Part 4: List of Investment options in India

In India, there are a lot of Investment options available for individuals, where they can invest their money to meet financial goals. Here, we will provide a list of popular investment options along with risk, reward, and maturity, so that one can choose wisely.

We are analysing these investments with the perspective of long term investment, therefore we discourage (and exclud) certain options which focus on short term investments or trading.

Why do we need to analyse investment options?

Often we see that some people put their money in savings accounts and fixed deposits, but these don’t make their money grow much. On the other hand, some people try to trade stocks or cryptocurrencies without knowing the risks, and they end up losing the money they worked hard for.

Before you invest your money, it’s important to understand how it works. Today, we’ll talk about popular ways to invest in India that can help your money grow and help you reach your financial goals.

Comparison Factors:

Before investing money in anything, we can evaluate it based on risk, return, maturity/liquidity and our knowledge about that investment type. This helps us choose the best investment instrument. Here is the criteria on which we have analysed different investment options:

Risk:

• Low => If fixed returns
• Moderate => If slightly volatile
• High => If high volatile
• Very High => If very high volatile

Return:

• Low => If returns are less than Inflation rate
• Moderate => If returns are slightly better than inflation rate
• High => If returns are quite higher than inflation
• Very High => If returns are very high

Maturity / Liquidity:

• Very Low | Moderate | High | Very high
  • Based on locking period, tenure and nature of investment

Knowledge & Experience:

• Based on how familiar someone with investment options

“Someone is sitting in the shade today because someone planted a tree a long time ago.”

— Warren Buffett

List of Investment Options:

Here are some common or we can say popular investment types that most people make use of.

Post Office Saving Schemes:

Other Investment Options:

Note: As cryptos is relatively new and have been very volatile so far, we do not recommend it as a good option for long term investment.

We will further analysing some of these options in detail and evaluate who should invest or not in particular investment type.

Fixed Deposit (FD):

• Risk: Low
• Return: Low (6% to 7%)
• Liquidity: High
• Who should invest?
  • If you have limited fund
  • If you want to withdraw for short term goals
  • If you are looking for low-risk investments
• Who should not invest?
  • If you want to beat inflation or expects high returns

Employees’ Provident Fund (EPF):

• Risk: Low
• Return: Moderate (7% to 8%)
• Liquidity: Low (Maturity on Retirement  – Age 58 Yr)
• Who should invest?
  • For organisations with more than 20 employees, it is mandatory to register under the EPF scheme
  • If you are a salaried employee, the chances are EPF is already deducted from salary. So, you do not need to decide.
• Who should not invest?
  • Not applicable

Public Provident Fund (PPF):

• Risk: Low
• Return: Moderate (7% to 8%)
• Liquidity: Low (15 Year lock-in)
• Who Should Invest?
  • Anyone looking to invest for long term (15 Year) goals
  • If needs tax free returns (Interest and maturity)
• Who should not invest?
  • If you are willing to take more risks for more returns
  • If you want to invest for short term goals or already invested most of money in long term investment such as EPF, NPS etc

National Pension System (NPS):

• Risk: Moderate
• Return: High
• Liquidity: Very Low (at the age of 60)
• Who Should Invest?
  • Anyone investing for retirement goals with pension/annuity
  • Want to save tax in addition to section 80C (1.5 lakh)
  • Want to invest for retirement with strict discipline (which EPF does not provide)
  • Want to invest in mix of Corporate debt, Government bonds and Equity market
• Who should not invest?
  • If you do not like the idea of pension/annuity and look for lump sum money only

Mutual Funds:

• Risk: Moderate
• Return: High (10% to 14%)
• Liquidity: Moderate
• Who Should Invest?
  • Anyone willing to take more risk for higher return
  • If you have invested enough in debt instruments such as FDs, PPF, SSY etc
  • If you want to invest in stock market but have less knowledge and time
• Who should not invest?
  • If you do not have enough patience to invest for long term (minimum 5 years)
  • If you are not emotionally capable to see your investment 30-50% down.

Stocks:

• Risk: Very High
• Return: Very High
• Liquidity: High
• Who Should Invest?
  • If you have knowledge / time to learn about stock market
  • If you have invested enough in other instruments such as FDs, PPF, MFs etc
• Who should not invest?
  • If you are not emotionally capable to see your stocks 40-60% down
  • if your investment decision is only influenced by someone (Friends, YouTubers)

Rule No. 1: Never lose money.
Rule No. 2: Never forget rule No. 1.

– Warren Buffett

As we are dealing with money here, it is important to start with less risky investment options such as FDs, PPF, EPF etc. Once you have invested enough money for your important goals, then you can learn about risky investments such as Stocks and Mutual Funds. It is important to read scheme related documents and consult with a Financial advisor.

Top reference and resources:

Checkout some of the best resources available on the same topic.

• https://www.youtube.com/watch?v=yK0iKkh_kXs&t=20s&ab_channel=AssetYogi
• https://www.youtube.com/watch?v=GiBvFVonXZs&ab_channel=InvestAajForKal
• https://www.youtube.com/watch?v=GKUV_oSzw70&ab_channel=YadnyaInvestmentAcademy

Disclaimer:
We are not Sebi Registered. Investing and trading in stock market, future and options, mutual funds, cryptocurrency, involve substantial risk of loss. Any such discussion or information provided here is for educational purposes only and before making any investment decisions, please consult with a financial advisor.