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6 BEST INVESTMENT PLANS FOR 1 YEAR- ONE YEAR INVESTMENT PLANS

6 BEST INVESTMENT PLANS FOR 1 YEAR- ONE YEAR INVESTMENT PLANS

Investing for a period of one-year can yield stable returns, but it can be less as compared to the long-term investment plans. Read further to know what mutual fund options are available when it comes to the short-term investment horizon.

Getting started with Mutual Fund Investment plan:

In the mutual fund industry, you will find two types of individuals – those who prefer short-term investment and others who prefer a long-term investment cycle. Mutual fund experts and advisors recommend one-year investment plans for conservative investors who do not want to take any risk and want to achieve short-term goals – paying your child’s fees or buying a gift, etc. Mutual fund investments that have a one-year investment period mostly comprise of debt fund options; however, the maturity varies from fund to fund.

Why it is best to invest in short-term mutual funds

Here’s why it is best to invest in short-term mutual funds, rather than keeping your money idle:

  • You can earn decent and steady returns
  • You will face low or zero risk as an investor, when there is no drop in investment value due to market fluctuations
  • The money is safe, even if you achieve low returns
  • A great liquidity option during emergencies

Best Investment Plans for 1 Year

If you count yourself as a risk-averse individual and want to invest in the best mutual fund plan for only a year, check out the listed investment plans:

  • Debt fund:

    These are short-term investment plans that invest in fixed-income securities consisting of corporate bonds, money market instruments, treasury bills, and other debt securities. As compared to equity mutual funds, these are less risky. You can choose to invest in debt funds if you’re looking for a high amount of liquidity, earn a regular income and tax benefits.

  • Arbitrage Funds:

    This type of mutual fund leverages the difference between derivatives and cash to generate profit. The returns are dependent on the volatility of the market. If you have surplus cash, a low-risk appetite and want to enjoy tax deductions, you can park your money in Arbitrage Funds. For taxes, these funds are treated as equity mutual funds. For funds sold within a year, you need to pay 30% of the tax for short-term capital gains, while 10% tax charges are applicable for long-term capital gains on arbitrage funds sold after a year.

  • Fixed maturity plans or FMPs:

    Also known as close-ended debt funds, fixed maturity plans invest in corporate bonds, certificate of deposits commercial papers, money market instruments, government securities and high-rates non-convertible debentures. Most common tenures for this type of plan ranges from thirty days to 180 days, 370 days and 395 days. FMPs can be either a dividend or a growth mutual fund option. If it is fixed maturity dividend plan then, the fund house levies Dividend Distribution Tax (DDT); however, if it is FMP growth option, then capital gains tax is applicable with the benefit of indexation.

  • Treasury bills or T-bills:

    These are money-market instruments which the Central government issues, having the maturity of up to a year. T-bills have three-maturities – 91 days, 182 days and 364 days. They are issued at a discount and redeemed at face value. For instance, a Treasury Bills of Rs.100 can be availed at Rs. 95. On the date of maturity, buyers get paid Rs.100. Treasury bills have a zero-risk and a high degree of tradability.

  • Short-term and Ultra-short Debt Funds:

    Short-term debt mutual funds refer to a scheme where the plan has a maturity varying from 1 year to 3 years. These are low-risk funds offering moderate returns to the investors. Short-term debt funds are often compared with fixed deposits (FDs) due to their similar investment terms. Unlike FDs, these debt funds do not attract any penalty if redeemed before maturity.

    Ultra-short debt funds are mutual fund schemes wherein the maturity ranges from 3 to 6 months. It has zero risks if you’re looking to invest for a few months. As compared to FDs, this type of fund offers slightly high returns.

  • Liquid Funds:

    An open-ended debt fund invests in money market instruments like T-bills, commercial papers (CP), and term deposits. Liquid Funds have a maturity of 3 to 6 months. It is a low-risk mutual fund scheme which offers high returns than your FDs or savings account in the bank. If you are looking for a short-term investment period, liquid funds are ideal investment instruments that offer returns in the range of 7-9%. The liquidity aspect of the mutual fund scheme is what makes this an attractive option among investors.

    If you have surplus cash and want to invest for a short amount of time, then you can choose any of the investment plans. You can easily attain stable returns by taking low risks, keeping in mind your short-term financial goals.

5 best short term investment options to fund your next dream vacation

5 best short term investment options to fund your next dream vacation

A great vacation depends on how much funds can be arranged without hurting one’s finances. One of the best ways of doing this is by dedicating a fund for this purpose. One can park this fund in short term investment options, so that it can be liquidated anytime one chooses while earning a return reward too. While investing money for a vacation, start early to create a large corpus and focus on low risk, assured return on investment and high liquidity instruments.

Take a look at the five best short term investment options to fund your dream vacation:

Bank fixed deposits 

A bank fixed deposit (FD) is a safe option to invest one’s funds for the short to long term. One can invest for a period of 7 days to 10 years, with interest rates varying accordingly. One can choose to have interest credited every month to the bank account or opt for interest reinvestment to fetch cumulative return.

At present, banks are offering interest rates in the range of 4 percent to 8 percent depending on the tenure one selects. Senior citizens receive an additional 0.5 percent on their deposits.

One can liquidate an FD anytime, but it is important to note that premature withdrawals result in lowering of interest income for the invested tenure by a percent. Also, interest earned on FDs are taxable as per your applicable tax slab.

Sweep in FD

Sometimes it is difficult to commit to a lump sum FD amount, so investors keep their funds idle in the savings account. One can channelize such investments by starting a sweep-in FD facility. Under the sweep-in FD facility, once the balance in a bank account crosses a certain threshold set by you, the excess amount is automatically converted into an FD. Later, if your account balance is low and you try to withdraw money from your bank account or a cheque is presented for clearing, the sweep-in FD is liquidated by that much amount and the remaining FD is not disturbed. One has the choice to fix the tenure. However, most banks provide a fixed tenure of 12 months. In case one wants to withdraw before the tenure ends, it will invite a fine of around 0.5-1 percent of the interest payable.

