Most investors wish to make investments with sky-high returns as quickly as possible without the risk of losing their money. It is the primary reason why many people look for top investment plans to double their investments in a couple of months or years with little to no risk (1).
However, no investment product would get you high-return and low-risk in combination, at least at present. In reality, returns and risks go hand in hand; you have to take higher risks to get higher returns, and vice versa.
While choosing an investment avenue, the thumb rule is to match your risk profile with the associated risks of the product before investing. Several investments come with high risks but can generate higher returns than other asset classes in the long term. On the other hand, there are several low-risk investment plans which can give you lower returns.
There are two many categories that investment products fall into financial and non-financial assets. Financial assets include market-linked products such as mutual funds and stocks and fixed income products like PPF and bank fixed deposits. Notably, most Indians invest in non-financial assets like physical gold, treasury bills, and real estate (2).
India’s Top Investment Options
When it comes to investing, several questions pop up in our minds. Some people invest for financial security while others invest to achieve their financial goals. That’s why intelligent investors look out for the best investment products in India, where they can grow their money in a specific timeframe. The investment options you select should depend on your;
- Investment horizon
- Risk appetite
- Liquidity requirements
- Financial goals
By investing in the best investment plans in India, not only can one achieve his financial goals but also build a financial cushion for the future to live a secure life.
That’s why investors are always looking for top investment options to multiply their money according to their risk appetite. In the article, we discuss the details of the top investment options in India that can help people grow their money and achieve their goals.
We have listed some of the best investment options in India 2021 with higher returns below. One can consider including these options in his financial portfolio (3).
Now, let’s quickly discuss the understanding of each of the best investment options in India 2021.
It is considered among the best investment options for a long-term period. While most investors consider direct equity a high-risk investment option, it also offers higher returns than any other available investment options in the Indian market.
While investing in direct equity plans, it is essential to consider certain aspects, such as picking the right stock, entry time, and market exit. Before you start investing in direct equity, make sure you know how to analyze a share stock before investing. Presently, the one-year, three-year, and five-year market returns are about 8, 13, and 12.5, respectively.
Investors need to open a demat cum trading account to invest in a direct equity fund (4).
Features of Direct Equity:
- Investing in direct equity offers higher returns
- Investors get into the legal terms of purchasing a company’s ownership
A mutual fund is among the most prominent investment options in India. It is an ideal investment plan that offers a high return on the investment over the long term. It is a market-linked investment alternative that invests money in several financial instruments like debt, equity, stocks, money market fund, and more.
Mutual funds generate returns according to the market performance of the fund. While the risk exposure in mutual fund investment is higher, it offers higher returns than other investment options available in the Indian market (5).
It offers two major investment options:
- Equity Mutual Fund: They are market-linked securities. Considering India’s most prominent mutual funds, they offer high ROI by investing in shares of companies with different market capitalization. Since it offers better returns, the risk involved is also higher. With the equity mutual fund scheme, 65% of the asset is invested in equity and other related securities, and 35% of the asset is invested in debt and money market instruments.
- Debt Mutual Fund: They are considered among the best investment options for those who wish to gain a steady ROI. Investors can invest in fixed-interest securities such as government securities, corporate bonds, commercial paper, treasury bills, and several other money market tools with a mutual debt fund. The goal of debt fund investments is to create capital appreciation and earn interest income.
Features of Mutual Funds:
- It allows investors to have a diversified investment portfolio and allows them to attain their investment goals.
- Mutual fund schemes have an allocated fund manager that assists investors in selecting a lucrative investment scheme.
- Beneficial as mutual fund schemes investments are exempted from the wealth tax.
- Mutual fund investments are transparent, allowing investors to make an informed decision.
National Pension Scheme
NPS or National Pension Scheme is a government-backed pension solution. According to investors’ preferences, it invests in government securities, bonds, equity, and other investment alternatives.
It offers two options, active and auto. Under the active option, investors can invest in assets according to their preference, whereas the auto option automatically invests funds in different assets.
The lock-in period depends on the age of the investor. Notably, it only matures when investors turn 60.
