Investing with intent and in the right manner can make you successful financially. The intent can vary based on what you want to achieve through your investments. If you want a big corpus for retirement, education or wedding, look to invest the maximum in equities. Equity investments can let your money grow exponentially over time, helping you meet such goals. But sometimes, these investments may not move at a great rate due to weak market sentiments. So, it requires a high-risk appetite to deal with the market fluctuations synonymous with equity investments. For short-term investors, bank deposits, debt instruments remain viable options. Choosing the right investment plan would become easy if you know about various financial instruments individually. Let’s do so here.
Let’s Talk About Investment Plan Strategies in Brief
Investments will bear fruit only when backed with a plan. Aggressive investors would find investing in equities suitable as suggested above. But putting the money in the right stocks at the right time for the right price would prove you right eventually. Similarly, bank deposits and debt instruments would help short-term investors only if chosen carefully based on interest rates and ratings. The interest rate of bank deposits remains the same throughout the deposit tenure. But there’s a catch! The rate prevailing at the time of locking the deal does not change. So, locking it when the rate is high would help you earn more. The ratings of debt instruments denote the level of capital safety. After discussing these selection strategies, let’s move on to individual investment options.
Investment Plan Options for Individuals with a High-risk Appetite
These individuals can choose from investing in stocks, mutual funds, ULIPs, etc.
Stocks – The Best Investment Plan for Those Who Know Market Dynamics
Direct investments in stocks can raise your bank balance immensely should you choose the right scrips and make changes to your holding levels as per the changing market conditions. You can buy and sell on the same day through intra-day trading. Or you can sell stocks later too. Many uninformed intra-day traders lose money, and the same remains the case for other traders too.
If we cast our mind back to when COVID entered India in March 2020, stock markets worldwide were plummeting, leading to panic selling of investments. Investors had cut their bullish bets on equities for a while, resulting in the BSE Sensex shrinking to 26000 in March 2020 from 41,000 a month ago. Not for the first time, stock markets have tanked – they have even during the recession of 2008-09 triggered by the US subprime crisis, and at different times.
What was needed at such moments was patience as well as a smart investor in many of them. Those who displayed the same went on to make gains as the market lunged forward with positive sentiments. For instance, the BSE Sensex has moved on to touch 60,000 recently, even defying the devastating second COVID wave that came in its way.
But many fear and press the panic button by selling the investments even if they come at a much lower price. Such times demand persistent investment. You can, however, look to divert your money to some stocks that might have fared better even during market downturns. Yes, not all stocks fall or fall at a heap. There will be some who could stand tall against the broader market fall. Needless to say, one needs to be an expert for a successful stock investment journey. Else check other equity investment options below.
Payment Required – Brokerage Fee
Mutual Funds Fast Becoming a Popular Investment Plan
Probably the best equity investment plan for someone who is not an expert but rather requires the help of a seasoned professional to scale stock investments. These professionals are fund managers roped in by the mutual fund companies to supervise your investments 24×7. But checking the profile of these managers would be important too; see how they have managed different portfolios over the years. That will give you an idea of whom to trust for portfolio management. Also, check how different funds have performed over the years. You can start buying mutual funds for an amount as low as INR 500 per month.
Charges – Fund Management Charges, Trustee Fee, Distribution Costs (If bought through a distributor). Mutual fund companies deduct these fees from the net asset value on each trading day.
ULIPs – Give You Extra Beyond Investment Returns
Unit-linked Insurance Plans (ULIPs) are similar to mutual funds as far as investment dynamics go. Here too, you’ll have the services of fund managers who will optimize your asset allocation based on market movement. But what extra ULIPs provide is the life insurance cover for your dear ones should you die during the policy term. The premium payable for ULIPs goes into securing the future of your dependents as well as helping you earn on the same.
Charges – Fund Management Charges, Premium Redirection Charges, Premium Allocation Charges, etc.
Note – Both mutual funds and ULIPs come with a list of funds – equity, debt and hybrid. To make the most of equity investments, you should choose an equity fund or an equity-oriented hybrid fund.
Let’s Talk for Those Who Can’t Bear Much Investment Risks
These people should invest the maximum in bank deposits and debt instruments that offer them the surety of regular income at zero or less risk. Of course, these investments don’t yield you much in the long run but can be handy for about 3-5 years. Let’s talk about these individually.
Regardless of risk tolerance, everyone, hopefully, has a savings account where they park money to earn interest of 3-4% per annum. However, a few banks offer up to 7-8% too to their account holders. Savings accounts can have certain minimum balance requirements for you to meet. These requirements can vary across banks. The minimum balance requirement can be as low as INR 1,000. You can also get some accounts without having to maintain any balance. Besides helping you grow your money, these accounts also allow you to deposit & withdraw money, avail online banking services, etc.
If you want a steady stream of income at an interest rate more than that of savings accounts, invest in fixed deposits. You can deposit a fixed sum of money that will earn you interest. Banks allow fixed deposits for a minimum of INR 5,000. These deposits run for a minimum and maximum of 7 days and 10 years, respectively. The interest rate on the same can range from 3-7.50% per annum. Once you lock the deal at a particular rate, the same will remain the same throughout your fixed deposit tenure, regardless of banks slashing rate afterward. So, the best time to open a fixed deposit account is when the interest rates are high.
Companies issue various debt instruments such as bonds, debentures and money-market securities to raise money from the public. These instruments earn holders an interest at a specified date. Let’s be clear that the interest can vary based on the performance of these securities. Before choosing these instruments, check their ratings assigned by top rating firms. Look to buy instruments that come with A, AA, AA+ as they signify the highest level of solvency. With such solvency rates, chances of getting your money back at promised rates are very high. Discard the ones with a rating of B, C or D. Interestingly, you can buy these instruments through mutual funds or ULIPs as they come with debt fund options too that invest in the same.