Types Of Investments in India

In today’s day and age, everyone seeks to improve their living standards and life quality by setting financial aspirations pertaining to their work and investments. The various types of investments form a very important aspect in every household as a means of wealth creation.

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The choice of which instrument of investment is feasible for a certain individual depends on the following factors-

  • Liquidity available for purpose of investment

  • Risk appetite

  • Tenure of holding the investment

  • Expected returns

  • Repayment options

The popular investment options available for probable investors, at present, are listed along with their respective features in detail below.

Stocks-

These are equity investment options that provide ownership in lieu of the amount invested. Stocks are issued by public limited companies looking to raise finance through the means of investment from the general public. The return earned through investments made in stocks is not fixed and bears a high risk. The investment bears profit in two ways-

  • Increase in the share price of the company due to favorable market conditions.

  • Interest received on the invested amount

Bonds-

These are debt-related investment options which provide the investor with an option to lend money to a financial institution, government institution or a private limited company.  Money raised by the means of bonds is utilized for the purpose of long-term investments and expansion purposes. The bondholder gets a fixed dividend from the institution, along with a promise of repayment of the initial invested amount upon maturity of the investment period. 

The investor enjoys the status of a creditor to the institution.

Bank Instruments-

These are the safest mode of investments available for investors. They are the most favored investment option for first-time investors as they offers fixed returns and substantially low risks. There are various investment instruments issued by banks, namely, savings accounts, certificates of deposit, money market accounts,  federal insurance and others. These investments have a pre-decided return which the investor receives as long as they wish to remain invested.

Saving schemes for college-

Education is the foundation on which the future of a person sustains in the long run. It is very important for all parents to ensure that their child gets the best available educational facilities.

At the time of investing in the education of their children, many parents who are unable to plan much in advance face a lot of issues. Due to unavailability of funds or lack of knowledge, many children have to compromise for less than their worth. Thus, it very important for every parent to start saving for the education of their child by investing in college schemes which gives handsome returns at the time of the actual expense.

There are various plans available for every parent to choose from. A few of them are-

  • College saving plans

  • Prepaid tuition plans

  • Savings bonds

  • Custodial accounts

  • Coverdell accounts

Annuities-

It is an instrument of investment in which the investor is promised fixed returns at predetermined intervals by the insurance company in which the investor has invested. Annuities are of various kinds.

Fixed Annuity

These are investment instruments issued by insurance providers. Basic features of the plan is that it offers fixed return after fixed intervals of time. The return provided is dependant on the various factors such as market conditions, interest rates, life expectancy etc.

Variable Annuity

These are dual benefit investment options which provide insurance benefits along with different investment options. The investor is given an option to choose among different variants of investment like mutual funds, stock options etc.

Indexed Annuity

It is a culmination of both variable and fixed annuity plans. The investor gets assured interest returns which varies according to the market trends. Each indexed annuity is different from one another. The reason it is not the most favored option of investment, despite its various benefits, is that it is very difficult for investors to compare between the various annuity options.

You may also like to read: What is an Annuity | Types of Annuity

Insurance-

  • The insurance company ensures the protection of the interests of a person at time of death, critical illness or any allied mishappening.

  • The insured person pays a one-time premium or numerous small sums in the form of regular premiums.

  • The insurer has an option to choose how the nominee gets the benefit of the selected plan.

  • There are two major variants of life insurance.

  • Whole Life Insurance

  • Term life insurance

  • Universal life insurance

  • Variable life insurance

  • Variable life insurance

Retirement-

Retirement refers to a phase in a person’s life in which, due to age, their capabilities depreciate.

It is very important for everyone to plan an easy retirement for themselves. This implies that everyone should make investments that would reap results and be fruitful and they never have to worry about their income source at the time of their retirement.

This is essential as this promotes a feeling of independence and self-reliance which is always a good thing. Depending on their personal needs, an investor can choose between a vast range of retirement plans available in the market at present.

The above-mentioned instruments of investment are readily available for all investors having varied interests. The choice of investment can be made by careful assessment of various features and risk factors of each instrument.

Past 5 Year annualised returns as on 01-05-2024

^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.

*All savings are provided by the insurer as per the IRDAI approved insurance plan.

Tax benefit is subject to changes in tax laws. Standard T&C Apply
~Source - Google Review Rating available on:- http://bit.ly/3J20bXZ

^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.

#The lumpsum benefit is calculated if policyholder invested ₹10000 monthly for 10 years in the fund with a policy term of 20 years. This Point To Point past performance data of last 10 years has been used to illustrate a scenario for the customers benefit. It is assumed that the past 10 years returns would have also been delivered in last 20 years. This is not guaranteed and not in anyway indicative of what the customer may actually get 20 years from now. The investment is subject to market risk and the risk is borne by the policyholder.

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