Robert Kiyosaki says, “It’s not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for.”
To build wealth, you should aim to invest your hard-earned money in the best investment options available in India. If you don't make the right decision at the right time, you might end up missing on a million-dollar opportunity!
But with multiple investment options available in India, how will you decide which is the best investment option for you?
Today we have come up with the 12 best investment options in India in 2021 that will help you create infinite wealth.
But before we get into the article, you need to know that each investment option has a certain amount of risk involved. Higher the risk, higher the potential return on investment and vice versa. Hence, you need to choose the right investment option based on your financial goals and risk appetite.
So let’s begin!
In this blog we will explore:
- Factors to consider while selecting the best investment options
- Why is choosing the right investment option important?
- Types of investment options
- Best investment options in India for 2021.
- Investment plan for goal-based wealth creation
- FAQs
Factors to Consider While Selecting the Best Investment Options
While planning your investment, you need to figure out the right investment option which fits your risk tolerance and financial goals. It should give you the desired return while also achieving your financial goals. Below are the factors that you should take into consideration while selecting the best investment option:1. Liquidity
Liquidity is how quickly an asset can be converted into cash. But why is liquidity important while selecting the best investment option? Liquidity is important simply because:- Short-term goal = Invest in highly liquid assets.
- Long-term goals = Invest in low-medium liquid assets.
2. Tenure
The tenure of your investment is the time for which you hold your asset to get maximum returns out of it. Why is it important to look at the tenure of investment?- Short-term goal = Investment options with a short-tenure.
- Long-term goal = Investment options with a long-tenure.
3. Diversification
Each investment option has a certain amount of risk involved, and diversifying your investment portfolios helps in minimising risk. As a popular saying goes, “ Never put all your eggs in one basket”. Regardless of the tenure of your investment, you should diversify your portfolio by investing in various asset classes.4. Risk appetite
There is a direct relationship between risk and return on investment. Why is it important to check your risk appetite before investing? Every individual has a different amount of disposable income for investment. According to the disposable income available, you must decide for yourself whether high-risk, low-risk or medium-risk investment options will suit you the best. Generally, higher the risk appetite higher the return and vice versa. Hence, you should know your risk appetite and choose the best investment option for yourself. However, risk can be minimised by proper planning, research and diversification.Comparison of Risk Categories
| High risk | Medium risk | Low risk | |
| Meaning | High risk investments are for investors who want to earn high returns and can afford to take high risk. | Medium risk investments are for investors planning to invest for long-term with moderate returns, usually around 7%-10% | Low-risk investments are for investors who are planning for safe investment with steady returns. |
| Tenure | 10 years + | 3 - 5 years | 1 - 3 years |
| Risk-Reward ratio | High | Moderate | Low - moderate |
| Investment options | Stocks, small-cap, mid-cap and commodities. | Large-cap, balanced funds, real estate, bonds | Government bonds, government schemes, Bank Fixed Deposit. |
5. Investment Objective
Before you start investing your hard-earned money in any instrument, you need to determine your investment objective. Why is it essential to know your investment objective? When you are planning to invest, you need to have clear investment objectives, such as: Short term goals:- To save tax
- To plan for vacations/vehicle purchase, etc.
- To fight inflation
- To increase saving
- Buying a home
- Child’s marriage and education
6. Age
Age is one of the most important factors that you have to take into consideration before selecting your best investment option. Why is it essential to consider your age before investing?- When you are young, you have very little to lose and you do not have many responsibilities, so you can go for high risk investment options.
- For senior citizens, it is advisable to go for low risk investment options.
Why is Choosing the Right Investment Option Important?
Choosing the right investment option will reap you good profits in the future and also help you accomplish your investment objective. It is not rational to invest in any instrument just for the sake of investing. You need to take into account factors such as your goals, investment objective, risk appetite, etc. If you take into consideration all the above factors while investing, you will surely create wealth for your future.Types of Investment Options
Investments can be financial investments and non-financial investments.- Financial investments are market linked and include stocks, mutual funds and even fixed income products like PPF account, Bank FDs etc.
- Non-Financial investments cannot be traded in the financial markets and its value is derived by its physical net worth. Example: Real estate, Gold etc.
