Types of Investment Plans, We Provide in India
The 10 types of investment in India are:
Sl. No | Type of Investment | Returns | Objective of Investment |
1. | Stocks | Returns are by way of capital gains and dividends and depend on market performance. | Wealth accumulation over a period. |
2. | Certificate of Deposits | Returns are by way of fixed interest for a particular period | Fixed returns with capital protection and liquidity. |
3. | Bonds | Returns via fixed or variable coupon rates. | Stable returns, risk distribution, and capital protection. |
4. | Real Estate | Returns are by way of rental income or capital appreciation | Regular income stream and capital appreciation. |
5. | Fixed Deposit | Interest rate locked in for a preferred tenure | Guaranteed income and capital protection. |
6. | Mutual Funds | Returns by way of dividends, interest, and capital gains. | Wealth accumulation over a period and creating a corpus with small and consistent investments via SIPs. |
7. | Public Provident Fund (PPF) | Returns by way of monthly interest compounded annually. | Retirement planning, to create a corpus for a financially stable retired life |
8. | National Pension System (NPS) | Variable returns-market linked and annuity. | Retirement planning, creating a corpus and a regular income stream |
9. | Unit-linked Investment Plans (ULIPs) | Market-related | Long-term wealth creation, life cover, and tax benefits. |
10. | National Saving Certificates | Fixed interest | Guaranteed returns, capital protection, and tax benefits. |
Investment Types
1. Investing in Stocks
These are long term investments that are ideal for those who are aiming to grow their wealth over time. Investing in stocks requires thorough knowledge of market trends, and the returns depend on market performance. A prudent search is imperative to pick the right stock that aligns with risk tolerance. This is one of the types of investments where the purchase and sale have to be timed carefully.
Stocks are one of the types of asset classes wherein the time required for capital appreciation depends on market performance. In the long run, stocks have shown better inflation-adjusted returns when compared to other asset types.
2. Certificate of Deposit
A certificate of deposit is one of the best types of investment in India for investors seeking fixed returns. It is a money market instrument issued against the money invested. It is issued by the Federal Deposit Insurance Company and governed by the RBI. This is among the types of financial investments where funds are invested in a bank in a demat form for a specific tenure.
The minimum investment accepted under the certificate of deposit is Rs. 1.00 lakh and its multiples. The tenure for certificates of deposits issued by commercial banks is between 7 days to 1 year, whereas the tenure for the deposits issued by financial institutions ranges between 1 year to 3 years.
3. Bonds
Bonds are investment vehicles that provide returns at a pre-defined rate till maturity. The investors lend money to the issuer, who pays interest at a pre-defined coupon rate until maturity. On maturity, the investor receives the principal amount back. Generally, bonds in India are on a fixed interest rate.
However, floating coupon rates and zero coupon rates have gained popularity over the years. At present, bond investments can be made directly or through debt mutual funds.
4. Investing in Real Estate
Investing in real estate involves purchasing either a residential or commercial property. Among the types of investments, real estate is for capital appreciation or a steady income stream through rent.
Investing in real estate is not restricted to the purchase of property. It can also be done by buying units of Real Estate Investment Trusts. These Trusts focus on purchasing commercial properties, and the returns are commensurate with the rental income from these properties.
6. Mutual Funds (MFs)
Mutual funds are ideal for investors who aim to allot funds to various types of investments to balance the risk. Mutual funds invest funds in equity, bonds, or both. Individuals can choose between debt funds, equity funds, or balanced funds depending on what their risk appetite is. Additionally, one can opt to invest small amounts regularly in mutual funds through Systematic Investment Plans (SIPs).
Assess your risk appetite and consider what your financial goals are before you invest in mutual funds. With the option to choose among different types of investments in India, you can invest in equity funds if you want to be an aggressive investor. Debt instruments work well if you are a conservative investor.
Further, if you want to save on overall tax liability, you can invest in tax-saving schemes like ELSS.
5. Fixed Deposits (FD)
Fixed deposits are ideal for risk-averse investors seeking guaranteed returns. Fixed deposits can be opened in banks or other financial institutions. They accept a one-time lumpsum amount for a pre-determined tenure.
While the principal amount remains secure, you earn interest till the maturity date at a pre-determined interest rate. This is among the types of investments that are popular owing to returns, capital security, and liquidity. You can opt for tenure to align with your financial goals.
7. Public Provident Fund (PPF)
Considered a tax-efficient retirement planning tool, Public Provident Fund is one of the safest among the types of investments. It is a Government of India-backed investment option and you can invest in it by opening an account in any bank with a minimum amount specific to the bank. The maximum permitted investment in a financial year ranges between Rs. 500 to Rs.1.50 lakhs.
This investment option has a lock-in period of 15 years. and qualifies for deduction under Section 80C~of the Income Tax Act 1961.
The benefits of compounding in PPF enable you to create a huge corpus. The interest is applied to the minimum balance in your account as is between the 5th and the end of the month. It is recommended to deposit funds into the account before the 5th of every month. Also, be sure to open a PPF account in a bank with digital transfers for the convenience of regular contributions.
8. National Pension System (NPS)
The National Pension System is an investment option backed by the government. It is considered one of the safest investment options that focuses on long-term savings, and i4*- t is a preferred retirement plan. Investors can diversify their investments in NPS by allocating the funds to Equity, Government and Corporate Bonds, and Alternative Investment Funds.
The subscribers, upon attaining 60 years of age, are permitted to withdraw a portion of the corpus in lumpsum while the remaining has to be utilised to purchase an annuity that provides a regular income stream. However, investors can now continue to invest in the scheme till they attain 75 years without superannuation.
You have two investment choices under NPS, i.e., active choice and auto choice. The asset allocation is predetermined in auto choice. Active choice is ideal for financially literate investors, and the portfolio can be as per their understanding.
Investing in real estate involves purchasing either a residential or commercial property. Among the types of investments, real estate is for capital appreciation or a steady income stream through rent.
Investing in real estate is not restricted to the purchase of property. It can also be done by buying units of Real Estate Investment Trusts. These Trusts focus on purchasing commercial properties, and the returns are commensurate with the rental income from these properties.
9. ULIPs (Unit Linked Insurance Plans)
ULIPs offer the dual benefit of insurance and investment. Clubbed with tax benefits, they are among the preferred investment options. A portion of the premiums paid towards the plan provides life cover, and the remaining is invested in market-linked assets.
These types of investments attract various charges like premium allocation charges, administrative charges, fund manager charges, etc. Look for a provider that collects minimum charges to maximize returns. You can use a ULIP Calculator to get a clearer understanding of these charges and how they may impact your overall returns.
While selecting a suitable plan, focus on flexibility in premium payments and customization of plans with different fund options. ULIP gives the option to switch funds depending on market conditions, risk appetite, and changing financial plans.
10. National Savings Certificate (NSC)
National Savings Certificate is a Government of India initiative to encourage small and mid-income investors. It is a safe investment option for individuals looking for guaranteed returns, capital protection, and tax benefits. You can purchase a National Savings Certificate from any post office branch.
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