Finance

Understanding Different Types Of Investment Options

If you want to invest, you need to understand the different investment options available. You can’t select the right investment and make the correct investment decision until you are aware of all the avenues. There are countless options to choose from, right from traditional investment options to newer investment options that are gaining popularity. While selecting an investment avenue you have to access your risk profile and match it with the investment product as every investment has a risk associated with it. Some investments having high risk have the potential to generate higher inflation generated returns in the long term while the investments with low risk are associated with lesser returns.

Let’s understand all the types of avenues available to invest;

  1. Mutual Funds – It is an investment vehicle that pools the money of many investors and invests it in different asset classes in a way to earn optimum results. Mutual funds can be of different types based on the securities they invest in and provide access to the diversified portfolio. It is a good investment option for investors who want to diversify their portfolio and lack time and technical knowledge to take their investment decisions
  2. Term Deposit – In term deposit the amount is invested at an agreed rate for a fixed amount of time. The duration of the investment ranges from the type of term deposit. There are cumulative, non-cumulative deposits, short term & long term deposit, senior citizen term deposit, sweep-in facility term deposit and tax-saver term deposit.
  3. Stocks – One of the most popular forms of investment. It represents the part ownership of stockholders in a company. If you invest in the stock of a particular company a small part of ownership is transferred to you. The returns are also impressive but it comes with the risk.
  4. Fixed Deposit – The most traditional and the safest form of investment with greater returns on the principal invested as compared to the returns generated from a regular savings account. Fixed deposit as the name suggests has a fixed tenure in which your amount is invested for the fixed time period and you can’t withdraw your money before maturity without financial repercussions.
  5. Recurring Deposit – The recurring deposit allows the investor to invest in a small amount of money every month to build a corpus for a pre-defined period of time. It is offered by banks and most of the NBFCs which allows the investor to deposit the fixed amount every month. The interest rate ranges from bank to bank and offers capital protection and guaranteed returns.
  6. Public Provident Fund – PPF is the long term savings-cum tax saving investment option backed by the Government of India. The interest rate is decided by the government every quarter based on the returns on government securities and is backed by sovereign guarantee. This kind of investment can help one to plan for retirement and the impact of compounding is huge.
  7. Real Estate – Real Estate is one of the most attractive investment options worldwide as it provided capital appreciation. However, investors have to carefully analyze the location, the nature of the property, and other factors as it can affect your return on investment.
  8. Precious Metals and Gold – There are several ways to invest in precious metals and gold. Gold in the physical form has safety risks which may impact the return on it. Today the modern approach of investing in gold is not restricted to buying only jewelry but an investor can invest in gold exchange-traded funds, gold mutual funds, and gold bonds.

Plan your investment wisely that matches with your financial goal.