In today’s day and age, it is imperative to make smart investment planning as it can help you to generate income by putting your money to work. As important as it is to save your hard-earned money, making the right investment choice is equally important, so that money can multiply over a long-term period. In order to start making an investment, you can consider either fixed income or growth-oriented investment instruments.
In personal financial planning, savings and investments play different roles. While both have their own importance, they have a different objective. In savings, you generally keep a specific amount of money aside for emergencies. On the other hand investing is when you invest your money with an objective to gain returns on investment and to multiply your funds.
Savings and investment differ in the way wealth is accumulated. Although, savings are considered as a passive way of accumulating wealth, making smart investment planning can help you to accumulate more wealth. Further, in this article, we will give some insight on where to invest money in order to maximize wealth.
Types of Investment
Prior to making any investment, it is very important to understand the different types of investment. For most of the investors, the investment differs in terms of high risk, low risk and medium risk.
Let us take a look at the best investment options to maximize your wealth:
Unit Linked Insurance Plan (ULIP)
ULIPs are considered as one of the most lucrative investment options in India. ULIP plans not only offer the benefit of investment return, but it also provides insurance coverage to the family of the insured. Moreover, the plan also offers the benefit of tax exemption. ULIP plans come with a lock-in period of 3-5 years and are the best suitable for investors who want to gain investment returns along with the benefit of insurance coverage. In a ULIP plan, a part of the premium is kept aside to be used for insurance coverage, whereas the remaining amount is invested in the various market-linked instruments such as debt, equity, bonds, etc. with an objective to gain investment return.
Mutual Fund Investment Option
Mutual funds are considered as one of the best investment options to multiply your hard-earned money. It is a market-linked investment option, wherein the money is invested in various market-linked investment instruments such as equity, debt, stocks and balanced funds with an objective to generate profitable investment returns in the long run. The returns are generated based on the market performance of the fund. Even though mutual funds investors have a high-risk exposure, it offers higher returns as compared to the other best investment options available in the market. The major investment fund options offered by mutual funds are:
Equity Mutual Fund
Equity funds are market-linked securities with the main objective to provide high ROI by making the investment in large-cap companies. As compared to the other investment options such as debt or FD, equity mutual funds offer much profitable returns over a long-term. This investment option is best suitable for investors who have a high-risk appetite and who want to gain a higher return on their investment.
Debt Mutual Fund
Debt funds are a great investment option for investors who want to gain a steady return on investment. In debt fund the money is majorly invested in the fixed interest securities such as corporate bonds, government securities, treasury bills, commercial paper, etc. The main objective of investing in debt fund is to gain capital appreciation along with the benefit of regular interest income.
Public Provident Fund
Public Provident Fund is the most popular and most trusted investment option available in the market. PPF is a government-sponsored scheme, which offers an annual interest rate of 8%. You can make a minimum contribution of Rs.500 in the PPF account and can invest up to maximum Rs.1.5 Lakh in a financial year. PPF account comes with a minimum tenure of 15 years. However, you can make partial withdrawals at specific circumstances.
Direct equity is another such investment option where you can consider making an investment for a long-term period. Even though for most of the investors' direct equity is a high-risk investment option, the returns offered by it is much higher as compared to other market-linked investments available in the market. However, while investing in the direct equity plan it is very important to consider certain aspects like selecting the right stocks, time of your entry and exit in the market. Before investing in the direct equity, make sure that you know how to analyze a share stock. Currently, the market returns offered by direct equity for 1 year, 3 years and 5 years are around 8%, 13% and 12.5% respectively. It is also important to note that in order to invest in direct equity; you should have a DEMAT account.
Equity Linked Savings Scheme (ELSS)
Equity-linked savings schemes are tax saving investment option, which offer the benefit of market return. ELSS fund comes with a lock-in period of 3 years and can be converted into open-ended scheme after the completion of 3 years. Under this fund option, around 60% of the investment is made in equity and equity-related securities. Along with the benefit of higher investment returns, the investment made in the ELSS up to the maximum limit of Rs.1.5 Lakh are applicable for tax exemption U/S 80Cof Income Tax Act.
Wrapping it up!
The most common question, which is often asked by investors along with where to invest, is how to invest. The answer to both these questions depends on your spending and earning. Before start making any investment, don’t forget to analyse your financial goals. Based on your long-term and short-term financial objectives you can choose to invest in these investment options in order to maximize your wealth.
You may also like to read: 10 Best Short Term Investment Plans in India
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