Additionally, the accumulated interest on this scheme is tax-free. When an investor chooses for the lump-sum payment on maturity, 40% of the maturity proceeds are exempted from tax. And if one opts to receive the pension after maturity, the entire amount is taxable as regular income (6).
Features of NPS:
- NPS investment offers the flexibility of option between active and auto.
- NPS also allows investors for partial fund withdrawal.
- It allows investors to remain independent even after their retirement.
PPF, Public Provident Fund
It is one of the most secure long-term investment options among all the available investment options in India. It is exempted from tax. One can open a PPF account from either a post office or a bank.
It would lock your invested money for a 15-year tenure, and you earn compound interest on the accumulated money. It also allows investors to extend the time frame for another five years. The only drawback of the PPF account is that it only allows you to withdraw money by the end of the 6th year. However, you can take a loan based on the balance of your PPF account in case you need money (7).
Below is the PPF interest rate from 2012 to 2021:
PPF Interest Rates for the past seven years
Features of PPF:
- Since PPF is a government-backed scheme, the principal amount and the interest amount are safe and guaranteed.
- It offers a 25 years lock-in period. Investors can also extend it for up to 5 years post the completion of the 15-year lock-in period.
- The minimum premium investment amount is 500 INR and up to 1.5 lakh INR on an annual basis.
- PPF also offers the benefit of availing loans against the invested amount.
Bank Fixed Deposits
Bank fixed deposits are well known for their fixed-pay venture option. As the name suggests, FD offers a fixed return over the investment tenure. The profits are payable monthly, quarterly, or yearly, as per the bank rules.
Depending upon the bank, fixed deposits offer cumulative and non-cumulative investment options. When it comes to the non-cumulative option, according to the underwriting, the bank will pay the interest. Whereas, with the cumulative option, the bank will reinvest the interest and pay it at maturity.
It makes FDs among the most popular investment options in India.
People can invest in fixed deposits either online or by visiting any bank branch of their choice. The FD interest rates range from 6.50% for regular account holders to more than 7% for senior citizens for a year tenure.
FDs also provide a range of tenures, from a minimum of seven days to full ten years, and investors can choose the amount based on their investment horizon (8).
Features of Bank FDs:
- Investing in bank FDs offers financial stability and a safe instrument tool that allows investors to earn high returns on a surplus fun.
- The bank FDs renewal is easy, and some banks also offer overdraft facilities against fixed deposits.
- Market fluctuations don’t affect the fixed deposit, and returns are fixed too.
SCSS, Senior Citizen Savings Scheme
SCSS is one of the risk-free tax-saving investment schemes in India for senior citizens above 60 years. It is among the best investments for senior citizens since it offers them a regular income. The scheme also offers a reasonable interest rate, 8.6% per annum, which make s it a highly beneficial investment option.
SCSS is available pan India via banks and post offices. The maximum amount one can invest is 15 lakh INR for a tenure of 5 years, which they can further extend for up to three years (9).
Features of SCSS:
- Nomination facility is available at the time of opening an SCSS account
- The scheme offers a high interest rate
- In case of any financial emergencies, there is a provision to withdraw funds prematurely
- Flexible investment tenure
Real estate is among the fastest-growing sectors in the country, which holds excellent prospects in different sectors like housing, retail, manufacturing, hospitality, commercial, and more. Purchasing a plot or an apartment is the best decision among the available investment options in India.
The risk is pretty low since property rates increase within six months. They work as a non-financial asset which is considered among the best investment plans with high returns over the long term (10).
Features of Real Estate Investment:
- High tangible asset value with real estate investment
- Allow an investor to have a portfolio, lowering hid volatility and offering high returns.
- Investors can liquidate their investments by selling their properties at the right time.
Gold ETF, Gold Exchange Traded Funds
Gold ETF are tools, a combination of gold and stock investment. One can easily buy the gold investment and can sell it with any company stock. They also serve as passive instruments on the price of the gold, making pricing transparent.
When the market-linked tools are volatile in terms of risks, often Gold ETF offers higher returns. Hence, before locking down a financial instrument, investors would need to conduct thorough research and get correct and complete information about the product and its market position (11).
