What are the best ways to invest money in India for middle class?
What are the best ways to invest money in India for middle class people?
Risk means the Chances of Losing Money. The money you are investing today you should remember that the money can go off also. And returns means what you are earning from that investment. If you understand risk and returns then you need to know that there are three types of investments.
1) High Risk High Returns
2) Low Risk Low Return
3) Medium Risk Medium Return.
If you take high risk your returns will be high.
If you take low risk your return will be low. and if you take medium risk your risk will be medium.
Due to this concept some people fear of loosing money and run away from investment. But if you need to take care of your money you need to know regarding investments. Let's see the options,
Here are the 10 best ways to invest money in India for middle class people
1) FD
It is an safe option many people prefer this option.. But it is an low risk and low returns investment.
Every bank has some scheme regarding FD as they are also doing business. In FD you became an investor for that bank During your FD tenure. The bank will keep money for that fix tenure and bank will invest in and bank will give some returns after the end of tenure. This is how an FD works.. The returns from FD is higher than your savings account. And longer the tenure longer the return.
2) GOLD
If you have money you should invest in gold.. The value of gold goes up with time. If you purchased gold today of 10rs that gold can be valued 29rs tomorrow. There are some advantages and some disadvantages.
A) It is an Medium risk Medium return on investment.
B) It is an safe and simple investment as there is no much paper work.
Disadvantages :-
A) Hard to check authenticity..
You don't know the seller is providing you the real gold or a fake gold.
B) Storage
The gold you had buy where you will keep that gold.. It can get stolen also.
3) Mutual Funds
What is mutual funds... Mutual funds are the companies who invests money in stocks on behalf of us. Mutual Funds have many options such as low risk low returns game high risk high returns game.. So its up to you in which field you need to invest. This is how you can buy the stocks and sell the stocks. But it is done by the companies.. Many companies also offers the mutual fund on period basis. For that you need to have your account with companies and for opening the account you need to register with your mobile number email id and pan number to their website.
- Choose direct mutual funds instead of going through broker(Mutual fund advisors). It will help you save crores of money in long term. Mutual fund agents commission will be approx. 0.5% to 3% of your investment.
- Do SIP in Mutual funds for at least 10% of your monthly take home salary. For the 10%, choose three funds in three SIP deduction dates in a month. Lets say you have Rs 6000 to invest. Choose X fund in dates between 1 to 10 for Rs 2000, Y fund in dates between 11 to 20, Z fund in dates between 21 to 31. This helps you either making more money in market fluctuation or loss less money in crisis.
4) Government Bonds
It is an low risk but medium returns... But what does that means...it is an safe investment like FD as you give your money to bank the bank will use the money for the bank purpose. But if you purchase the Government bonds you become investor for government and you'll give money to government and government will use that money to run a Country. By purchasing Government bonds we say to government that take our money and run the country and after some period provide us with returns. This is how government bond's works and it is an safe investment.
5) Stock Market
It is an High Risk High Returns Investment. But what are you doing in stock market!! Basically you give the money to the companies like Reliance and Tata. And with our money they run their company and provide us some part of profits from their company. Now the thing is how to invest in stock market? It is very easy you need to open an account with stock market companies by just providing your mail id and pan card. And they will open an demat account. After investing in the share if the share value gets increase If the company is performing very good then your investment are also performing very good.. There is downside of stock markets as well... For investing in stock market there is an long learning curve involved. You need to know the current affairs, need to know how stock market runs. There are so many factors which you need to educate your self. Hence it is an high risk and high returns.
You need to pay various charges to the brokerage firm for example shareKhan. You need to pay. For example for equity cash intraday trades you need to pay 0.10% on buy side. For equity delivery traded you need to pay 0.50% or 10 paisa per share or Rs.16 per scrip which ever is higher. So sharekhan will help you to invest your money in share market.
6) Real Estate
This is an high return investment. As there is an high return, than the risk will also get high.
It is an long term investment. If you had spent Rs. 1 crore to buy an property it will not be valued 10 crore by tomorrow itself. It may take 10 years. There are various factors involved such as legal factor. The seller can sell you an illegal property. And if it happens then you have wasted your 1 crore. Due to legal factors. Hence it is an high risk and high returns.
7) PPF-Public Provident Fund
PPF’s are fifteen year investment scheme totally tax free under appropriate sections of Income tax which can further be extended in block’s of five years indefinitely. Interest rate on PPF are not exorbitant as they are linked to G-Sec and not the stock market them self. Start investing around 5000 a month for 15 years ,this when calculated will give you a return of 1699316 with an effective interest rate of 7.6 % compounded annually.
8) NSC (National Savings Certificate)
The minimum time period yo remain invested in this is 5 /10years. It is a fixed income investment scheme with return of 8% . The amount to be invested can be as low as Rs. 500 per year. The risks are very low.
*The maturity amount is taxable.
9) NPS- National Pension Scheme
One can start investing in NPS as soon as one turns 18. In this there are two accounts, 1st is tier one account which is mandatory and 2nd is tier two which is discretionary in nature. Start contributing around 5000 per month which translates to 22,200,00 over a period of 37 years . With the help of calculator provide for , expected return of 23493308 crore can be accumulated which is translates to around a monthly pension of 117467 if the entire corpus is pulled out in the form of annuity .
http://www.npstrust.org.in/content/pension-calculator
10) ELSS (Equity Linked Savings Scheme)
Liquidity - can withdraw after 3 years
Tax benefit - comes under 80C so you can invest up to 1.5 lakhs to get tax benefit under 80C.
Returns - approx. 10–15% depending on market condition when you withdraw after 3 years. you have an option to keep invested. in the long run, it may give you good returns.
Taxability at maturity - Taxed as per LTCG. i.e. profit up to 1lakh is tax exempted anything beyond that is taxed at 20%.
Some more options to understand to invest money in India
- Start Investing Early if you haven’t started, Remember Warren Buffet started at the age of 11.
- Compounding is 8th wonder of the world.
- Example : Rs 1 Lakh Investment a year will become Rs 1 .17 crore in 20th year with 15 % compounding. On an other side, instead of Rs 1 lakh a year , if you invest only Rs 10,000 a year you will end up making only Rs 11.7 Lakhs in 20th year with 15% compounding
- Overnight you can’t make an empire . Have Patience. Buffet tasted his first Billion dollars at his 56th age only.
- Risk taking & diversification. Don't park all your money in one sector (Ex : only in IT sector), diversify to three/four sectors (Ex: IT, Auto, FMCG, Pharma). If you are young, go for high risk equity investments.
- Don’t do any investments blindly. Know about your stock/funds well before investing. Investments are as good as marriage.
- Say NO to Recurring deposit / Fixed Deposit. If you investing in FD /RD, stop this today. Try to stay away form insurance investments.
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