Return on the sweep-in FD is usually the same as a normal FD account. On this investment, one is taxed as per the existing tax slab. If you earn interest above Rs 10,000 a year, the bank will deduct tax deductible at source.

Recurring deposits 

If you do not have a big lump sum amount to invest, one can start accumulating money by investing through recurring deposits. Under an RD, a fixed amount is deducted from your bank account at regular intervals. One can invest in an RD for a tenure ranging from 6 months to 10 years. One receives similar interest benefits like that on an FD for the respective tenure.

Like an FD, if one withdraw an RD before completion of the tenure, banks may charge a penalty as per the prescribed rate. One can invest in an RD and create a corpus for your vacation without taking much risk and receive a low to moderate return.

Corporate fixed deposits

Corporate FDs are similar to bank FDs, but carry higher risk, therefore the interest rate offered is typically 1-2 percent higher than bank FDs. Corporate FDs comes with a minimum tenure of 1 year. The liquidity aspect may not be as attractive as that of the bank FDs. Companies allow premature withdrawals at its discretion and may charge a penalty as per the applicable rate.

One can invest in corporate FDs to diversify their investments and maximise returns. The interest earned through this investment is added to an individual’s income. If the interest earned is above Rs 5,000 per year, TDS is deducted.

Liquid mutual funds

Liquid mutual funds are debt-oriented schemes. One can park their surplus funds in a liquid mutual fund and earn low-risk returns in the short to medium term. One can withdraw the funds when needed without having to worry about exit load. It also offers an easy entry and exit route.

Return from liquid funds are not fixed. Subject to the prevailing market condition, one can earn a return of around 6-7.5 percent per annum.

One can use a liquid fund investment to park business funds or short term lump sum amounts to earn attractive returns.

Liquid funds are subject to capital gains, which is taxable. One is taxed based on how long one stays invested in a fund. Short-term capital gains (STCG) are levied if you exit within 3 years, while investments over 3 years attract long-term capital gains (LTCG).

High interest earning savings accounts

Many banks offer attractive interest rates on savings account. The interest one earns from such an account is around 6-7 percent per annum (subject to minimum balance requirements). A savings account allows one to deposit funds or withdraw it anytime. So, one doesn’t need to lock in funds to earn a high return. Interest up to a lakh earned on a savings account in a financial year is exempted from tax. One can use these high interest savings accounts to accumulate funds for your vacation and even to invest in mutual funds, sweep-in FDs, regular FDs or an RD account and ensure high liquidity while earning attractive returns.

New to investing? Here’s how you can formulate your strategy

New to investing? Here’s how you can formulate your strategy

Ever since the outbreak of the novel Coronavirus, the Indian equity market (the S&P,BSE,Sensex), has been on a rollercoaster ride. In general, it has been a challenge to earn respectable returns. On the contrary, investors have witnessed wealth erosion over the last few months. For newbies equity investing has been such a tumultuous experience and they are perhaps saying, “Cash is King”. But irrespective of whether it is a volatile market or not, if you are new to equity investing, here are some steps you can follow to devise a sensible and solid investment strategy:

  • Hold ‘optimal’ cash – neither too much nor too little – for your necessary monthly expenses and emergency purpose. For the latter, you may hold 12 to 24 months of regular monthly expenses, including EMIs on loans, in a separate savings bank account and/or a Liquid Fund or Overnight Fund.
  • Set your asset allocation right i.e. how much money you park in equity, debt, and gold (akin to placing eggs in different baskets).
  • To optimally set your asset allocation, consider your age, income & expenses, assets & liabilities, investible surplus, risk appetite, the broader investment objective, financial goals, and the time in hand to achieve those envisioned financial goals.
  • Set realistic return expectation and do not get carried away by past returns.
  • Prudently diversify your investment within each asset class (equity, debt, and gold) to reduce risk. But take care not to over-diversify, because it yields no extra benefit beyond a point, on the contrary, adds to the hassle of managing a bulky portfolio.
  • Look at the silver lining amidst the challenging times, and be on the search for appropriate investment opportunities. Make volatility your friend; do not get petrified by it.
  • To plan for long-term goals (more than 3 years away), SIP into worthy and suitable mutual funds. While for the short-term goals (less than 3 years), consider recurring deposits and short-term deposits.
  • To achieve the envisioned goal, keep investing. If you stop in between, it will apply brakes on the power of compounding and inflation could end up eroding the purchasing power of hard-earned money.
  • If you already have an investment portfolio, review it comprehensively, preferably with the help of an expert. Do not take investment decisions (buy, hold, or sell) in an ad hoc or unscientific manner, which may do more harm than good. Similarly, do not base the investment decisions going by what your next-door neighbour, colleague, friend, relative, etc. does with his/her portfolio. Keep in mind, investing is an individualistic exercise. There is no“one-size-fits-all approach”.

Looking to park money for the short-term? Here are your options

Looking to park money for the short-term? Here are your options

Investments can be classified as short-term and long-term – depending on the time horizon for your goal. Typically, a short-term goal would be one that is up to three years away. Some instances of a short-term goal could be paying for your child’s school fees within one year or making a down payment for purchasing a house within three years. In both cases, you know exactly when you need the money and how much. Hence, you must plan your investments in such a manner that the funds are available when you need them.

  • Debt Mutual Funds – Certain sub-categories of debt mutual funds can help you address your short-term needs and ensure liquidity. One of the objectives of a debt mutual fund scheme is to earn a steady and regular income for investors. That said, the investment objective, risk, and the returns vary on the types of debt mutual scheme you choose.

