Top Ten Investment Options

The Indian market boasts of a wide range of investment products. Many of us feel confused about which investment option aligns the best with our financial goals. Here’s a list of the top ten investment options in India to give you a bird’s eye view of some of the most sought after investment avenues.

• Gold ETF
• Gold sector fund
• Gold futures contracts

1. Equity Stocks The stock market is one of the most vital areas of a market’s economy. It gives companies access to capital and investors a slice of ownership in a company with the potential to realize gains based on its future performance.Dividends also provide periodic income to the shareholder but are declared at the discretion of the company. Although equity is considered to be volatile, investors who hold stocks with a view of medium to long term perspective have usually benefitted from capital appreciation.
2. Equity Mutual Funds Mutual funds are investment vehicles that pool money from the public and invest the accumulated corpus in a wide range of securities and instruments. Equity funds are a class of mutual funds that primarily invest in stocks of companies.These funds target long-term appreciation in the value of the portfolio and gains through dividends earned on the stock. However, just like equity, equity funds are considered to be a risky asset class even though here, the risk is diversified.
3. Debt Mutual Funds Debt mutual funds predominantly invest in debt securities. Their investment objective is to create a stable income-generating source for investors who are not entirely risk-aggressive. Debt mutual funds invest in commercial papers, certificates of deposits, treasury bills, corporate bonds, debentures and government bonds among others. Although they are perceived to be less risky as compared to their equity counterparts, debt funds are not entirely risk-free.
4. National Pension Scheme The National Pension Scheme is a government-sponsored pension scheme in India. Subscribers make voluntary contributions into their Pension Account to accumulate a post-retirement corpus, for which they receive a tax deduction. The returns are market-linked as this scheme mobilises money from the public and invests in a diverse range of securities like shares, bonds and bills. It is similar to a mutual fund but is targeted to only make retirement-related savings.
5. Public Provident Fund The Public Provident Fund is a government-funded long-term savings vehicle. It is regarded as an evergreen investment scheme as it enjoys the Exempt-Exempt-Exempt (EEE) treatment. It is widely popular amongst long-horizon investors who are looking to save tax and build a corpus for their retirement. It is regarded as one of the safest savings plans in India since it is fully guaranteed by the Central Government. As of Quarter 1 of FY 2020-2021, the investments in PPF earned an interest of 7.9%.
6. Bank Fixed Deposit Fixed deposits have been a time-honoured investment choice of almost every Indian household. Fixed deposits are a financial product offered by banks that yield interest which is paid out at regular intervals. The depositor may choose for the interest to be ploughed back and compounded into the FD.Fixed deposits are considered to be an easy investment for risk-averse investors. Although they have proven to be one of the safest avenues of investment, there have been instances of banks defaulting.
7. Senior Citizens’ Savings Scheme The Senior Citizen Savings Scheme (SCSS) is a government-sponsored savings instrument designed to generate income for senior citizens in India. It is a voluntary account that can be opened with a minimum deposit of one thousand rupees or any sum in multiple thereof, subject to a maximum of fifteen lakhs rupees. The Senior Citizen Savings Scheme (SCSS) yields an attractive rate of interest, which usually lingers in the 8% to 8.5% bracket.
8. Post Office Monthly Income Scheme The Post-Office Monthly Income Scheme is a small-savings scheme backed by the Government of India. It offers assured returns on the deposited amount and is therefore considered as a relatively safer bet. This makes the scheme more suited for risk-averse investors or pensioners looking to fulfil primary goals like setting aside an amount for basic monthly expenses on food and rent.The tenure of investment in this scheme is 5 years and it yields an annual interest rate of 7.6% payable monthly. It should be noted that the maximum investment amount here is Rs. 4.5 lakh for a single holder and Rs. 9 lakh for a joint holder.
9. Real Estate Owning real estate (residential or commercial) has been one of the top priorities for almost every Indian household as people prefer the tangibility of this asset class. Rent from real estate provides a steady and regular source of income. It has been noticed that a rise in interest rates softens the real estate markets. This is because when funds are easily accessible, more people buy real estate. This pushes up real estate values.Real estate investments also serve as a hedge against inflation as usually, real estate values, as well as rents, increase with inflation. However, investment in real estate is not that simple as it involves a large amount of capital commitment and heavy transaction costs.
10. Gold Gold is an international asset which is always in demand as its quality and value can be objectively measured. The value of gold in India depends on the international price of gold, the exchange rate for converting the currency into Indian rupees, and any duties on the import of gold.Since gold suffers from one of the highest risks of theft, investors are now evolving their mindset by turning to different forms of exposure in gold, like-

To sum it up, each investment option has its pros and cons. Every person should consider their investment goals and risk appetite before choosing an investment avenue.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.