It’s great to hear that you are planning to invest for your future. Congrats, you have already started on your journey to financial freedom. While there are many products that you can invest in, not all are advisable. It’s not a one size fits all situation. Whatever product suits your friend may not suit you.
Below are some of the questions that you need to answer before you decide on investing in anything:
- What is the financial goal that you want to invest for?
- Is it a short term (<5 years) or a long term (>=5 years) goal?
- How much risk are you willing to take? Are you comfortable with the ups and downs of the market?
- What is your present age? Are you in your 20s,30s,40s or later?
- How much money do you need today to achieve that goal?
- What will that amount become(after inflation) by the time you want to achieve that goal?
Once you have a clear answer to all the above questions then it becomes very easy to choose the investment product.
As a general guideline, if you are a risk-averse person you should invest in low volatility products. Some examples are bank FDs, RDs, PPF, debt funds, etc. On the other hand, if you are comfortable with taking a risk and are a long term investor you can go with equity funds, stocks(with proper research), P2P loans, etc.
Equity funds are usually volatile in the short term. So it’s better to invest in them only if you are ready to stay invested at least for 7 years. Historically over the long term, equity has usually beaten the market and provided handsome returns.
Also one more important tip. Diversify your investments across multiple products. Don’t put all your eggs in one basket. Based on your age and risk appetite, you can invest in a mixture of equity and debt products.