For short-term needs, the six categories of debt mutual funds that you may consider are:

1. Overnight Fund – For very short-term horizon, say a day, to a week, to a fortnight, to a month, this sub-category of debt mutual funds can be considered. According to SEBI’s classification norms, an Overnight Fund is mandated to invest in overnight securities that have a maturity of 1 day. These are typically money market instruments viz. Treasury bill (T-Bills), Tri-Party Repos (TREPS), Reverse Repos, etc.

An Overnight Fund commands a very low risk-very low return investment proposition.

2. Liquid Fund – A Liquid Fund is mandated to invest in debt and money market securities with a maturity of up to 91 days. For instance, money market instruments such as Certificate of Deposits (CDs), Commercial Papers, Term Deposits, Call Money, T-Bills and so on.

A Liquid Fund entails low risk; it is placed at the lower end of the risk-return spectrum vis-à-vis other debt mutual funds. A Liquid Fund is suitable if you have a low-risk appetite, prefer safety and liquidity over returns, and have an investment time horizon of 1 month to 3 months, or a little more.

3. Ultra-Short Duration Fund – This sub-category of debt mutual fund invests in instruments with higher duration as compared to liquid funds. An Ultra-Short Duration Fund is mandated to invest in Debt & Money Market instruments with an average duration of between 3 months to 6 months.

When compared to a Liquid Fund, the Ultra-Short Duration Fund exposes you to slightly higher risk, since the underlying portfolio of the fund is in relative higher maturity debt papers. That being said, the return potential is a tad better than a Liquid Fund.

If you have an investment time horizon of anywhere between 3 to 6 months, or slightly more; an Ultra-Short Duration Fund may be considered.

4. Low Duration Fund – This is a variant of the short-term debt fund that invests in debt and money market instruments such that the average duration of the portfolio is between 6 months to 12 months. It holds slightly longer maturity debt papers in comparison to an Ultra-Short Duration Fund.

Thus on the risk-return spectrum, a Low Duration Fund is placed a little above an Ultra-Short Duration Fund; because the slightly higher maturity increases the duration risk to its portfolio as well. Hence, if you have an investment time horizon of up to a year, you should consider a Low Duration Fund.

5. Money Market Fund – As the name suggests, a Money Market Fund invests in Money Market instruments having the maturity of up to 1 year. The instruments include Certificate of Deposits (CDs), Commercial Papers, Term Deposits, Call Money, Treasury Bills and so on. Thus, on the risk-return spectrum, indicatively a Money Market Fund is placed above a low duration fund.

If you have an investment time horizon of up to a year, this sub-category of debt mutual funds may be considered. These funds have the potential to give superior returns to an FD.

6. Short Duration Fund – These debt funds invest in debt and money market instruments such that the average duration of the portfolio is between 1 and 3 years.

Compared to a Low Duration Fund, the maturity profile of the debt portfolio is longer while it invests in a variety of debt papers: corporate bonds/debentures, government securities, and money market instruments.

Thus, on the risk-return spectrum, a Short Duration Fund is placed two levels above a low duration fund. It is suitable if you have a low-to-moderate risk profile.

Do note that investments in debt mutual funds are not absolutely risk-free. Debt mutual funds typically attract interest rate risk, credit risk (also known as default risk), portfolio concentration risk, and liquidity risk. The returns earned on a debt mutual fund are market-linked. The performance of the funds depends on the quality of debt papers and money market instruments they hold in the portfolio. Hence, scheme selection plays a pivotal role.

Axis Bank offers a choice of top debt mutual funds. Visit the mutual funds section on our website to select one that meets your requirements.

Bank Fixed Deposit – A bank FD earns an assured rate of interest, addresses liquidity needs, helps in contingency planning, and achieving short-term financial goals. From an asset allocation and diversification standpoint, you may hold some money in fixed deposits.

At Axis Bank, you can book your bank FD with a minimum of Rs 5,000 for a flexible tenure starting from a minimum of 7 days to a maximum of 10 years. This can be done online. Axis Bank offers an attractive rate of interest on bank FD to enable wealth creation.

5 Best Short-Term Investment Schemes To Earn Money

You can make safe bets on your accumulated capital with the help of low-risk investments for a shorter term, ranging from 1 to 5 years. With short-term investments, you can invest your money without locking it in for a long duration.

When looking at the right investment options, you must choose your investment options based on liquidity, tenor and risk. Safe investment options such as Fixed Deposit is also good short-term investment options that provide you with sufficient flexibility, so you can earn assured returns.

If you’re looking for secure ways to invest your money for gradual, risk-free growth, the following options are ideal for you:

  • 5 Best Short Term Investment Options in India

    The best short term investment options available in India are:

    • 1. Savings Account
    • 2. Liquid Funds
    • 3. Recurring Deposits
    • 4. National Savings Certificate
    • 5. Fixed Deposits

    Read along to know more about these savings schemes, and find out which is the best option for you, to grow your savings.

    1. Savings account

    As one of the preferred choices of most people, savings accounts offer maximum liquidity. This helps you withdraw funds anytime and anywhere without any hassles. However, with an interest rate hovering around 4%, a savings account is not the best investment vehicle, unless you constantly need access to all your funds.

    Additional Read: Fixed Deposit Vs. Savings Account

    2. Fixed deposits

    Fixed deposits are easily among the best options for short-term investments. They offer a high rate of return, independence from market fluctuations and interest rate volatility, and high flexibility in terms of tenor period. You can also withdraw your deposit during times of emergency by paying a penalty. The interest on FD are taxable after your earnings cross Rs. 10,000.

    The safety of capital and surety of returns has increased the popularity of fixed deposits as investments. Enjoy additional features like fixed deposit calculator that help you calculate returns and plan your investments accordingly. You can opt for a hassle-free online fixed deposit application with some of the leading financiers. You can check Fixed Deposit Rates In India first before making a decision.

