Best Investment Options in India 2021

When it comes to investing, many first-time investors want to jump right in with both feet in the field. Unfortunately, very few of those investors are successful; most of them lose money. So, I researched and decided to share the best investment options in India to start with.

Investing in something requires at least a basic knowledge about that. There are a lot of investment options are available at the present time but it is important to keep in mind that some of these investment options come with a huge risk of losing your money!

Why choosing Right Investment Asset Matters?

Investing your money can be a great way to ensure your financial future. With the right Investment Option, you can be sure to have money for emergencies, for the education of your children, for your retirement, etc.

If you make the wrong investment or choose the wrong Investment Options, you may just end up where you started or worse, flat broke. Most people who invest wisely by making the right investing decisions with their money, follow the same basic investment pattern, although they may define it by another name.

So, before you start investing your money, it is always better to do research and should focus on learning about investing. Along with gaining knowledge about Investing, I always recommend you define your investing goals before choosing the best Investing opportunity.

Define Your Goals for Investment

Before you invest a single rupee, really think about what you hope to achieve with your investment. Knowing what your goal is, will definitely help you to choose better investment options and will also enable you to make smarter investment decisions along the way!

It is safer to invest your money in such investment options that will give you returns slowly over time and can be used for your future goals like retirement, a child’s education, or a child’s marriage.

Your goals might be different from above mentioned few and you can choose the investment asset accordingly. But here, I want to share my personal concern and that is the goal of getting rich overnight. Too often, people start investing money with dreams of becoming rich overnight and this is impossible. Let me know in the comment section if I am wrong.

It is really a very bad idea to start investing in hopes of becoming very rich overnight. However, if your investment goal is to get rich quickly, you should learn as much about high-yield, short-term investing before starting with investments. You should keep in mind that higher returns come with higher risks. Further, before diving into an investment you should know your risk profile too.

You can classify yourself as one of the below-defined types of investors before Investing in the Market.

Different Types of Investors (Based on Risk Profile)

If you want to know which type of investor you are; here are the major three types of investors – conservative, moderate, and aggressive. Investors can be differentiated based on their levels of risk tolerance like high risk and low risk.

  • Conservative investors – Conservative investors often invest in cash that means they invest their money in interest-bearing savings accounts, fixed deposits, mutual funds, Provident Funds, and SIPs. These investments considered as safe investments carrying a very low risk and grow over a long period of time. That is why these are called low-risk investments and investors choose these investment options called Conservative Investors.
  • Moderate investors – Moderate Investors often invest in cash, bonds, and sometimes invest in the stock market. This type of investing usually carries low or moderate risks. Moderate investors often also invest in real estate and commodities assuming that it is a low-risk investment asset.
  • Aggressive investors – Aggressive investors commonly do most of their investing in the stock market that carries higher risk. These types of investors also tend to invest in business ventures as well as a higher risk of real estate because of a high return on investment.

I hope now, you have got an idea of your investment risk profile, and accordingly, you’ll choose the best investment options for your goals. So, next in the article, I am going to discuss the investment assets available in India to start with.

Type of Investment Options in India

Before you start investing, it is also very important that you learn about the different types of investment options in India. You should also, understand the risks involved in a particular investment, and pay attention to the past performance of said investment.

Overall, here are the major investment options in India:

  • Stocks
  • Bonds and
  • Cash

Sounds simple, right? Well, unfortunately, it starts getting very complicated from there. Because each type of investment has numerous types of investments that fall under it. You need to learn in deep about each different investment type to get the best return out of it.

Every investing segment has its own advantages and disadvantages. Also, their risk profile and returns vary according to your expertise, like the stock market can be a big scary place for those who know little or nothing about it and can be very fruitful for experts.

So, instead of going too deep in investing, I am going to list handpicked most reliable investment options in India for better returns.

