Investment in India

Finance » Investment

The various types of investment options in India which can yield you very good gains if you want to invest money for long or short duration. The kind of investment that you make would depend on several factors like your preferences, the amount of money that you have and the amount of risk you are willing to take. Some people are quite market savvy and hence know how to invest in but those who do not have much knowledge about the market are usually not willing to take risks.

  • Stocks: When you buy the stock of a company, you become one of the owners of the company. You would have a share in the net profits that the company gets after meeting the expenses like paying taxes, payment of raw materials etc. Although investing stocks is quite beneficial, you should know which company to invest in to gain maximum benefits. These profits are known as dividends. Although the stocks can yield very good profits, they fluctuate according to the market rate. You may have to suffer loss if the prices of stocks or shares go down.
  • Investment in IndiaBonds: These are long term debt instruments. When you buy a bond, you lend your money to other parties and you are paid a sum of interest on maturity. These usually provide a fixed income to you and are issued by various organizations to raise capital. Usually large organizations need huge amount of money that cannot be provided by a single bank. These organizations raise money by issuing bonds and other debt instruments in the market. If you buy this bond, you are lending your money to the organization and you earn money in the form of interest rate. Bonds are issued by the government institutions, central government, state governments, private parties and other financial institutions. Bonds are said to be safer than stocks but are more risky as compared to fixed deposits. Bonds issued by government institutions are said to be almost risk free. There are several rating companies like ICRA and CRISL that rate these bonds. You should prefer to invest in bonds that have AAA ratings. Investing in bonds below BBB ratings is usually nor recommended by experts.
  • Mutual Funds: As the name suggests, mutual bonds are funds invested mutually. If you want to invest but do not have either the knowledge or the time to study the market trends and invest their money in various kinds of investment policies. You hire a fund manager (or a company) who in turn would invest your money on your behalf in various kinds of investments so that you get maximum returns. When you take the services of someone you have to pay for it and this is how they earn. You have to pay a certain amount of money to buy a mutual fund or to quit a mutual fund. They are subject to market risks, but the main advantage of this kind of investment is that because your funds get diversified and are managed by someone who is an expert in this field, you are less likely to suffer from loss.
  • Gold: Indians love to buy this yellow metal as a jewelry but very few of them are aware of that this is a very good long term investment. This precious metal tends to outperform other types of metals during times of economic slowdown worldwide. It also helps you to diversify your investment portfolio. If you want to sell gold or silver you are likely to find buyers very easily and so they are quite liquid assets. Although investing in jewelry in the most common forms of investing in gold, it is not considered by economists to be the best ways. The main reason is that when you buy jewelry, you end up paying a lot of money as making charges. Investing in gold coins, gold bullion bars, exchanged traded funds, shares of gold mining companies, gold certificates, gold mutual funds etc., are some of the ways to invest in this precious metal.
  • Insurance: Life insurance is also one of the safest modes of investment, if you are looking for investing in the long term. If the insured does not die before the maturity of the term, then money that you get on maturity is quite a good amount. The best part of this type of investment is that you do not have to pay tax on the invested money. It is very good option for those who are not market savvy and do not want to invest in schemes that are prone to risks. It is encourages savings as you have to compulsorily keep aside a small amount of money for it. It makes you less dependent financially when you need a large sum of money (for example child's education or marriage) after you retire.
  • Fixed Deposits: This is one of the most popular forms of investment in India. This kind of investment is usually done in a bank. You take a fixed sum of money and deposit in a bank for a predetermined period of time. After the maturity of the term, you are paid an interest by your bank. This interest is decided at the time you deposit the money. The interest rates on fixed deposits vary from eight to ten percent for one year. The fixed deposits are quite safe, especially in the nationalized banks. However, they are also taxable and may not yield good results after deducting tax, especially if the amount is huge. They also may not yield good results if the inflation rate is high.

Thus, before you go ahead and invest your money make sure that you become familiar with the various options available to you in the market. Also get to know the risks involved in these types of investments before spending money on a particular scheme, especially if you have limited resources. Check out the gains both in the long as well in the short term. It also a very good thing not to invest all your money in one kind of investment. A diversified investment portfolio is said to be one of the best ways of investment.