3. Recurring deposits

These deposits can be opted for in case you do not want to invest a lump sum amount in one go. Recurring deposits offer you the flexibility to invest money monthly. It is possible to open a recurring deposit account at your nearest financial institution or even at the post office. Recurring deposits from financial institutions have a minimum tenor of six months and a maximum tenor of 10 years. Remember that interest earned on them is taxable.

Additional Read: Difference Between Fixed Deposit and Recurring Deposit

4. National Savings Certificate (NSC)

This investment option has a tenor of 5 years. All you need to do is visit your post office and complete a simple application process. An advantage of NSCs is that you can claim tax exemptions under section 80C of the Income Tax Act. Again, the interest earned is taxable.

5. Liquid funds

Liquid funds are a type of mutual fund that invest your money in short-term government certificates or securities. It is possible for an investor to withdraw money from these funds at any time. However, it is not prudent to allocate your emergency funds into this option, because gaining complete access to your money back takes around 2 or 3 days.

Liquid funds offer you a higher interest rate of up to 7%. Since the money in these funds is invested in money market instruments, you can expect a comparatively higher amount of security for your investment.

9 best investments in 2021

9 best investments in 2021

To enjoy a comfortable future, investing is absolutely essential for most people. As 2020 showed, a seemingly stable economy can be quickly turned on its head, leaving those who haven’t prepared scrambling for income. But those who could hold on to their investments may have done quite well, as the market registered new all-time highs in the second half of the year.

But with some stocks at what seems like astronomical valuations, what moves should investors consider taking in 2021? One idea is to have a mix of safer investments and riskier, higher-return ones.

Why invest?

Investing can provide you with another source of income, fund your retirement or even get you out of a financial jam. Above all, investing grows your wealth — helping you meet your financial goals and increasing your purchasing power over time. Or maybe you’ve recently sold your home or come into some money. It’s a wise decision to let that money work for you.

While investing can build wealth, you’ll also want to balance potential gains with the risk involved. Markets can become volatile quickly, and 2020 rang up some of the biggest daily declines ever, but those were soon followed by new all-time highs, despite a majorly challenged economy.

Regardless of the overall climate, you have many ways to invest — from very safe choices such as CDs and money market accounts to medium-risk options such as corporate bonds, and even higher-risk picks such as stock index funds. That’s great news, because it means you can find investments that offer a variety of returns and fit your risk profile. It also means that you can combine investments to create a well-rounded and diversified — that is, safer — portfolio.

What to consider

Risk tolerance and time horizon each play a big role in deciding how to allocate your money. The value of each can become more obvious during periods of volatility.

Conservative investors or those nearing retirement may be more comfortable allocating a larger percentage of their portfolios to less-risky investments. These are also great for people saving for both short- and intermediate-term goals. If the market becomes volatile, investments in CDs and other FDIC-protected accounts won’t lose value and will be there when you need them.

Those with stronger stomachs and workers still accumulating a retirement nest egg are likely to fare better with riskier portfolios, as long as they diversify. A longer time horizon allows you to ride out the volatility of stocks and take advantage of their potentially higher return, for example.

If you’re looking to grow wealth, you can opt for lower-risk investments that pay a modest return, or you can take on more risk and aim for a higher return. Or you can take a balanced approach, having absolutely safe money now and still give yourself the opportunity for long-term growth.

The best investments for 2021 allow you to do both, with varying levels of risk and return.

Here are the best investments in 2021:

  1. High-yield savings accounts
  2. Certificates of deposit
  3. Government bond funds
  4. Short-term corporate bond funds
  5. S&P 500 index funds
  6. Dividend stock funds
  7. Nasdaq-100 index funds
  8. Rental housing
  9. Municipal bond funds

Overview: Best investments in 2021

1. High-yield savings accounts

Just like a savings account earning pennies at your brick-and-mortar bank, high-yield online savings accounts are accessible vehicles for your cash. With fewer overhead costs, you can typically earn much higher interest rates at online banks. Plus, you can typically access the money by quickly transferring it to your primary bank or maybe even via an ATM.

A savings account is a good vehicle for those who need to access cash in the near future.

Risk: The banks that offer these accounts are FDIC-insured, so you don’t have to worry about losing your deposit. While high-yield savings accounts are considered safe investments, like CDs, you do run the risk of earning less upon reinvestment due to inflation.

Liquidity: Savings accounts are about as liquid as your money gets. You can add or remove the funds at any time, though your bank may legally limit you to as few as six withdrawals per statement period, if it decides to do so.

2. Certificates of deposit

Certificates of deposit, or CDs, are issued by banks and generally offer a higher interest rate than savings accounts.

These federally-insured time deposits have specific maturity dates that can range from several weeks to several years. Because these are “time deposits,” you cannot withdraw the money for a specified period of time without penalty.

With a CD, the financial institution pays you interest at regular intervals. Once it matures, you get your original principal back plus any accrued interest. It pays to shop around online for the best rates.

Because of their safety and higher payouts, CDs can be a good choice for retirees who don’t need immediate income and are able to lock up their money for a little bit. But there are many kinds of CDs to fit your needs, and so you can still take advantage of the higher rates on CDs.

Risk: CDs are considered safe investments. But they do carry reinvestment risk — the risk that when interest rates fall, investors will earn less when they reinvest principal and interest in new CDs with lower rates, as we saw in 2020. The opposite risk is that rates will rise and investors won’t be able to take advantage because they’ve already locked their money into a CD.

Consider laddering CDs — investing money in CDs of varying terms — so that all your money isn’t tied up in one instrument for a long time. It’s important to note that inflation and taxes could significantly erode the purchasing power of your investment.

Liquidity: CDs aren’t as liquid as savings accounts or money market accounts because you tie up your money until the CD reaches maturity — often for months or years. It’s possible to get at your money sooner, but you’ll often pay a penalty to do so.

3. Government bond funds

Government bond funds are mutual funds or ETFs that invest in debt securities issued by the U.S. government and its agencies.