Best Investment Options in India 2021

  1. Direct Equity
  2. Equity Mutual Funds
  3. Debt Mutual Funds
  4. National Pension Scheme
  5. Public Provident Fund
  6. Bank Fixed Deposit
  7. Senior Citizens’ Saving Scheme
  8. RBI Taxable Bonds
  9. Real State
  10. Gold

1. Direct Equity (for Quick Returns)

Investing in stocks may not be everyone’s cup of tea as it’s a volatile asset class and there is no guarantee of returns either. Further, not only is it difficult to pick the right stock, timing your entry and exit is also not easy as well. The only silver lining is that over long periods, equity has been able to deliver higher than inflation-adjusted returns compared to all other investment asset classes.

At the same time, the risk of losing a considerable portion of capital is high unless one opts for the stop-loss method to curtail losses. In stop-loss, one places an advance order to sell a stock at a pre-specified price. To reduce the risk to a certain extent, you could diversify your capital across sectors and market capitalizations. To invest in direct equities, one needs to open a Demat account through a Stock Broker.

If you are confused while choosing the brokers; you can find a handpicked list of them here – Best Brokers in India.

If we look at the returns from equity investment then 1, 3, and 5-year stock market returns are around 13 percent, 8 percent, and 12.5 percent, respectively.

2. Equity Mutual Funds (Overall Best Investment Option)

Equity mutual funds mostly invest in equity stocks. As per the present, Securities and Exchange Board of India (SEBI) Mutual Fund Regulations, an equity mutual fund scheme must invest at least 65 percent of its assets in equities and equity-related instruments. An equity fund can be divided into two types one is actively managed and the second is passively managed.

  • Actively Managed Fund: In an actively traded fund, the returns are mainly dependent on a fund manager’s ability to generate better returns.
  • Passively Managed Fund: Index funds and exchange-traded funds (also called ETFs) are passively managed funds, and these track the underlying index.

Note: Equity schemes are also categorized according to market capitalization or the sectors in which they invest. Further, they are also categorized by whether they are domestic (investing in stocks of only Indian companies) or international (investing in stocks of overseas companies).

If we look at the returns from equity investment then 1, 3 and 5-year market return is around 15 percent, 15 percent, and 20 percent, respectively.

3. Debt mutual funds

Debt funds are ideal for investors who want steady returns with less risk. They are less risky compared to equity funds because Debt Mutual Funds are less volatile. Debt mutual funds mainly invest in fixed-interest generating securities just like corporate bonds, government securities, treasury bills, commercial paper, and other money market instruments.

If we look at the returns from equity investment then 1, 3 and 5-year market return is around 6.5 percent, 8 percent, and 7.5 percent, respectively.

4. National Pension System (NPS)

The National Pension System (NPS) is a long-term retirement-focused investment instrument managed by the Pension Fund Regulatory and Development Authority (PFRDA). The minimum annual (April-March) contribution for an NPS Tier-1 account to remain active must be Rs 1,000 which has been recently reduced from Rs 6,000. It is a mix of equity, fixed deposits, corporate bonds, liquid funds, and government funds, among other instruments. Based on your risk appetite, you can decide how much of your money can be invested in different types of instruments like equities/FD through NPS.

If we look at the returns from equity investment then 1, 3 and 5-year market return for Fund option E is around 9.5 percent, 8.5 percent, and 11 percent, respectively.

5. Public Provident Fund (PPF)

The Public Provident Fund (PPF) is one product a lot of people turn to from starting. Since the PPF has a long tenure of 15 years, the impact of compounding of tax-free interest is big, especially in its later years. Further, since the interest earned and the principal invested is backed by a sovereign guarantee, it makes it one of the safest investments.

Presently, the interest rate on PPF is 8.5% per annum on actual contribution towards PPF.

6. Bank fixed deposit (FD)

A bank fixed deposit (FD) is a safe choice for investing in India for most of the peoples. Under the deposit insurance and credit guarantee corporation (DICGC) rules, each depositor in a bank is insured up to a maximum of Rs 1 lakh for both principal and interest amounts of FD.

As per the need, one may opt for monthly, quarterly, half-yearly, yearly or cumulative interest options in Fixed deposits. The interest rate earned is taxable & added to one’s income, which will be taxed as per one’s income slab.

