Investing is elemental to building wealth in the long term. It is not exactly about how much money you actually have, but instead how smartly you invest your hard earned money. With several investment options available, deciding on which ones are the best suited for your investment goals, can be challenging.
This article will glance at the top 10 investments that can make you rich in India.
Equity Mutual Funds
Equity mutual funds are among the best investment options for long-term wealth creation. They invest in stocks of various companies and provide investors with an opportunity to invest in a diversified portfolio.
Over the long term, equity mutual funds have historically outperformed most other investment options, providing higher returns. However, it's important to note that equity
mutual funds come with higher risk than other investments.
Public Provident Fund (PPF)
The Public Provident Fund (PPF) is a long-term investment option offering a fixed interest rate and tax benefits. The investment made in PPF is eligible for tax deduction under section 80C of the Income Tax Act.
The current interest rate of PPF is 7.1% (as of April 2023), which is higher than most other fixed-income investment options. The maturity period of PPF is 15 years, which can be extended for another five years.
National Pension System (NPS)
The National Pension System (NPS) is a long-term retirement-focused investment option. It is a market-linked investment option that invests in various equity and debt instruments. The performance of the underlying investments determines the returns from NPS.
The investment made in NPS is eligible for tax deduction under sections 80C and 80CCD of the Income Tax Act. The maturity proceeds from NPS also qualify for tax exemption.
Real Estate
Real estate refers to the buying, selling, or renting land, buildings, or any other property. It is a tangible asset that has been popular among investors for a long time. In India, real estate is considered a safe investment option that provides regular rental income and capital appreciation.
Real estate investments can be either residential or commercial. Investors can choose to invest in either type of real estate or in both. Investing in real estate requires significant capital. Furthermore, real estate is not an immediately liquid asset. It is a long-term investment requiring due diligence and a thorough understanding of the market.
Gold
Gold has been a popular investment option historically due to its unique properties. Gold is considered a safe investment during economic uncertainty and geopolitical turmoil.
Gold has a limited supply, making it a finite resource that retains its value over time. Gold is also a tangible asset, meaning it is not subject to the same market forces as paper investments like stocks and bonds.
One of the main reasons why investors turn to gold during economic uncertainty is because it provides a hedge against inflation. This is because gold tends to retain its value even when the value of fiat currencies decreases.
Inflation can erode the purchasing power of money. Still, the value of gold tends to rise in tandem with the inflation rate, making it a valuable investment during inflationary periods.
Fixed Deposits (FDs)
Fixed Deposits (FDs) are a type of investment product offered by banks and financial institutions. They allow individuals to deposit money for a fixed period, ranging from a few months to several years. During this period, the deposited amount earns a fixed rate of interest, which is determined at the time of investment and remains constant throughout the tenure.
One of the primary advantages of FDs is their safety and security. They are considered one of the safest investment options available, as the risk of the capital loss is low. The deposited amount is protected by the Deposit Insurance and Credit Guarantee Corporation (DICGC) up to a limit of Rs. 5 lakhs per depositor per bank in case the bank or financial institution defaults.
The interest rates offered on FDs are generally higher than those on savings accounts, making them an attractive investment option for individuals looking for a fixed return. The interest rates can range from 4% to 8%, depending on the bank and the tenure of the FD.
FDs are also eligible for tax deduction under Section 80C of the Income Tax Act, up to a limit of Rs. 1.5 lakh per financial year.
National Savings Certificate (NSC)
The National Savings Certificate (NSC) is a fixed-income investment option with a fixed interest rate. The maturity period of NSC is five years, and the interest rate is currently 6.8% (as of April 2023). The investment made in NSC is eligible for tax deduction under section 80C of the Income Tax Act.
Unit-Linked Insurance Plan (ULIP)
The Unit-Linked Insurance Plan (ULIP) is a market-linked investment option that combines insurance and investment. ULIPs invest in various equity and debt instruments and allow investors to invest in a diversified portfolio. The investment in ULIPs is eligible for tax deduction under section 80C of the Income Tax Act.
Stock Market
India is currently one of the fastest-growing economies in the world, and the stock market has been on an upward trajectory for several years now. Investing in the stock market can be lucrative for those looking to grow their wealth. However, before investing in the stock market, it is vital to understand the basics of investing and the risks involved.
The best way to get started is to open a trading account. You can make significant returns on your investments with the right approach, patience, and some measure of luck.
Government Bonds
Government bonds are a type of debt security issued by the government. These bonds are essentially loans taken out by the government to finance various public projects such as infrastructure, education, and healthcare.
Investors who purchase these bonds effectively lend money to the government. In return, they receive a fixed interest rate over a specified time, typically from a few months to several years. They're considered low-risk investments, as the government is unlikely to default on its debt.
They can be bought through banks and other financial institutions and are an excellent option for risk-averse investors who want a steady income stream.
Conclusion
It is important to note that investing carries some measure of risk. It is essential to do your due diligence and understand the risks associated with each investment option. Diversifying your portfolio is vital to spread your risk across different asset classes. Additionally, it is essential to remember your financial goals and investment horizon while choosing investment options.
Note: To help plan your trading activities and investment strategies, find here the NSE Holidays 2023, BSE Holidays 2023, MCX Holidays 2023, and Muhurat Trading 2023. Also see here to know more about the stock market timings.
Disclaimer
The investment options and stocks mentioned here are not recommendations. Please go through your own due diligence and conduct thorough research before investing. Investment in the securities market is subject to market risks. Please read the Risk Disclosure documents carefully before investing. Past performance of instruments/securities does not indicate their future performance. Due to the price fluctuation risk and the market risk, there is no guarantee that your personal investment objectives will be achieved.