The funds invest in debt instruments such as T-bills, T-notes, T-bonds and mortgage-backed securities issued by government-sponsored enterprises such as Fannie Mae and Freddie Mac. These government bond funds are well-suited for the low-risk investor.

These funds can also be a good choice for beginning investors and those looking for cash flow.

Risk: Funds that invest in government debt instruments are considered to be among the safest investments because the bonds are backed by the full faith and credit of the U.S. government.

However, like other mutual funds, the fund itself is not government-backed and is subject to risks like interest rate fluctuations and inflation. If inflation rises, purchasing power can decline. If interest rates rise, prices of existing bonds drop; and if interest rates decline, prices of existing bonds rise. Interest rate risk is greater for long-term bonds.

Liquidity: Bond fund shares are highly liquid, but their values fluctuate depending on the interest rate environment.

4. Short-term corporate bond funds

Corporations sometimes raise money by issuing bonds to investors, and these can be packaged into bond funds that own bonds issued by potentially hundreds of corporations. Short-term bonds have an average maturity of one to five years, which makes them less susceptible to interest rate fluctuations than intermediate- or long-term bonds.

Corporate bond funds can be an excellent choice for investors looking for cash flow, such as retirees, or those who want to reduce their overall portfolio risk but still earn a return.

Risk: As is the case with other bond funds, short-term corporate bond funds are not FDIC-insured. Investment-grade short-term bond funds often reward investors with higher returns than government and municipal bond funds.

But the greater rewards come with added risk. There is always the chance that companies will have their credit rating downgraded or run into financial trouble and default on the bonds. To reduce that risk, make sure your fund is made up of high-quality corporate bonds.

Liquidity: You can buy or sell your fund shares every business day. In addition, you can usually reinvest income dividends or make additional investments at any time. Just keep in mind that capital losses are a possibility.

5. S&P 500 index funds

If you want to achieve higher returns than more traditional banking products or bonds, a good alternative is an S&P 500 index fund, though it does come with more volatility.

The fund is based on hundreds of the largest American companies, meaning it comprises many of the most successful companies in the world. For example, Amazon and Berkshire Hathaway are two of the most prominent member companies in the index.

Like nearly any fund, an S&P 500 index fund offers immediate diversification, allowing you to own a piece of all of those companies. The fund includes companies from every industry, making it more resilient than many investments. Over time, the index has returned about 10 percent annually. These funds can be purchased with very low expense ratios (how much the management company charges to run the fund) and they’re some of the best index funds.

An S&P 500 index fund is an excellent choice for beginning investors, because it provides broad, diversified exposure to the stock market.

Risk: An S&P 500 fund is one of the least-risky ways to invest in stocks, because it’s made up of the market’s top companies. Of course, it still includes stocks, so it’s going to be more volatile than bonds or any bank products. It’s also not insured by the government, so you can lose money based upon fluctuations in value. However, the index has done quite well over time.

The index closed 2020 near all-time highs after a strong rebound, so investors may want to proceed with caution and stick to their long-term investment plan, rather than rushing in.

Liquidity: An S&P 500 index fund is highly liquid, and investors will be able to buy or sell it on any day the market is open.

6. Dividend stock funds

Even your stock market investments can become a little safer with stocks that pay dividends.

Dividends are portions of a company’s profit that can be paid out to shareholders, usually on a quarterly basis. With a dividend stock, not only can you gain on your investment through long-term market appreciation, you’ll also earn cash in the short term.

Buying individual stocks, whether they pay dividends or not, is better-suited for intermediate and advanced investors. But you can buy a group of them in a stock fund and reduce your risk.

Risk: As with any stock investments, dividend stocks come with risk. They’re considered safer than growth stocks or other non-dividend stocks, but you should choose your portfolio carefully.

Make sure you invest in companies with a solid history of dividend increases rather than selecting those with the highest current yield. That could be a sign of upcoming trouble. However, even well-regarded companies can be hit by a crisis, so a good reputation is finally not a protection against the company slashing its dividend or eliminating it entirely.

Liquidity: You can buy and sell your fund on any day the market is open, and quarterly payouts are liquid. To see the highest performance on your dividend stock investment, a long-term investment is key. You should look to reinvest your dividends for the best possible returns.

7. Nasdaq-100 index funds

An index fund based on the Nasdaq-100 is a great choice for investors who want to have exposure to some of the biggest and best tech companies without having to pick the winners and losers or having to analyze specific companies.

The fund is based on the Nasdaq’s 100 largest companies, meaning they’re among the most successful and stable. Such companies include Apple and Facebook, each of which comprises a large portion of the total index. Microsoft is another prominent member company.

A Nasdaq-100 index fund offers you immediate diversification, so that your portfolio is not exposed to the failure of any single company. The best Nasdaq index funds charge a very low expense ratio, and they’re a cheap way to own all of the companies in the index.

Risk: Like any publicly traded stock, this collection of stocks can move down, too. While the Nasdaq-100 has some of the strongest tech companies, these companies also are usually some of the most highly valued. That high valuation means that they’re likely prone to falling quickly in a downturn, though they may rise again during an economic recovery.

Liquidity: Like other publicly traded index funds, a Nasdaq index fund is readily convertible to cash on any day the market is open.

8. Rental housing

Rental housing can be a great investment if you have the willingness to manage your own properties. And with mortgage rates hitting all-time lows recently, it could be a great time to finance the purchase of a new property, though the unstable economy may make it harder to actually run it, since tenants may be more likely to default due to unemployment.

To pursue this route, you’ll have to select the right property, finance it or buy it outright, maintain it and deal with tenants. You can do very well if you make smart purchases. However, you won’t enjoy the ease of buying and selling your assets in the stock market with a click or a tap on your internet-enabled device. Worse, you might have to endure the occasional 3 a.m. call about a broken pipe.

