Does Equity Investment Scare You? Here is How You Can be a Fearless Investor

Investment planning is crucial to achieve diverse lifegoals. In general, risk and returns are directly proportional, which means you can expect sky-high returns by investing in high-risk instruments.  

If you are a risk-averse investor, you would want optimal returns at the lowest risk of losing the principal money you invested. This is one thing that might have prevented you from investing directly into equities. 

Does it mean you can’t become a successful, fearless investor? 

Not at all.

All successful investors match their risk profile with diverse investment avenues before choosing them. The best part – you can start doing it too. Think more about investment diversification and not market timing, which can kill your returns. 

Even if your investment portfolio does not have equities in it, it can still flourish while giving you good returns. Choose the following financial instruments to keep your money safe while also getting good returns:

  1. Liquid Funds

Liquid mutual funds invest in high credit quality instruments, such as certificates of deposit and treasury bills. They are debt funds that mature in 9o days; hence, they have lower associated risk and lower returns as compared to other classes of debt funds.

If you have surplus cash that you do not need in the next few months, invest it in liquid funds. Another safety feature of this financial instrument is that it has no lock-in period and withdrawal gets processed in a day. 

Even though these funds provide liquidity, invest a part of your emergency corpus in them, not all of it. Link these investments with short-term financial goals, like paying for insurance or your child’s school fees a few months later.  

  1. Equity Mutual Funds

Investing directly into equities is suitable for those who have enough knowledge about stock markets. If you don’t know much, invest through equity funds instead.

Equity mutual funds invest in the stocks of companies across several market caps. In comparison to debt funds, you get higher returns. 

It is managed by professional fund managers and backed by research teams with specialized knowledge about the stock market. So, you won’t have to worry about the nitty-gritties of stock market volatility. 

Also, Securities and Exchange Board of India (SEBI) regulates them. So, choosing a fund house with a proven track record of success can give you good returns over a while.

  1. Public Provident Fund (PPF)

If you seek long term capital appreciation along with tax benefits, invest in PPF. 

It is unique in the sense that the investment, returns as well as maturity benefits are non-taxable under Exempt-Exempt-Exempt (EEE) status. Backed by the Indian government, it is entirely risk-free. 

Indeed, it is a highly flexible investment option. You can invest a maximum of one and a half lakh rupees in a year as a lump sum or through EMIs. Currently, the PPF interest rate is 7.9% compounded annually.  It has a lock-in period of fifteen years, which you can further increase in blocks of five years. 

  1. Bank Fixed Deposit or FDs

You might have heard your father or grandfather talking about the importance of investing in FDs. It is one of those financial instruments which are nearly essential in every investor’s portfolio. Compared to equities or other market-linked instruments, they are least affected by market volatility, thus keeping your money safe always. 

You can choose to get fixed returns on your investments at regular frequencies.  If you don’t need that payout option, opt for a cumulative fixed deposit with which you will get the total sum of returns and principal when it matures. 

In a nutshell, investing directly into equities is a high-risk game. Avoid playing it, and you can still achieve success in getting optimal returns for your investments. If in doubt, ask for help from reputable financial advisors such as FinEdge. Liquid mutual funds, PPF etc., make sure you assess your investment plans regularly no matter which instruments you choose.