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When it comes to investing in India, we often get confused with a large number of products available in the market. Should we invest in mutual funds or in stocks? Or will the glittery cryptocurrency market be more appropriate to invest? Some experts will say ”Mutual funds sahi hai” with the precaution:
”Mutual fund investments are subject to market risks. Please read all scheme related documents carefully before investing”
That is where the below quote from Warren Buffet comes into the picture.
”Risk comes from not knowing what you’re doing”
When it comes to investing in India, your best bet against risk is your knowledge of the product. If you invest blindly relying on the advice of a friend or some well-wisher then it will be risky. Thousands of people have lost millions of money day trading in the stock market. They did not do any research themselves and instead followed blindly the recommendations of so-called experts.
Hence it is absolutely critical that before you invest in a product, you do thorough research about it. This is applicable for all of them from mutual funds, stocks, cryptocurrency to fixed income instruments like fixed deposits, recurring deposits, etc. Strive to be a DIY (Do-It-Yourself) investor rather than one who just blindly follows the herd.
Below I have captured details about some of the best options available for investing in India right now. Take a peek to know which products you can invest right now.
Mutual Funds investing in India
Mutual funds are one of the best options available at present for investing in India. They invest in the stock market and their returns are based on the movement of the Sensex. If you want to beat the inflation and generate long-term wealth then this is your best bet. What’s more mutual funds are managed by a team of experts who are authorities in this field. They constantly monitor the fund performance and keep churning the portfolio when required.
Related reading: What is the maximum number of mutual funds that you should invest in?
Mutual funds fall into different categories based on their market capitalization: Large cap, mid cap, and small cap. Each of them invests in different stock baskets to ensure optimal returns. The stocks range across different industries like food, mining, IT, petrochemicals, agriculture, etc. Equity mutual funds have given an average return of 12% over a period of 10-12 years.
Stocks investing in India
Another way to invest in the share market is by directly buying stocks. When companies look to raise funds through public funding they issue stocks. In return for purchasing the stocks, the investors get a certain percentage of return from the company’s profits. Stocks are available for companies in various sectors like IT, pharma, food, transport, agriculture, etc. Stock investing in India should be done keeping a long term in mind. The holding period should not be less than 10 years at any cost.
If you are planning to invest in stocks you should be very careful while doing so. While investing in good stocks can create a fortune, on the other hand investing in bad stocks can drain a large chunk of your savings. You should not blindly follow the advice of stockbrokers. You should do detailed research and your due diligence before investing.
Peer to peer lending
Peer-to-Peer lending or P2P is taking the Indian market by storm. This concept was already hugely popular in China before it came to India. The idea is pretty simple. People who want to borrow small amounts of money often find it difficult to get the required loan approval from banks.
Related reading: Why do you need to have an emergency fund even before you start investing?
Now with the advent of P2P platforms like i2i Funding, Lendenclub, Faircent, etc., this problem is easily solved. These borrowers can now reach out to a pool of million investors for lending the required money. The rate of interest charged is also less than the banks. On the other hand, potential investors can expect to earn returns anywhere between 12-25% on their investments. This is definitely a great option for investing in India and earning some extra income every month.
Note: If you are interested to invest in P2P, use my referral code “LDC11940” to register on Lendenclub. You will get an instant discount of Rs.250/- in the registration fees.
Fixed deposits, recurring deposits
These are the traditional investment options available. They are offered by banks and ensure guaranteed returns. So if you are looking to invest and also want to ensure the safety of your capital then this is a good choice. However, keep in mind that the returns are not tax-free. If the interest earned in a financial year is more than Rs. 10,000 then it will be treated as a regular income and taxed accordingly.
Gold investing in India
Gold is one of the ancient products of investment. People purchase gold and keep it as a hedge against difficult times. When economic recession or any such situations arise then gold can be easily sold and exchanged for cash. However looking at the different investment options available today, it is not advisable to invest in gold.
The main reason is that the value of gold will not necessarily appreciate in the future. Any rise in its price is always driven by the belief that someone else will pay more for it eventually. A pile of gold will stay the same pile of gold no matter how much time passes.
Real estate
Man has been in pursuit of land since times immemorial. Alexander, Caesar, Akbar, Napoleon- all these historical figures fought great wars to conquer lands. They felt that land was synonymous to power. The same trait has continued to us as well from our ancestors. Many people invest in land hoping that someday the price will appreciate and they will sell it making big bucks. But due to several reasons real estate is not the best investment option nowadays.
From above it is evident that knowledge of the product whatever it might be is a must before you invest in it. Always do thorough research from your end before you invest your hard-earned money in anything. Don’t just blindly follow the advice of others. Follow the DIY approach. Soon you will find yourself standing before the cave of gold:
“Khulja sim sim…”