But if you hold your assets over time, gradually pay down debt and grow your rents, you’ll likely have a powerful cash flow when it comes time to retire.

Risk: As with any asset, you can overpay for housing, as investors in the mid-2000s found out. With low interest rates and a tight housing supply, housing prices ran up in 2020, despite the struggles facing the economy as a whole. Also, the lack of liquidity might be a problem if you ever needed to access cash quickly.

Liquidity: Housing is among the least liquid investments around, so if you need cash in a hurry, investing in rental properties may not be for you (though a cash-out refinance is possible). And if you sell, a broker may take as much as 6 percent off the top of the sales price as a commission.

9. Municipal bond funds

Municipal bond funds invest in a number of different municipal bonds, or munis, issued by state and local governments. Earned interest is generally free of federal income taxes and may also be exempt from state and local taxes, too, making them particularly attractive in high-tax states.

Muni bonds may be bought individually, through a mutual fund or an exchange-traded fund. You can consult with a financial adviser to find the right investment type for you, but you may want to stick with those in your state or locality for additional tax advantages.

Municipal bond funds are great for beginning investors because they offer diversified exposure without the investor having to analyze individual bonds. They’re also good for investors looking for cash flow.

Risk: Individual bonds carry default risk, meaning the issuer becomes unable to make further income or principal payments. Cities and states don’t go bankrupt often, but it can happen, and historically muni bonds have been very safe — although a rough 2020 has challenged that safety a bit.

Bonds may also be callable, meaning the issuer returns principal and retires the bond before the bond’s maturity date. This results in a loss of future interest payments to the investor. A bond fund allows you to spread out potential default and prepayment risks by owning a large number of bonds, thus cushioning the blow of negative surprises from a small part of the portfolio.

Liquidity: You can buy or sell your fund shares every business day. In addition, you can typically reinvest income dividends or make additional investments at any time.

Bottom line

Investing can be a great way to build your wealth over time, and investors have a range of investment options, from safe lower-return assets to riskier, higher-return ones. That range means you’ll need to understand the pros and cons of each investment option to make an informed decision. While it seems daunting at first, many investors manage their own assets.

But the first step to investing is actually easy: opening a brokerage account. Investing can be surprisingly affordable even if you don’t have a lot of money. (Here are some of the best brokers to choose from if you’re just getting started.)

Where to Invest Money for Good Returns in India

Where to Invest Money for Good Returns in India

An increasing number of individuals across the country are starting to invest their money in financial instruments with the hope that their money will grow over a period of time. If you would also like to invest in products that can enhance your wealth, there are a few important points to consider.

First things first, you will have to ascertain whether or not you have enough funds for the present. While it is important to save for the future, your present must be secure before you can start thinking forward. Make sure that you make the right amount of sacrifices and don’t compromise too much of your present in the hope that you will have a great future.

The next most important thing to consider would be emergency money. Since most investment instruments are granted against lock-in periods, the funds invested cannot be withdrawn until the completion of said period. Before making any investments, it is advised that investors set aside some funds as emergency money as it can come in handy in times of unforeseen emergencies like medical or other expenses.

Clearing off your debts is another important step to take before making investments. Unless you are totally free of debt, making investments can be a risky endeavour. Having debts will make it harder for you to manage your investments, making it essential to clear off all credit card dues and loans before putting your money into an investment instrument.

In case you have no debts to your name and have also managed to set aside funds for emergency purposes, you are set to invest. Here are some of the options you can consider to derive high returns on investment.

Stock Markets

Investing in the stock market means that you can contribute to any company’s capital provided it is listed on the stock exchange. A company’s equity can be purchased by buying their shares, and the price of said shares will rise or decline depending upon the company’s financial performance. Investors are in for profits if the company from which the equity was purchased also makes profits.

The most important thing to remember when investing in the stock market is that good returns are possible only if the investor is extra careful when choosing the stock in which he / she wishes to invest. Stocks that come with low beta value are a better bet as the rise or decline in stock prices will depend upon how the market fluctuates.

Mutual Funds

Investing in mutual funds means that your funds will be put into a group of investment options, primarily bonds and equities. Since your investments are diversified when invested into mutual funds, it is considered a much safer option in comparison with investing in individual shares in the stock market. Another great factor about investing in mutual funds is that the funds are managed by well-trained and skilled banking professionals who are in a better position to handle investment portfolios than regular investors.

Initial Public Offerings

IPOs are undertakings by companies that wish to sell its shares to the general public. When an Initial Public Offering happens, the prices are usually low. In case the performance of the company has been up to par, the investor will have a better chance to make profits. IPOs are among the most preferred investment options in India as it offers returns in excess of 60% per year.

Systematic Investment Plans

SIPs are easy and smart options that require individuals to invest a particular pre-determined sum of money on a regular basis. The mode of payment (quarterly / monthly / weekly) can be chosen by the investor based on his / her convenience and preference. The amount chosen will be debited automatically from the investor’s linked account and put into a certain mutual fund scheme. With each debit of the account, extra units of the scheme will be purchased and added to the investor’s mutual fund account. SIPs are considered as the ideal savings instruments as they not only deliver healthy returns, but also play their part in helping investors inculcate the habit of savings.

Real Estate

Last but not least, real estate is also a good area to invest in. The returns on investment offered by real estate is higher than any other sector. If you have the funds to make large investments in real estate, a little patience is all you need as the value of the land or property will increase to a significant extent over a period of time.

7 Easy Ways To Start Investing With Little Money

7 Easy Ways To Start Investing With Little Money

Investing even very small amounts can reap big rewards. Here are 7 ways you can start investing with little money today.

 

For many people, the word “investing” conjures up images of men in suits, monitoring the exchange of millions of dollars on a stock ticker.