Best Investment Options for you in 2021
1. Direct equity (Stocks)
| Liquidity | High |
| Tenure | Long- term |
| Risk | High |
| Who can invest | If you want to maintain liquidity and make quick profits. |
| Risk-Reward ratio | High |
2. Equity mutual fund
| Liquidity | High |
| Tenure | Long - term |
| Risk | Moderate |
| Who can invest | If you are looking for a long term investment option with moderate risk. |
| Risk-Reward ratio | High |
3. Debt mutual fund
| Liquidity | High |
| Tenure | 1 day to 7+ years |
| Risk | Moderate |
| Who can invest | If you are looking for comparatively less risky options than shares. |
| Risk-Reward ratio | Moderate |
4. Public provident fund
| Liquidity | Low |
| Tenure | 15 years lock in period |
| Risk | Low |
| Who can invest | If you are planning to invest in safe investment options for a long duration. |
| Risk-Reward ratio | Low |
5. Fixed Deposit
| Liquidity | High |
| Tenure | 7 days to 10 years (premature) |
| Risk | Low |
| Who can invest | If you have a lump sum amount to invest for a fixed period. |
| Risk/reward | Moderate |
6. Real Estate
| Liquidity | Low |
| Tenure | Long term |
| Risk | Moderate |
| Who can invest | Investors invest with the view of future appreciation of the property. |
| Risk-Reward ratio | Depends on the location of the property. |
- Capital appreciation of the property.
- The rent earned from the property.
7. Gold
| Liquidity | High |
| Tenure | Long term |
| Risk | Low |
| Who can invest | If you wish to diversify your investment and want to hedge against inflation. |
| Risk-Reward ratio | High |
8. Sukanya Samruddhi Account
| Liquidity | Low |
| Tenure | 21 years |
| Risk | Low |
| Who can invest | Parents of a girl child who wish to save funds for her marriage and education. |
| Risk-Reward ratio | Low |
9. National Saving Certificate
| Liquidity | Low |
| Tenure | 5 years |
| Risk | Low |
| Who can invest | If you want a tax saving investment |
| Risk-Reward ratio | Low |
10. National Pension Scheme
| Liquidity | Low |
| Tenure | Matures at the age of 60 |
| Risk | Low |
| Who can invest | If you are looking to save money for your retirement with tax benefits, then this investment option is for you. |
| Risk-Reward ratio | Low |
11. Recurring Deposit Account
| Liquidity | High |
| Tenure | Short term |
| Risk | Low |
| Who can invest | If you are looking to save in a systematic manner. |
| Risk-Reward ratio | Low |
12. Money Market Funds
| Liquidity | High |
| Tenure | Short term |
| Risk | Low |
| Who can invest | Investors who want to earn more than savings account without taking risk. |
| Risk-Reward ratio | Low |
Here is a quick summary of all the investment options available for you!
| Investment Options | Risk Types | Tenure | Risk- Reward Ratio |
| Direct equity | High | Long term | High |
| Gold | Low | Long term | High |
| Equity Mutual Fund | Moderate-High | Long term | High |
| Real Estate | Moderate | Long term | Depends on the location of the property. |
| Debt Mutual Fund | Moderate | Medium-Long term | Moderate |
| Fixed Deposit | Low | Medium- Long term | Moderate |
| Public Provident Fund | Low | Long term | Low |
| Sukanya Samruddhi Account | Low | Long term | Low |
| National Saving Certificate | Low | Medium term | Low |
| National Pension Scheme | Low | Long term | Low |
| Money market funds | High | Short term | Low |
| Recurring Deposit Account | Low | Short term | Low |
As a bonus, here is a basic investment plan for goal-based wealth creation
| Goals | Remarks | Suitable Asset Class |
| Emergency funds | Emergency Funds Amount = Your monthly expenses including household expenses, leisure, EMIs etc X 6 months | Fixed Deposit, Liquid Funds |
| Buying house | You can accumulate funds for downpayment which is generally 20%-30% of the property value. | SIP in Mutual Fund + SIP in Blue chip stocks |
| Child’s education | Child’s higher education is getting expensive these days. So, from the year your child is born you should start saving and investing through SIPs in various asset classes. | SIP in Mutual Fund + SIP in Blue chip stocks |
| Retirement corpus | If you wish to retire early, you have to plan your retirement journey well in advance. Saving a small amount of money in a systematic manner today will reap good returns in the long run. | SIP in Blue chip stocks |
| Buying a car | Instead of taking a vehicle loan, plan for buying a car without any financial burden | Fixed Deposit + Recurring deposit |
Easy & quick
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