We should not let our money lie idle in the bank account. That way it loses its value over time and cannot keep pace with the growing rate of inflation. Rather we should ensure that our money works equally hard as us(if not more) to make more money for us. The way to do that is through investing. Now investing approach may vary from person to person based on their risk appetite. Below I have shared few products that investors of different risk appetites can consider for growing their hard-earned money.
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For risk-averse investors(Debt investments)
This category includes people who are not comfortable with taking too much risk. They prefer safety and stability of capital as compared to returns. They are happy making a modest return as long as their capital amount is safe. These people can consider investing in the below products to further enhance their savings:
- Fixed deposits
- Recurring deposits
- Public Provident Fund(PPF)
- Liquid funds
- Overnight funds
- Government bonds, e.g. Bharat Bond FoF, Sovereign Gold Bond, etc.
- Provident Fund
- Voluntary Provident Fund
- Physical gold
- Bank savings accounts(not preferable).
For investors comfortable with taking risks(Equity investments)
On the other hand, if you are comfortable with taking calculated risks then there are a lot of options for you available in the market. These can provide above-average returns over the long term. But please be cautious that with high returns comes high volatility as well. But it has been found that if one holds their investments for 10 years or more then the risks of losses reduce significantly.
Below are the various options that aggressive investors can consider:
- Equity mutual funds-Large cap, mid-cap, multi-cap, small cap
- Direct equity investing through stocks
- Cryptocurrencies such as Bitcoins, Ethereum, Ripple, etc.
- Investing in foreign stock markets such as the US
- Peer to peer lending(P2P).
Conclusion
While investing it’s always a good idea to spread your money across multiple products. That way even if some of them underperform the others can still make the overall portfolio returns a decent one. Also irrespective of whether you are a risk-averse investor or a risk-taker, it is recommended to maintain an asset allocation of debt and equity in your portfolio. That is to say that instead of going for 100% debt or 100% equity, you should target to have a mix of both. Now the percentage of each may vary depending on your age and risk appetite. But as a rule of thumb, it is suggested to have roughly (100-Your Age)% in equities and the rest in debt. For example, if your current age is 30 then ideally you should invest 70% into equities and the remaining 30% into debt.