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Investment Options for Short Term and Fix Income In India

Well, the short-term and long-term financial investment options available for Indian investors.
  1. MUTUAL FUNDS

  2. SIP

  3. BONDS

  4. GOVERNMENT SECURITIES

  5. PRIVATE SECURITY

  6. BANK FIXED DEPOSIT (FD)

  7. REAL ESTATE

  8. GOLD

  9. EQUITY OR DIRECT EQUITY (STOCK MARKET)

  10. NATIONAL PENSION SYSTEM (NPS)

  11. PUBLIC PROVIDENT FUND (PPF)

  12. ULIP

  13. ETF

  14. POST OFFICE SCHEMES


MUTUAL FUNDS

A mutual fund is a professionally-managed investment scheme, usually run by an asset management company that brings together a group of people and invests their money in stocks, bonds and other securities. Mutual funds, particularly equity mutual funds, are believed to be the best investment avenue in India currently.

As an investor, you can buy mutual fund 'units', which basically represent your share of holdings in a particular scheme. These units can be purchased or redeemed as needed at the fund's current net asset value (NAV). These NAVs keep fluctuating, according to the fund's holdings. So, each investor participates proportionally in the gain or loss of the fund.

The biggest advantage of investing through a mutual fund is that it gives small investors access to professionally-managed, diversified portfolios of equities, bonds and other securities, which would be quite difficult to create with a small amount of capital.

SIP:

Systematic Investment Plan is an investment strategy wherein an investor needs to invest the same amount of money in a particular mutual fund at every stipulated time period.

Investing in SIP enables an investor to take part in the stock markets without actively timing them and he/she can benefit by buying more units when the price falls and less units when the price rises. This scheme helps reduce the average cost per unit of investment through a method called Rupee Cost Averaging.

BONDS:

A bond is a debt instrument in which an investor loans money to an entity (typically corporate or government) which borrows the funds for a defined period of time at a variable or fixed interest rate. Bonds are used by companies, municipalities, states and sovereign governments to raise money to finance a variety of projects and activities. Owners of bonds are debt holders, or creditors, of the issuer.

GOVERNMENT SECURITIES:

A Government Security (G-Sec) is a tradeable instrument issued by the Central Government or the State Governments. It acknowledges the Government’s debt obligation. Such securities are short term (usually called treasury bills, with original maturities of less than one year) or long term (usually called Government bonds or dated securities with original maturity of one year or more). 

In India, the Central Government issues both, treasury bills and bonds or dated securities while the State Governments issue only bonds or dated securities, which are called the State Development Loans (SDLs). G-Secs carry practically no risk of default and, hence, are called risk-free gilt-edged instruments.

PRIVATE SECURITY:

Private securities can be any type of investment, including publicly traded stocks, bonds or funds to non-public investments offered by private parties.

BANK FIXED DEPOSIT (FD):

A fixed deposit (FD) is a financial instrument provided by banks or NBFCs which provides investors a higher rate of interest than a regular savings account, until the given maturity date.

REAL ESTATE:

Real estate is property made up of land as well as anything on it, including buildings and natural resources. 

REIT or Real Estate Investment Trust refers to an entity created with the sole purpose of channelling investible funds into operating, owning or financing income-producing real estate. REITs are modelled on the lines of mutual funds and provide investors with an extremely liquid way to get a stake in real estate. It is a type of security that provides all types of investors, big or small, an outlet for regular income, portfolio diversification, and long-term capital appreciation. Like any other security, REITs can enlist themselves on a stock exchange.

REITs have many advantages for interested investors. It provides a regular income stream along with reduced portfolio volatility and dividends and wealth accumulation. As a result of it being a listed entity, it is bought and sold with ease providing great liquidity. It is a natural hedge against inflation as returns have been seen to consistently outpace Consumer Price Inflation.

There are primarily two types of REITs – equity and mortgage. Real Estate Investment Trusts are extremely beneficial for the development of an economy as they allow dormant investable funds to be channelled into infrastructure projects such as apartment complexes, hospitals, schools and the likes.

GOLD:

Here are four ways you can invest.
  1. Gold Bullion. Buy physical gold at various prices: coins, bars and jewelry.
  2. Gold ETFs. Gold exchange-traded funds are a popular way to have gold exposure in your portfolio without the hassle of storing the physical metal.
  3. Gold ETN
  4. Gold fund: As the name suggests, invests in various forms of gold. It can be in the form of physical gold or stocks of gold mining companies.

EQUITY OR DIRECT EQUITY (STOCK MARKET):

In equities, the shares are expressed in terms of face value, issue price, market value, etc. If you invest in equities, you have high chances of making a return which is twice or thrice as high as your capital. But at the same time, the risk factor associated to equities is high as well.

PUBLIC PROVIDENT FUND (PPF):

The National Pension System (NPS) is a long term retirement - focused investment product managed by the Pension Fund Regulatory and Development Authority (PFRDA). The minimum annual (April-March) contribution for an NPS Tier-1 account to remain active has been reduced from Rs 6,000 to Rs 1,000. It is a mix of equity, fixed deposits, corporate bonds, liquid funds and government funds, among others. Based on your risk appetite, you can decide how much of your money can be invested in.

ULIP:

ULIP is a financial instrument which facilitates investments in equities and bonds while offering protection at the same time. It’s an integrated plan in which one portion of the investments are apportioned towards stocks and bonds as chosen by the individual and the remaining is maintained as a life insurance cover.

ETF

ETF's launched on NSE. Exchange Traded Funds are essentially Index Funds that are listed and traded on exchanges like stocks. An ETF is a basket of stocks that reflects the composition of an Index, like Nifty 50. The ETFs trading value is based on the net asset value of the underlying stocks that it represents.

POST OFFICE SCHEMES:

If you are looking for an investment avenue with short locking period, then post office schemes are the best option to go for. The monthly income scheme of the Indian postal service is considered one of the safest options to park your funds as it offers higher returns without any form of risk. It offers returns in the form of fixed monthly income,
Hope this article has added something new to your knowledge base. This article is only for information purpose. You have to decide what's best for you based on your requirement and risk appetite. But the best return is with equity only.

Things to remember for investing is:
  • Invest periodically on regular intervals
  • Start investing as soon as possible invest 500/- but do start investing
  • Invest in schemes which provides you tax exemption & higher rate than inflation.
  • Spread your risk with diversification like take some Government security, government bonds, f.d. etc these are safe return as government will pay you although return is low. Have small investment in mutual funds, SIP, equity & land if possible.
  • Set a target value for your investment don't be greedy you can reinvest your profit amount but booking profit is important.
  • Never exit in hurry think well if your desired profit ia not there.
  • Always have emergency backup so you don't have to be dependent on investment amount getting liquid.
For most of the investment purpose you will need a demat account. Now what is that?
A demat account holds all the shares that you purchase in electronic or dematerialized form. Like the bank account, a demat account holds the certificates of your financial instruments like shares, bonds, government securities, mutual funds and exchange traded funds (ETFs).
If you need demat account you can have it with Zerodha Broking with lowest brokerage and access for Mutual Funds Investment directly on lowest commission. You can register your details on this link and they will call you back for guidance Open an online trading and demat account with Zerodha and enjoy the lowest brokerage .


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