Characterized as a developing market economy, the economy of India is the world’s fifth-largest economy by nominal GDP and the third-largest by purchasing power parity (PPP).
Although the UN Trade Agency has projected India’s growth rate to slow down at 6% compared to last year’s 7.4%, India still stands as the world’s second-fastest-growing economy. Also, the long-term growth prospective of the Indian economy remains positive due to its young population and corresponding low dependency ratio, healthy savings, and investment rates.
The Government of India has taken significant initiatives to strengthen the economic credentials of the country and make it one of the strongest economies in the world. But, what about you as an individual? Have you taken the right steps to secure your financial future by making the right investments?
Why are investments important?
Money lying idle in your bank account is an opportunity lost. You should invest that money smartly to get good returns out of it. Investing allows you to put your money in vehicles that have the potential to earn strong rates of return.
If you don’t invest, you are missing out on opportunities to increase your financial worth. Of course, there is a possibility of losing part of your money if you invest, but if you invest wisely, the potential to gain money is higher than if you never invest. Interestingly, if you work hard to earn the money that you have, why would you not want your money to work harder?
Types of investments
The Indian investor has a number of investment options to choose from. By making wise investments, you can not only achieve your financial goals but can also win a financial cushion for your future.
Here is a look at the top 4 investment avenues Indians look at while saving for their financial goals.
When you buy a company’s stock a.k.a. company’s shares, you buy a legal ownership in that company. This allows you to actively participate in the company’s growth. Stocks are ideal long-term investments. So, learning to invest wisely and with patience over a lifetime can yield a portfolio far outpacing the most modest income.
2) Mutual Funds:
These are investment vehicles that pool the money of many investors to create a huge investable amount (corpus). This large corpus is then invested into various companies across industries, operating in different sectors of the economy – depending on the type of fund chosen. Investors can also begin with as little as Rs.500, depending on their goals. All the investors of a mutual fund share in its profits, losses, incomes, and expenses in direct proportion to their level of investment.
3) Fixed Deposits:
Fixed deposits are one of the oldest and safest investment instruments provided by the banks. The interest rates on fixed deposits are higher than the interest provided on savings account or current account balances. It is necessary for every individual to diversify his or her investment portfolio into various types of fixed income and variable income investment sources. Fixed deposits can be a regular income source of investment or simply a source of funds for emergency.
4) Life Insurance Plans:
The importance of investing in life insurance cannot be stressed enough. Life insurance is designed to offer financial safeguards and also work as a good investment plan, which helps meet several life goals in turn. In other words, life insurance plans help you achieve financial safety for near and dear ones while you are around. The life insurance sector in India has been witnessing steady growth as more and more people are waking up to the necessity of investing in life insurance plans.
How should you plan your investments?
The first step in planning your investments is to figure out the right investment that fits your profile and needs. Here are a few things to keep in mind when planning your investments:
• Do adequate research and choose your investments wisely.
• Know that investing for a longer duration will bear sweeter fruits. So, have patience and don’t fall for schemes that promise you easy-quick returns.
• Keep reviewing the status of your investments.
• Consider the tax implications on the returns you earn from your investments
• Keep things simple and avoid complicated investments.