such company fixed deposits cannot be withdrawn before maturity. So you should analyse them well before selecting the investment period.

 

Company fixed deposits do not come with any insurance, and are neither controlled by RBI (Reserve Bank of India). It is an ideal option for the investors who are willing to invest for a longer duration and take some risk at the same time.

9. Unit Linked Insurance Plans (ULIP)

A Unit Linked Insurance Plan is an option that offers investments in bonds and equities, along with protection via insurance. In this type of plan, a part of your premium is invested in the stocks and bonds as determined you, and the rest is paid towards a life insurance cover. Just like any other investment option, it involves some amount of risk. The fluctuations are measured in terms of Net Asset Value (NAV).

10. Investment in Bonds

If you are not comfortable in investing in any of the above schemes, then you need not worry. There is still one very safe investment option – bonds. There are many bonds that offer a nominal rate of interest, and many are floated by governments, making them fairly safe options!

How to choose the best investment option?

best investment options

Amidst all these options, how can you choose the best investment option for yourself? The time and money you can put into an asset, your understanding of it, and how comfortable you are making investment-related decisions can significantly affect your decisions. Here are few things that need to be kept in mind while choosing the best investment option!

1. Needs and goals of investment

Think carefully about your needs and the desired goals from the investment. It should align with your own personal plans – in terms of expected returns, the risk factor, and the expected timeline.

2. Investment period

The next thing to be determined is the number of years you want to invest for. This is usually one of the major deciding factors, because it is the time period for which your capital will be blocked while it generates returns. Based on the investment periods, the investment plans are divided into long-term and short-term investment plans.

3. Risk Factor

Investors have varying risk appetites. You may be willing to take bigger risks than others, or you may rather protect your principal even if it means having to skip some potential gains. This is perfectly alright. But it is important to determine the level up to which you are willing to take risks. Based on this, decide your investment plan. For example, investment options like equity shares have higher risk while fixed deposits or a PPF have minimal risk. While higher risk investment funds may provide good returns in long run, the lower risks investment funds provide stable returns that are unlikely to fluctuate, giving you more clarity on what to expect.

4. Asset Allocation

After you decide the amount of money you are willing to invest and the risk associated with it, diversify your capital. Decide the ratio of the money you want to invest in different kinds of assets – equity, debt, or others. Diversification is a very important aspect of investing, and should always be part of your investment strategy.

5. Check the fees

Look for the investment fees you may need to pay while making a particular investment option. For example, you need to pay to the fund manager or to the advisor in case you invest into mutual funds, or take financial advice respectively. Remember to check out Clearfunds, which offers zero-commission, and access to Direct Mutual Funds that give you higher returns!

 

Comparison of the best investment options

To help you better with the process of choosing the right investment option for you, here is a quick comparison among the best investment options:

Asset Type Min Amount (Rupees) Max Amount (Rupees) Investment Period (Years)
Public Provident Fund 500 1,50,000 15
Equity Shares No lower limit No upper limit Not applicable
Mutual Funds 500 No upper limit Applicable for ELSS and close-ended schemes
Gold Investment No lower limit No upper limit Not applicable
Post Office Schemes 1500 4,50,000 5
Real Estate Investments No lower limit No upper limit Not applicable
Initial Public Offering (IPO) No lower limit No upper limit Not applicable
Company Fixed Deposits 2000 No upper limit Not applicable
Unit Linked Insurance Plans (ULIP) 1,00,000 No upper limit 45 or more
Investment in Bonds No lower limit No upper limit Variable

Of course, the selection process will vary from person to person depending on various parameters and preferences. The best investment options may not the best for someone else. Choosing the right ones is vital, as only then the returns will match your expectations. Choose wisely, and get started on Clearfunds to jumpstart your investment journey!