I’m here to tell you: You don’t need to be the Wolf of Wall Street to start investing. It’s okay if you’re more of a mouse of Main Street. Even if you only have a few dollars to spare, your money will grow with compound interest.

The key to building wealth is developing good habits—like regularly putting money away every month. Swap out the barista-made cappuccinos for coffee at home and you could already be saving more than $50 a month.

Once you have a little money to play with, you can start to invest.

In 2020, you can get a date, a ride or a pizza with the swipe of a smartphone screen. Investing is no different. If you can automate your bills, why not your investments? It’s just as easy.

With a robo-advisor or savings account, you can make your money work while you play. With a stock trading app, you can play with a little money and learn valuable investing lessons at the same time.  Just like Halloween costumes, investing comes in many different forms. It shouldn’t be a scary word.

With so many different options, investing for beginners is simpler and more straightforward than ever before.

Soon you’ll see how addictive growing your money can be.

Here are seven simple ways to get there:

1. Try the cookie jar approach

Invest With Little Money - Cookie Jar Approach

Saving money and investing it are closely connected. In order to invest money, you first have to save some up. That will take a lot less time than you think, and you can do it in very small steps.

If you’ve never been a saver, you can start by putting away just $10 per week. That may not seem like a lot, but over the course of a year, it comes to over $500.

Try putting $10 into an envelope, shoebox, a small safe, or even that legendary bank of first resort, the cookie jar. Though this may sound silly, it’s often a necessary first step. Get yourself into the habit of living on a little bit less than you earn, and stash the savings away in a safe place.

The electronic equivalent of the cookie jar is the online savings account; it’s separate from your checking account. The money can be withdrawn in two business days if you need it, but it’s not linked to your debit card. Then when the stash is large enough, you can take it out and move it into some actual investment vehicles.

Start with small amounts of money, and then increase as you get more comfortable with the process. It may be a matter of deciding not to go to McDonald’s or passing on the movies, and putting that money into the cookie jar instead.

Chime currently offers a strong 0.50% APY for their online savings account. There is no minimum deposit required and the yield is earned on all balances (no minimum balance required).

7 Easy Ways To Start Investing With Little Money - Chime

Chime is also a top choice for your savings because they include a bevy of other features that really focus on the individual saver.

  1. 38,000 fee free ATM’s
  2. Spot Me feature that means you won’t be charged an overdraft fee if you overdraw your balance
  3. Direct deposit that gets you paid 2 days faster

And if you need a little boost to start saving while earning your APY, Chime can round up your purchases to the nearest $1 to help you save faster and earn faster.

7 Easy Ways To Start Investing With Little Money - AspirationWith Aspiration Plus, your interest bumps up to 1.00% APY (Variable). You’ll pay $15 a month for this option, though, or $12.50 a month if you pay annually. Aspiration also has a choose your own monthly fee model that has all the basic features but doesn’t offer interest on your savings.

A few other features that make Aspiration a strategic way to start saving money.

  1. Spend $1,000 in the first 60 days and earn a $100 welcome bonus with Aspiration’s Standard’s no interest Spend & Save account. Or earn $150 when you spend $1,000 in the first 60 days if you have Aspiration Plus.
  2. Everyday cash back, including up to 0.5% back at popular retailers like Walmart, Target, and CVS. Up to 10% cash back at Conscious Coalition members.
  3. Fee-free ATM use at 55,000 locations worldwide. Plus members get one out-of-network ATM fee reimbursed each month.

Combine the money you save on fees with your cash back and you have a little extra that you can put toward your investments each month. Best of all, Aspiration is heavily focused on making the world a little better. With every enabled swipe of your debit card, Aspiration puts money toward reforestation projects. You’ll also earn more cash back by shopping with purpose-driven brands like TOMS and Warby Parker.

2. Let a robo-advisor invest your money for you

Invest With Little Money - Robo-advisors

Robo-advisors entered the investing scene about a decade ago and make investing as simple and accessible as possible. You don’t need any prior investing experience, as robo-advisors take all of the guesswork out of investing.

Robo-advisors work by asking a few simple questions to determine your goal and risk tolerance and then investing your money in a highly-diversified low-cost portfolio of stocks and bonds. Robo-advisors then use algorithms to continually rebalance your portfolio and optimize it for taxes.

There’s no easier way to get started in long-term investing. Most robo-advisors require just $500 or less to start investing and charge very modest fees based upon the size of your account. All offer automated investing plans to help you grow your balance.

If there’s any downside to Robo-advisors it’s cost. Robo-advisors charge an annual fee equal to a small percentage of your balance. The industry average is about 0.25%. So, if you invest $10,000, you’ll pay $25 a year. That’s not a lot of money, but it begins to add up if you amass hundreds of thousands of dollars.

It’s important to note that robo-advisors fees are on top of the fees charged by the exchange-traded funds (ETFs) that robo-advisors buy to make up your portfolio. You can avoid paying the robo-advisor fees by building your own portfolio of ETFs or mutual funds. For the vast majority of investors, however, that’s a lot of additional work and responsibility.

The bottom line? Robo-advisors are cheap and well worth it.

Wealthfront

6 Easy Ways To Start Investing With Little Money - Wealthfront

A robo-advisor that I highly recommend to first-time investors is Wealthfront. Their fees are reasonable at 0.25%, but the kicker is that you can get your first $5,000 managed free (specific to MU30 readers).

So if you’re looking to start investing with little money, Wealthfront could be the way to go. You will need $500 to get started though with Wealthfront so keep that in mind.

Visit Wealthfront

M1 Finance

M1 Finance 210

If you don’t have that $500 starting balance, there are still great options for you in the Robo-advising space. M1 Finance charges no commissions or management fees, and their minimum starting balance is just $100.

You can choose from one of their pre-made diversified portfolios or customize your own by purchasing stocks and ETFs through their platform. The user interface is super easy to use.

