Being young is the best feeling in the world and why shouldn’t it be? You have a world of opportunities awaiting you and along with that, an abundance of choices. For those of you who, started early, got your first job and started saving, we have some useful information for you to make the most of your time. It is a simple truth that dreams take blood, sweat and tears but what most of you weren’t told or chose to ignore in the radicalism of youth is that money too is going to be a prime component to the recipe. With time on your side, there is no better thing to start doing than to invest and invest early.
Taking financial investments seriously at an early age in your life gives you the advantage to achieve financial freedom earlier, helps you build a strong financial portfolio and also benefit from the time period. We are hoping that most of you are here because you already realize this and are starting to see the merits in getting started on your road to financial freedom, and each slab of that road is paved with smart investments. We have put together an entire list of financial instruments and the best investment options in India that you can start leveraging early on in your life to build a great investment portfolio. Let’s take a closer look at these investment options:
- The Stock Market
For those of you who might not know, stocks are investments in publicly managed businesses that offer part ownership to you in the form of a stock for a nominal investment. Depending on the success of the company over time the value of your stock will either rise or fall. The stock market dealing is known as equity dealings and includes high risk for your investments. While the returns can be equally magnanimous, the risk can often outweigh the benefits. So it is important to choose your equity stock wisely and gain fair knowledge of the subject matter of each stock you plan on investing in. Having a good understanding of the company, its business, the market, past performance and future goals, will give you a good idea of whether or not to invest in the respective company stock. Also, you want to consider the right time to enter a market. The stock market is constantly fluctuating and can mean that a stock might fall before rising to an all-time high. Therefore, it matters when and in what stock quantities you enter a certain market. There are various online and offline consultancies that provide services such as managing your stock portfolio as well as guiding you with the right kind of stock options to invest in. With respect to stock markets, it is always advisable to have a representative managing your dealings who is a stockbroker or has fair experience in the stock investment market since constant monitoring is required to keep you up to date with changes and to efficiently manage your investments.
2. Bonds
These are basically financial investment options that take your invested funds and apply them to projects undertaken by companies wherein companies require to take up loans. Put simply, it’s a great way to put your money to work and reduce the risk value associated with the investments. Like any loan, there is an interest rate attached to the borrowing made by the third party company and since your funds were used to aid the company loan, you get a share of the profits made via interests. Depending on the accessibility you have to various markets, you will have limited to varied options with respect to bonds. In most cases, bonds are issued when large government projects are undertaken, especially related to infrastructure. Bonds also offer varying rates of return and tenures. Depending on your duration of investment, you can choose the bond that fits your investment needs. Unlike stock market trading, bonds offer great stability and long-term security. The risk factor with bonds is extremely low and a great inclusion to your diversified financial portfolio.
3. Mutual Funds
These investment funds offer a balance between high-risk high-return equity and low-risk low-return bonds. Not to be mistaken, mutual funds are still funds that invest in the equity market and are subject to market fluctuation, although mutual funds offer medium risk portfolios. Most mutual funds are efficiently managed and invested in growth markets that are stable and offer long-term security. Additionally, mutual funds offer the flexibility to make additions to the investment portfolio in systematic monthly payments instead of large sums of payments upfront as might be the case in bonds or certain stock options. In today’s context, mutual funds are preferred over traditional investment options such as fixed deposits or recurring deposits because the rate of return is substantially higher. While most fixed deposits and recurring deposits offer single-digit rates of interest, most of the well-performing mutual funds offer rates of return in multiple of ten. Setting up mutual funds is also very easy these days and hardly requires too much of processing time. Another added advantage to using mutual funds over stocks is that you do not have to manage the fund and can rest assured that the fund is being operated keeping in mind market trends.
4. Hedge, Index and/or Arbitrage Funds
These are some more complex financial options for investing but more or less employ similar concepts as the ones above. The major difference is that these types of funds are actively managed by investment brokers and consultants and constantly keep changing their strategies to ensure that they provide massive returns to their investors. By pooling funds from multiple investors, these funds are able to make large market bids and in some cases even influence market trajectories, which is also why they are sought after by many wealthy individuals as a means to maximize their capital. Most hedge funds require high principal investments and might have other prerequisites for qualification. Alternatively, Index and Arbitrage funds are easier to find and can be easily invested in. Due to the extensiveness of this particular option, we suggest individually researching these types of funds for more accurate information.
5. Retirement Plan
You might wonder why we jumped to retirement plans. Well, unlike the common misconception, retirement plans are not just set up in anticipation of retirement. Even though we all will retire at some point. These plans also act as tax saving options and provide long-term stability to the financial portfolio. Setting up these plans is fairly simple and there are a few common ones to choose from in the market.
