But, before we understand how to invest money, let’s first know why you need to carry out the process of investing money in the first place.
What justifies investing?
You can make enough money working as a professional, a business owner or a salaried employee to live comfortably. After taking care of all of your immediate needs, you likely have some leftover cash. What will you buy with this additional money? Do you treat yourself to a few luxuries? Do you hold it as cash or do you store it in your bank? Or do you make good use of it to earn a fair profit? In this circumstance, the question of "how to invest money" emerges.
Investing money is just as important as having a source of income. Smart investments contribute to your financial stability by helping you to achieve your financial goals for the now and the future.
Investing may help you build wealth, provide a second source of income, and generate returns that outpace inflation. When your primary source of income ends after retirement, it ensures that you can maintain a high standard of living.
What kinds of investments are there in India?
Understanding the various investment options offered in India is essential if you're considering investing. Depending on the level of investment risk that the plans offer—low, medium, or high—they may change. Let's explore this in further depth below.
Investments that are high-risk
These investment strategies carry a high level of risk, but they also have the potential for excellent long-term returns. Among other things, equities stocks and equity-based mutual funds are examples of high-risk investment schemes. These products are quite susceptible to market volatility, and as a result, their returns can vary greatly.
Only if you have a high-risk appetite as an investor should you consider investing in high-risk financial products. Before thinking about investing in these products, it's also crucial to have a solid understanding of how the market operates.
Moderately risky investments/ medium-risk investments
Compared to low-risk investing plans, these programs carry some risk but may provide investors with better returns. If you want to earn respectable returns on your investments and have a moderate taste for risk, these investment products are best suited for you. Although there is no assurance of returns, you can estimate what they could be.
Index funds and ULIPs with balanced funds are some examples of medium-risk investment tools.
Low-risk investment opportunities
You receive set returns from these financial vehicles. The returns are immune to market turbulence. At the moment you buy the plan, as an investor, you will be aware of the amount you will receive back from it. You could think about investing in these plans if you have a low-risk tolerance or wish to save for non-negotiable goals, like your child's education.
Endowment insurance policies, fixed deposits, national savings certificates, and the Sukanya Samriddhi Yojana (SSY) for female children are a few examples of low-risk investment schemes in India.
And, yet again where should you be investing money?
India today is a financial hub, offering a variety of investment options across a wide range of investment channels. You can choose to just keep your cash at home or invest it in:
- Insurance programs
- A mutual fund
- Stock market
- Real Estate
- Derivatives and currency trading
- Public Provident Fund (PPF), modest savings accounts, and fixed deposits
- Novel asset categories
You must choose where to put your money and how to use these avenues to reach your financial objectives because each of these investment options has unique qualities. Consider your requirement for liquidity, wealth building, other sources of income, the protection of your money, and life insurance as you go along.
Invest in equities, stock funds, and lands like farmlands for growth. Nimbus is one such way where you could build a home amidst nature, out of the investment. It isn’t just a land where you invest, but a place where your kids can play, a place for your work, a place where you plant your own garden near a beautiful cottage.
Additionally, you should choose a portfolio that is mostly made up of stocks or stock funds if you have a high-risk tolerance, a lengthy time horizon, and the ability to tolerate volatility.
Bonds tend to be more stable and less volatile, so if you have a low-risk tolerance, you should include more of them in your portfolio. Your portfolio should reflect your aspirations as well. You'll generally want to purchase more stocks than bonds since your portfolio may be more aggressive and take more risks for long-term goals, which could result in better returns.
Whatever path you take, spreading your money across a variety of asset classes is the greatest approach to achieving your long-term financial objectives and reducing risk.