All the investors look for huge returns as soon as possible, when investing their money. They want the risk quotient to be as low as possible, so that they don’t at least lose the principal amount. However, an investment with low risk and high return is a myth. Risk and return are directly proportional to each other i.e. higher the risk, higher the return. So, whether your investments are financial or non-financial, you have to match your risk profile with the risk profile of the product.
Here are the Top 3 investment options that most Indians look for while saving for their financial goals.
- Direct equity: This type of investment technique is a very high risk and volatile and therefore, is not everybody’s cup of tea. There are very high chances of incurring losses, so you have to do in-depth research of the types of shares and even the entry and exit time before making the investments. To reduce the risk quotient, diversification across various sectors need to be done. To invest in stocks , demat accounts are required.
- Equity mutual funds: These mutual funds primarily invest in equity stocks. As per Securities and Exchange Board of India (Sebi), 65 percent of this mutual funds assets have to be invested in equity and equity based instruments. Their categorization is done based on whether they are Domestic(investing in stocks of Indian companies) or International(investing in stocks of overseas companies) and based upon their management(active or passive). In an actively managed fund, the return are primarily dependent on the fund manager’s ability.
- Real Estate: One should not consider the house they live in as an investment. However, the second property that the person owns will be considered as an investment as it will be able to generate returns. Real Estate can produce returns in two ways: capital appreciation and rentals. However, the value of the return depends upon the location of the real estate, which is the single most important factor associated with it. The risks associated with it is that investing in real estate is highly illiquid and it is also very difficult to get the required regulatory approvals.
Along with these Top 3 investment options, there is a myriad of other investment options available, some of which are fixed income and the other are market linked investments. While the fixed income ones help in conserving the accumulated wealth to meet the yearned result, the market related investments produce high returns with extremely high volatility. For a good long term result, it is important to get the best of both worlds and have a prudent mix of investments keeping tax, risk and time horizon in mind.