7. Senior Citizens’ Saving Scheme (SCSS)

Probably the first choice of most retirees in India, the Senior Citizens’ Saving Scheme (SCSS) is a must-have in their investment portfolios. As the name suggests, only senior citizens or early retirees can invest in this scheme as per existing rules.

SCSS can be availed from a post office or a bank by anyone above the age of 60 years. SCSS has a minimum of five-year tenure, which can be further extended by three years once the scheme matures. The upper investment limit is Rs 15 lakh for this scheme, and one can open more than one account.

Presently, the interest rate that can be earned on SCSS is 8.3% per annum, payable quarterly, and is fully taxable.

8. RBI Taxable Bonds

The government has replaced the erstwhile 8% Savings (Taxable) Bonds 2003 with the 7.75% Savings (Taxable) Bonds. These bonds come with a minimum tenure of seven years. The bonds can be issued in Demat form and credited to the Bond Ledger Account (BLA) of the investor and also a Certificate of Holding will be given to the investor as proof of investment.

9. Real Estate

The house that you bought for a self living can not be considered as an investment. If you bought it with no intention to live in it, then it can be considered as an investment. 

The location of the property is the single most important factor that will determine the value & return of your property and also the rental that it can earn. Investments in real estate can deliver returns in two ways – capital appreciation and rentals. However, unlike other investment asset classes, real estate is highly illiquid. The other huge risk is with getting the necessary regulatory approvals, which has largely been addressed after the coming of the real estate regulator.

10. Gold

Having gold in the form of jewelry has its own concerns like safety and high cost. Then there’s the ‘making charges’, which typically range between 6 to 15 % of the cost of gold and may go as high as 25 percent in case of customized orders & designs. For those who would want to buy gold coins, there’s still an option for good returns. One can also buy ingeniously minted coins in India.

The best way of owning paper gold in a more cost-effective manner is through gold ETFs. Such Gold investment (buying and selling) happens on a stock exchange (NSE or BSE) with gold as the underlying trading asset. Investing in Sovereign Gold Bonds is another better option to own paper-gold.

Best Investment Tips to Become a Successful Investor

If someone making an investment then his or her main motive is to make money and gain some profit. Experienced investors usually study market trends before investing their money. However, inexperienced investors depend on advice from financial advisors and brokers to guide their investments to gain some profits.

While investing we should always keep in mind that Money always grows with time in the stock markets. Successful and profitable investment takes a lot of patience and constant monitoring of market fluctuations & trends. It is very important to adopt flexibility and diversification of funds to turn the investment into a Profitable Investment.

The best Investment Tips to start investing are:

  1. Invest Purposely
  2. Lean on Own Understanding
  3. Train Yourself
  4. Choose Broker/Advisor Wisely
  5. Think Long Term
  6. Be Flexible
  7. Diversify Your Investment
  8. Make a Simple Approach
  9. Be Disciplined
  10. Invest Smartly

It might be that you are the cynical type who chooses to believe that the basic rules could not possibly be as easy as they seem, in some areas, those seem so complex. It is true. However, these rules have withstood the test of time.

1. Invest Purposely

First of all, make sure that the money you choose to invest is indeed earmarked for the purpose of investing. If you take Investing as gambling then you should keep in mind that in any form of gambling, there is nothing to be gained and everything to be lost. You should not put up money that you cannot afford to lose because the market is volatile and anytime can take a downturn.

2. Lean on Own Understanding

One rule that people generally refuse to apply in any area of their lives, including the world of investing, is they don’t rely on their own understanding. Most of the time, this is the result of people balking at entrusting another person with their money, believing that with a little understanding they can work the market themselves. This reasoning is fundamentally flawed.

3. Train Yourself

In the first place, most people will not be able to begin to unravel the complicated graphs, pie charts, and statistics by which the investment world relates its information and it all happens due to lack of knowledge. In order to understand what the numbers mean, you will need to have some basic training before entering into Investing.

There may come a time after you have had some experience in the market that you will be able to make sound decisions on your own, but the initial get-your-feet-wet phase is not the time to attempt Investing in any asset.

