A Beginners Handbook for Investments in India

 “Anyone who is not investing now is missing a tremendous opportunity.” – Carlos Slim

Life is one big opportunity to experience and realize all that you wish and dream for. From buying a penthouse to sending your child to the Ivy League College, there are so many things that you want to turn into reality. And, one thing that bridges the gap between your present reality and the fulfillment of your aspirations is having enough money. 

However, with your salary and monthly savings, you doubt if you’ll ever be able to make this come true. That is why we suggest that you consider the great money-making potential of ‘Investments.’ 

So, if you’re a beginner, who wants to start making investments, then let’s guide you about it all.

Why Should You Invest? 

Your life goals make you look forward to life. While you may be saving a part of your income each month, but that only helps you create a reserve fund. This reserve, most of the time, is only enough to cover you for a rainy day or to meet certain specific expenditures. 

However, investments, on the other hand, put your money in funds that also pay you profit and thereby help you multiply your money. In this way, investments help you in wealth creation, and thus, enable you to achieve your dreams and life goals with relative ease. 

What makes investments profitable, in comparison to savings, is the involvement of risk factor — greater the risk, higher the chances of making profits. 

When to Invest? 

Many of you often waste many precious years of your life thinking about investing your money but feel hesitant because of various reasons. While you can start investing whenever you feel like, but to reap maximum benefits, it is recommended that you start early.

Investments, due to the time factor involved, are subject to compounding. Therefore, the earlier you begin, the more you’ll be able to multiply your funds. Also, if you give your funds ample time to grow, and remain disciplined by not withdrawing now and then, you’ll be able to multiply your wealth big time. 

So, suspend all your doubts and start investing at the earliest possible. That is how, 10 to 15 years from now, you’ll have enough funds to realize your big dreams.

How to Invest? 

To invest in a smart investment plan, you may keep the following points in mind-

Research Well – Before putting your hard-earned money in any fund, find out more about different instruments and see which one aligns with your need and goals the best.  

Put Your Money in Different Baskets– Due to the risk involved in investments, put your money in different instruments, rather than all in one. This will keep you safeguarded. 

Start Small– Don’t think that you require a big sum of money to start. In fact, as a beginner, the key would be to start small and then gain big. 

Choose Tax-Saving Investments– There are investments which give you tax benefits. Choose such investments to gain additional benefits.

Where to Invest?

There are mainly two types of financial instruments. One is equity investments, and the other is debt investments. Equity investments, due to the relatively higher risk involved, offer greater returns than debt investments to investors.

Further, investments can also be divided based on how they are acquired. Direct investments can be directly bought on your own from the government or any other institution, while indirect investments refer to instruments which invest in a variety of stocks or bonds or both on your behalf.

 Direct Investments 

1. Stocks: This refers to shares in the ownership of any company. These earn you dividends in return. 

1. Bonds: This refers to the money you lend to government or institutions that give you fixed interest at regular intervals and return you the face value too in the end.

Indirect Investments 

1. Mutual Funds: This diversified investment gives you the option to invest in a pure debt, equity, or a hybrid fund. Funds collected from different investors are invested in the company’s bonds or shares and are managed by a professional fund manager. If you go for equity funds, then the safest bet would be to invest in index funds, while in debt funds, gilt funds are most reliable. 

1. Unit Linked Investment Plan (ULIP): ULIPs refer to insurance plans that also offer investment benefit. ULIPs also help you get tax benefits, under sec 80C subject to conditions. 

This plan, with its dual benefits, insures your family and also helps you achieve your financial goals quite easily. Reputable Insurers like Max Life Insurance offer reliable ULIP plans that provide you with the option of investing your money in six different funds. Moreover, they also provide you the option of two free partial withdrawals, which means you can have financial assistance in case you face an emergency.

1. Public Provident Fund (PPF): This is another fund considered as the best investment plan for tax benefit.A government offered saving scheme, PPF invests your money for a fixed period and earns you returns on your savings. This is a safe and accessible investment and provides 8% interest rate of return (starting 1^st October 2018). 

Start with A Smart Investment Plan

Now that you know how to go about with investing your money, build a sound investment portfolio for yourself. Buy a smart investment plan and earn significant returns. Make sure that you also include best investment plans for tax benefit, so that you can save more too.

Start early, start now, and realize all your dreams!