Features of Gold ETF:
- Gold ETF investment offers high liquidity, which investors can easily trade in the stock exchange.
- The advantage of choosing the intended quantum to buy and sell.
- Investors can use it as security for loans and make an instant transaction.
RBI Bonds are taxable and come with a seven-year tenure with a 7.75% interest rate per annum. These are demat mode only, and investors get it accredited to their BLA, Bond Ledger Account.
Investors can issue these bonds for 1k INR and also get a Certificate of Holding as investment proof.
Investors can access it as regular income with the non-cumulative option. On the contrary, they can get reinvested interest within the cumulative option (12).
Features of RBI Bonds:
- Anyone can invest in RBI taxable bonds with no maximum limit on the investment amount.
- Upon fulfillment of specific criteria, senior citizens can avail of premature withdrawal
- Investors can get interest payments in cumulative and non-cumulative forms.
PMVVY, Pradhan Mantri Vaya Vandana Yojana
The PMVVY is accessible to senior citizens of India of 60 years and above age. It offers 7.4% of assured return annually. According to investors’ choice, the scheme offers pension income duly payable monthly, quarterly, bi-yearly, or annually. The minimum pension amount is 1k INR and can go up to 9,250 INR monthly. Investors can also invest 15 lakh INR in the scheme for a decade tenure, an available offer until the end of the fiscal year 2023. At maturity, the invested amount would be paid back to investors, and in case of their demise, it would be paid to the nominee (13).
Features of PMVVY:
- Regular pension for senior citizens.
- One can avail of a loan on 75% of the purchase price after holding the scheme for a minimum of three years.
ULIP, Unit Linked Insurance Plan
ULIP plans offer dual benefits of insurance and investment. They are also exempted from tax. A part of the fund is invested in insurance coverage, while the remaining is invested in market-linked tools such as bonds and shares. Investors can choose ULIP plans with a lock-in tenure of 3 to 5 years. Investors can get a premium at the predefined time and enjoy the benefits of the complete policy term (14).
Features of ULIP:
- Investors get the flexibility to invest according to their risk appetite.
- It offers a long-term investment plan while allowing investors to reap maximum returns.
- It has tax-free maturity.
POMIS, Post Office Monthly Income Scheme
As consistent with the name, POMIS offers monthly savings regulated by the Indian Post Office. Any citizen can easily open a post office MIS account starting with a 1500 INR minimum sum. The scheme offers a five-year maturity term. Notably, the scheme is not tax-exempted (15).
Features of POMIS:
- Investors can either open the POMIS account jointly or individually.
- It allows investors to earn monthly taxable interests.
- One can also open multiple accounts and invest the corpus upon maturity.
IPO, Initial Public Offerings
IPO is an offer where new companies invite the public to purchase their shares before they get listed on exchanges. The share prices are low in IPO, and investors often keep an eye on the prospective companies whose stock value may inflate over time post IPO.
However, it also has its risk since shares can also drop depending on its performance and market conditions. While we can consider IPOs a long-term and low-risk investment with the right companies, it has certain risks that investors need to assess before investing in any IPO (16).
Features of IPO:
- A stock alternative.
- There is no interest charge or repayment.
- It is especially beneficial for founders and venture capitalists since it allows them to cash out the early investment.
Most preferred Investment Plants for 1-year (Short-term)
- Fixed maturity plans
- Debt mutual funds
- Post-office term deposits
- Arbitrage mutual funds
- Recurring deposits
- Fixed deposits
Most Preferred Investment Plans for 5-years
- Liquid funds
- Saving accounts
- Post Office time deposits
- Large-cap mutual funds
- The stock market, Derivatives
When it comes to wealth management and making smart investments, the thumb rule is to have a thorough understanding of different investment options available in the market.
The investment purpose varies from investors to investors. It could involve financial objectives, investment tenure, risk level, and so on. Hence, investors need to understand their investment needs and accordingly invest in different available options to help them grow their money, offering them lucrative returns, whether long-term or short-term.
Additionally, an investor must also not get confused between saving and investment. Saving is an aloof method of wealth collection while investing is a technique to create more wealth.