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Building a portfolio? Consider these investment options for balanced returns

Summary: Investing is necessary to grow your wealth. Depending on your financial goal and investments plans. Check the different types of investments plans in India.

29 Aug 2022 by Team FinFIRST

different types of investments

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Thanks to increased awareness and ease of investments, investors in India can choose from several securities to grow their wealth

Investing is necessary to grow your wealth. Depending on your financial goal and risk appetite, you can choose from several investment instruments to invest your money. Some carry less risk and are less rewarding, while others are volatile but can deliver substantial returns. It boils down to your preference and whether you can tolerate volatility. On that note, let us delve into India's most popular investment options.

The different types of investments

Investments in India can be broadly classified into three main categories: fixed income, market-linked, and alternative investments. Let us understand these three categories in detail.

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1. Fixed income investments

A fixed income investment is a type of investment that helps an investor earn fixed interest or dividend payments until its maturity date. In other words, a fixed income investment provides fixed returns. Since the returns are guaranteed, the risk involved in these investments is low.

2. Market-linked investments

In a market-linked investment, the returns earned by an investor depend on the underlying asset's performance. This underlying asset could be equity or debt. A market-linked investment does not guarantee returns, as the returns depend on the market's movement. They carry significant risk, although the reward is high.

3. Alternative investments

An alternative investment could have an underlying tangible or intangible asset. Knowing your financial goal before investing in an alternative investment is essential since the risk can vary.

Popular investment options in India

Let us understand how to invest your capital in India and the risks involved in each option.

1. Equity

An equity investment involves buying or selling company shares. The two kinds of returns that an investor can make from stock investment are regular income in the form of dividends and capital gain from capital appreciation. When the price of a stock increases, an investor can earn a profit by selling those shares. However, the risk involved in equity investment is high since it is linked to the market. In a bear market, for example, investors suffer losses when the value of a stock plummets.

It is advisable to invest in stocks only when you have a clear financial goal in mind.

2. Fixed Deposits (FDs)

A fixed deposit is a fixed income investment that banks and financial institutions usually offer. An FD is a secure option with tenures ranging from seven days and ten years. The risk involved in an FD is low, and their interest rate is generally higher than that of a savings account. Also, tax-saving FDs qualify for tax benefits under Section 80C of the Income Tax Act, 1961. You can use Metra Trust's FD calculator to calculate the maturity amount of an FD.

3. Public Provident Fund (PPF)

The Public Provident Fund was first introduced by the Finance Ministry's National Savings Institute in 1968. It is an investment that acts as both a savings scheme and a long-term investment product. PPF requires minimal initial investment and provides guaranteed high returns. Investments up to ₹1,50,000 in a PPF account are tax-deductible under Section 80C of the Income Tax Act, 1961.

4. Mutual Funds

A mutual fund scheme pools money from various investors and invests it in equity and debt instruments. Mutual fund investments through the SIP (Systematic Investment Plan) route are popular and growing monthly. Mutual funds help investors participate in the market and grow their wealth consistently.

5. National Pension Scheme (NPS)

The National Pension Scheme is a widely known retirement scheme that also provides various tax benefits. The NPS scheme can help investors earn tax benefits of up to ₹1,50,000 under Section 80C of the Income Tax Act, 1961. Investors can also benefit from a tax deduction of another ₹50,000 under Section 80CCD of the Income Tax Act, 1961.

If you wish to invest in any of the popular investment options mentioned above, use Metra Trust's investment calculators to evaluate your approximate returns. Metra Trust also offers the tools to begin your investment journey in these assets.

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject Metra Trust or its affiliates to any licensing or registration requirements. Metra Trust shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.

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