6. Commodities
As the name suggests, a commodity is an actual good used commerce. Back in the barter system days, when paper money didn’t exist, exchanging one commodity for its worth in the quantity of another commodity was the fair practice in trade. One bag of rice could be exchanged for a few hundred grams of coffee and so on so forth. While we are far ahead the barter system days, the value in commodities remains the same. Commodities like coffee, precious metals, industrial metals, oil, natural gas etc are valuable and their prices keep fluctuating in the market. There is great potential to earn from commodities and also some bit of security. While the value of a commodity can fall in the market, it will in very few cases go below a certain threshold and even in those cases, will most likely rise back up to a nominal value. When it comes to a commodity, it would take a significant supply of a particular commodity with respect to its demand to devalue the commodity. Contrarily the same is not likely for a business stock. A company can run into the ground and its product demand can be eaten up by a competitor, the same is less likely to happen in the case of coffee. Coffee will remain to have a value as long as people in the world consume the beverage or it continues to be used as an ingredient in foods. To invest in commodities, you will need to enlist the help of a broker or firm as there are several processes associated with the same and will also require a fair bit of capital to start reaping decent profits to cover the expenses.
7. Post Office Monthly Schemes
For those of you who do not know, post offices still exist. And like always they do more than just deliver post. The post office monthly scheme doesn’t directly associate you to the post office but it is a fund that is supported by the operations of post activities in the country and acts as a safe, low-risk, stable investment option that offers regular returns. For more details on this, simply check up online for the Post Office Monthly Schemes.
8. Company Fixed Deposits
Unlike the fixed deposits offered by financial institutions and banks, companies and business also offer investment options where an individual can add to the company fund for not share in the company but lucrative rates of return. These types of deposits allow companies to directly generate funds from individuals, avoid high interest on loans as well as reduce the involvement of middlemen. Although, when investing in such type of fixed deposits be certain of the company or business you are dealing with and make sure to have formal agreements drawn up for the processes. In most cases, there will be formal paperwork involved but you need to be extra careful as these types of investment options fall outside the purview of the financial regulatory boards in India and some schemes may also be fraudulent.
9. Unit Linked Insurance Plans
Commonly abbreviated as ULIPs, these are a life insurance financial products that offer an investment option as well. Unlike traditional insurance options, Unit Linked Insurance Plans are equity-based investments that also provide you with a life term insurance for an insured sum or for the market value of your investment. It’s a double benefit scheme with a fair share of risk involved because the investments are stock market based and subject to market volatility.
10. Real Estate
Unlike most of the other options, investing in real estate will require a fair bit of capital investment but if made under the right guidance and the right time, you are likely to earn the highest investment potential barring stocks. Real estate prices are known to consistently rise due to the development of the land and over time increase in demand. In very few cases have there ever been a reduction in land prices and these are mostly very rare occurrences. Real estate is a great way to have a very strong financial investment and if done well can help you reap benefits in a few short years.
11. Cryptocurrencies
Comparatively, a new addition to the investment options of the past and for quite a period of the time argued upon as being a hoax or insecure investment. Cryptocurrencies have stood the test of time, at least for the initial period and proven to be valuable in ushering in a new age of digital currencies that are being used as a mode of financial operations at scale. Buying cryptocurrencies like bitcoin can be fairly difficult with the rates today unless you have a strong surplus amount to spare but there are various other cryptocurrencies that have been introduced in the global markets and you can consider investing in them. There are also a variety of companies cropping up that are allowing a hedge fund system for people to own small portions of a bitcoin or other cryptocurrencies, thereby allowing for investors to reap the benefits of the gains without the heavy capital investment needed to have a complete stake.
12. Venture Capital Investments
You may have heard this term before and it is quite like finding a horse at the derby and putting money on it to win, except here there are many horses to choose from and they can all win. Venture capital investing is the process of identifying companies and business that are young, growing and yet not in the stock market. Most often referred to as start-up, these companies are in the early stages of their growth and need various amounts of funding to achieve their year on year targets. By investing in capital into such companies, you stand to gain part ownership of the company as well as reap the benefits of the companies over time growth. You will need key insights into the businesses and also a good amount of capital but if you are keen on multifold returns, we strongly recommend keeping your eyes peeled for when the right opportunity comes knocking at your door.
We urge you to dig deeper into each of these and look for the best investment options in India in each segment to build a strong financial portfolio. There’s no stopping you from investing in each and every one of these options, so do not limit yourself. While funds may be a challenge in some cases, consider building your wealth in such as way that you can diversify your portfolio over time to reap the benefits from every possible financial instrument and option available to you.
Posts by SpeakBindas Editorial Team.