4. Choose Broker/Advisor Wisely

Check the background of the advisor you choose and don’t believe them blindly, as there are a lot of brokers out there looking for a quick fleece. The Best Brokers will have years of experience, a variety of investment backgrounds, registered with SEBI, and will probably cost you much less than you might think.

5. Think Long Term

Unless you invest millions of rupees initially, it will take time for your investments to mature and begin to accumulate substantial gains. The best investments are proven over time, and thus it is best to place your funds in long-term choices. The details of this are plain – it is best to forget about this money in terms of cash fallback, at least for a number of years generally called Long Term Investment.

6. Be Flexible

Investors need to be flexible with their investments because investment strategies involve regular analysis and monitoring of the financial market. Beginner investors should seek help from financial advisors on their investment portfolios to get better returns.

While building an investment portfolio long-term planning and asset allocation are very important. Mutual funds, Equities, Bonds, and other investment products provide a good ground for investment flexibility. The investment portfolio should be designed to help diversify your investments.

7. Diversify Your Investment

Diversification is an oft-flogged truism of the investment world and you should follow it. A good portfolio will include cash and cash equivalents, growth investments (stocks), growth and income investments such as mutual funds, SIPs, and Provident Fund. Diversification involves making different types of investments to gain higher returns.

This risk-management technique of investing helps to diversify investments in stocks, bonds, cash, and deposits. Diversification ensures that you do not have all your eggs in one basket because any part of the market can experience a downturn at any time. It does not waive off the risk of loss totally, but it definitely creates more avenues for profit and minimizes losses.

The investor can invest in a number of different companies to diversify his or her portfolio like foreign securities and mutual funds. Even if one company or asset declares a loss, the investor still has the other investments to fall back on.

Note that diversification doesn’t mean that only investing in several areas will save you but you should also make sure that no one area contains a disproportionate percentage of your funds. Diversification is the best investing strategy to counter the risk involved in the total loss of investment.

8. Make a Simple Approach

It is safe for inexperienced investors to follow simple investing tips for investing money. Immature investors should not invest in companies and sectors that they are not very sure about and haven’t researched. A simple approach to investment is to stake money in recognized companies/assets that offer high returns and show a consistent growth pattern over the years. It pays to conduct research on the company before making an investment decision.

9. Be Disciplined

Market trends fluctuate due to a number of reasons. An investor’s judgment should not be based on the momentary instability of the market. It is not advisable to make a change in the adopted strategy midway through an investment call. However, regular analysis and timely reviews of the market help to keep abreast of important information on the stock market.

10. Invest Smartly

Investors need to be well informed and alerted all the time about current financial market trends and fluctuations. Investors are advised to be methodical when following an investment strategy. It is equally important to understand and monitor the economics and trend of a company or asset in which investment has been made. The investor should be updated regularly on business, political, financial, and Stock Market related news to learn the political implications that may affect the company in the future.

Conclusion: Best Investment Options

Investments carry the element of risk and therefore investors are advised to investigate the asset before investing. Making a smart investment and diversifying investments can give higher returns on investment. Disciplined investing and long-term investing goals are to be exercised while investing. However, I’ve mentioned the best and safe investment options in India. The above-mentioned investment options are proved to be the best investment options in India with the time.

FAQs: Best Investment Options in India

What are the best investment options in India?

Direct Equity, Equity Mutual Fund, and Debt Mutual Funds are the best investment options in India available with the highest profits.

What are the safe investment options in India?

National Pension Scheme, Public Provident Fund, and Bank Fixed Deposit are the safe investment options in India available with the lowest risk and moderate profits.

What are the best investment options in India for the long term?

Senior Citizens’ Saving Scheme, RBI Taxable Bonds, Real State, and Gold are the best investment options in India for the long term with great returns.

What are the best investment options in India for the short term?

Cash Equity and Derivatives are the best investment options in India for the short term with high risk and high profits.

Zelman Yakubov

About the author

Hi, I am Zelman Yakubov, an expert stock market trader. My goal is to educate and mentor people that wants to learn the financial trading markets. In my free time I love to go out for various different entertainment and try new restaurants.

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