In a discussion with Sandeep Jethwani, Co-Founder of dezerv, we talked at length about “Top 10 Ways To Create Wealth Faster and Become Rich”. (Spoiler alert!) So here are 5 ways that we think are the best approach to start investing your money.
1. Fixed Deposit (FD)
FDs are a low-risk investment option offer by banks and non-banking financial organizations. The interest rate remains unaffected by market changes, making it a popular choice for many. Instead of keeping your idle cash in the savings account, which mostly has a low-interest rate, you can deposit a lump sum amount in an FD account. There is usually a penalty if you withdraw the money before the tenure, but the lock-in period starts from 7 days in most banks, allowing you the flexibility to choose from the duration you need.
Investing in stocks, also known as equity or shares, makes you one of the owners of the publicly traded company. Since this is a market-linked form of investment, it usually offers high returns with considerably higher risk than other options. With a well-researched portfolio, you can earn dividends and gain from capital appreciation. Identifying the right stocks for you and continuously monitoring them is crucial to minimize the potential for heavy losses. Considering it as a long-term investment solution can also prevent you from the negative impact of a volatile market.
This fixed-income instrument is a type of debt investment. You lend money to the government or a corporation, and they pay you a predefined amount as interest. At the end of the maturity term, you get the entire principal amount back. Treasury bills, government securities, municipal bonds, and corporate bonds are some of the popular bonds available. Check the credit score or risk involved before giving your money to any organization. While government bonds are less risky, they also offer lower interest rates.
4. Mutual Fund
If spending time or effort identifying the correct stocks and bonds is not your cup of tea, mutual funds are the next best thing for you. The fund pools money from various investors and is manage by a professional fund manager. The money is then invest in shares, government bonds, corporate bonds, and other money market instruments, yielding returns based on market performance. Like other market-based instruments, it possesses a particular risk. So, it is always advisable to do thorough research.
5. Public Provident Fund (PPF)
Launched by the National Savings Institute, PPF is a considerably safe investment option in India as the government backs it. It has a lock-in period of 15 years, which can be extend in blocks of 5 years. Thanks to the low-risk factor and long tenure, many include it in their retirement investment plan. It also offers tax benefits of up to INR 1,50,000 per annum under Section 80C of the Income Tax Act 1961.
Now that you know some primary ways to invest your money, get start as soon as possible. Do your research, but do not wait for a particular day or month to start this habit. Some of these options allow you to begin investing with as little as INR 100, while some let you invest for even 7 days. So, no matter how small you want to start, it’s never too soon.