Where can I invest my money?

Now that you know that you need to invest if you wish to see that Volkswagen Beetle parked in your garage, I’m sure most of you must be in a dilemma as to where do you actually invest your money! The sheer number of financial products which claim to offer you great returns at minimal risk is mind boggling! Combine this with the gibberish information given in their brochures and you will be soon rethinking your decision to invest.

The single greatest factor in growing your investment is the rate of return (RoR) you get on your investment and as you will see highest returns are offered by investments that are the most riskiest. Of course there are ways to minimize your risk while maximising your RoR, but more on this later. For starters, let’s see what investment avenues are open to you as a retail investor.

Investment Options Available to you…

Lets discuss a few important ones in detail here

1. Fixed Deposit

A Fixed Deposit or FD accrues 8.5% of yearly profits, depending on the bank and the period of investment, which makes it a widely sought after and safe investment alternative, as all banks operate under the guidelines of the RBI. The minimum tenure of FD is 15 days and maximum tenure is 5 years and above. Senior citizens are entitled for exclusive rate of interest for FD’s.

2. Insurance policies

Insurance is also considered a good investment alternative as it offers services to indemnify your life, assets and money besides providing satisfactory and risk free profits. Indian Insurance Market offers various investment options with reasonably priced premium. Some of the popular Insurance policies in India are Home Insurance policies, Life Insurance policies, Health Insurance policies and Car Insurance policies.

3. Public Provident Fund (PPF)

Like NSC, Public Provident Fund (PPF) is also supported by the Indian government. An investment of minimum Rs 500 and maximum Rs 70, 000 is required to be deposited in a financial year. You can create a PPF account in a GPO or head post office or in any any nationalised bank branches and avail an income tax deduction of up to Rs 1, 00,000

under Section 80C of IT Act. The 8% rate of interest of PPF is evaluated yearly with a lock in tenure of maximum 15 years.

4. Mutual Funds

Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. Mutual funds issue units to the investors, which represent an equitable right in the assets of the mutual fund. Like stock market, mutual fund investment are also entitled for various market risks. Depending on the objective of the funds like long term growth and low risk factor or high income growth with high risk factor or low growth rate and stability of principal, the fund manager invests in respective fields on behalf of you as shareholders.

For individual investors it is very easy type of investment because someone else manages their funds, take care of accounts and invest money over many different available securities. But a word of caution to all you novices, the performance of Mutual Funds may not have been as  impressive as it seems over the years, so analyze the performance and returns of a fund before you put your hard earned money into it!

5. Stock Market

This one will bring you the closest to owning that Volkswagen Beetle! Investing in share market yields higher profits. Influenced by unanticipated turn of market events, stock market to some extent cannot be considered as the safest investment options. However, to accrue higher gains, an investor must update himself on the recent stock market news and events.

Investment in the Stock Market is quite easy, you only need a Trading and Demat Account first and many banks, private agencies offer this service. But it may not be an easy task, as there are over 5000 companies listed in the BSE (Bombay Stock Exchange) and NSE (National Stock Exchange). Making a choice of the company for buying shares is an important thing to do. Keep watching this space for more on this topic.

What’s Next??

Now that you know all the options available to you, you need to assess your risk and return appetite and that’s exactly what we’re going to help you do in our next Blog!

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  1. Wally Tacker - 03. Aug, 2010

    5 most important investment options | Stock Shastra http://ht.ly/18pdT4

  2. skprasad - 03. Aug, 2010

    RT @StockShastra: Where can I invest my money? http://bit.ly/aJYIRa