Visit M1 Finance

Betterment

6 Easy Ways To Start Investing With Little Money - Betterment

If you’re starting out with less than $100, you may want to consider Betterment, which has no minimum starting balance whatsoever. Like M1, it’s also great for beginners as it provides a super simple platform and a hassle-free approach to investing.

Visit Betterment

3. Start investing in the stock market with little money

7 Easy Ways To Start Investing With Little Money - Start investing in the stock market with little money

When it comes to investing in the stock market, cost is often the barrier to entry. It takes money to make money, right?

Not anymore. The internet has made it easy for consumers to get started with very little upfront money. That means you can put a few dollars in to familiarize yourself with investing before making a bigger commitment. It’s a great way to learn about investing while putting very little money at risk.

Today, there are increasing numbers of options that have swung open doors to a new generation of investors – letting you get started with as little as $1 and charges no trade commissions.

In the past, stockbrokers charged commissions of several dollars every time you bought or sold stock. That made it cost-prohibitive to invest in even a single stock with less than hundreds or thousands of dollars. In fact, $0 commissions across comp have been so successful they’ve disrupted the entire investing industry and forced all the major brokers – from ETrade to Fidelity – to follow suit and drop trading commissions.

Plus the ability to invest in companies with fractional/partial shares is a complete game-changer with investing. With fractional shares, it means you can diversify your portfolio even more while saving money. Instead of investing in a full share, you can buy a fraction of a share. If you want to invest in a high-priced stock like Apple, for instance, you can do so for a few dollars instead of shelling out the price for one full share, which, as I write this, is around $370.

Public

7 Easy Ways To Start Investing With Little Money - Public

Public, an investing app, offering thousands of stocks and ETFs with no commission fees on trades and no account minimums. With Public, you can purchase most stocks through what Public calls “Slices”-  so you don’t have to plunk down thousands of dollars to become a shareholder in huge companies that you want to invest in but cannot otherwise afford.

Public makes investing easy and user friendly: you simply pick your stocks and ETFs, enter the amount of money you’d like to invest, and Public “slices” off a portion of a share to fit the amount you’ve chosen.

Public also offers a social investing experience making it a great option for beginner investors. You become more financially literate while watching what others are doing with their investments. It’s like peeking into someone’s investing account for ideas – but it’s what everyone is doing and totally legit.

Download Public App

Robinhood

7 Easy Ways To Start Investing With Little Money - with Robinhood

Robinhood is also designed for young traders new to investing, and Robinhood is currently rolling out fractional share investing to make it easy to start investing with little money.

And the best part? Robinhood gives you one free stock just for joining. That gives your portfolio a small headstart at no cost to you.

Importantly, Robinhood promotes equality of access with a $0 account minimum and no transaction fees. Robinhood also has free options trading. Users who opt for the premium account Robinhood Gold pay $5 a month for access to extra perks like after-hours trading.

Unlike robo-advisors, Robinhood supports and encourages active stock trading. In my mind, trading stocks is not the same thing as investing money for the long-haul. But trading is fun and a great way to learn about how the market works and how companies are valued. And if you can try your hand at trading with small amounts of money, it’s even better. Robinhood’s platform makes trading a snap.

Download Robinhood App

Advertiser Disclosure – This advertisement contains information and materials provided by Robinhood Financial LLC and its affiliates (“Robinhood”) and MoneyUnder30, a third party not affiliated with Robinhood. All investments involve risk and the past performance of a security, or financial product does not guarantee future results or returns. Securities offered through Robinhood Financial LLC and Robinhood Securities LLC, which are members of FINRA and SIPC. MoneyUnder30 is not a member of FINRA or SIPC.”

4. Dip your toe in the real estate market

Invest With Little Money - Real estate

Believe it or not, you no longer need a lot of money (or even good credit) to invest in real estate. A new category of investment known familiarly as “real estate crowdfunding” makes it possible to own fractional shares of large commercial properties without the headache of being a landlord.

Crowdfunded real estate investments require larger minimum investments than robo-advisors (for example, $5,000 instead of $500). They’re also riskier investments because you’ll be putting that entire $5,000 into one property rather than a diversified portfolio of hundreds of individual investments.

The upside is owning a piece of a real physical asset that’s not necessarily correlated with the stock market.

As with robo-advisors, investing in real estate via a crowdfunding platform carries costs that you wouldn’t pay if you bought a building yourself. But here, the advantages are obvious: You share the cost and risk with other investors and you have no responsibility for maintaining the property (or even doing the paperwork to buy it!)

I think real estate crowdfunding can be an intriguing way to learn about commercial real estate investing and also diversify your assets. I wouldn’t lay all of my money on these platforms, but they do make an intriguing alternative investment especially in these times of unprecedented market volatility and pitiful bond yields.

6 Easy Ways To Start Investing With Little Money - Fundrise

With Fundrise’s really easy-to-use online platform, you simply need a starting minimum investment of $500. So if you’re an unaccredited investor, you can buy properties without paying those very large fees that end up being a deal-breaker if you want to start dabbling in real estate. By managing your own portfolio, the fees come to just 1% and Fundrise always offers a 90 days satisfaction guarantee.

Visit Fundrise

7 Easy Ways To Start Investing With Little Money - Diversy Fund

Like Fundrise, DiversyFund also allows you to invest in real estate with as little as $500. With zero management fees and no net worth requirement, the company is dedicated to making investing in real estate affordable and accessible for everyone, not just the top 1%. DiversyFund also features plenty of educational resources to help you learn more about real estate investing and gain the tools you need to grow your wealth.

Visit DiversyFund

5. Enroll in your employer’s retirement plan

If you’re on a tight budget, even the simple step of enrolling in your 401(k) or other employer retirement plan may seem beyond your reach. But you can begin investing in an employer-sponsored retirement plan with amounts so small you won’t even notice them.

This is one step that everybody should take!

For example, plan to invest just 1% of your salary into the employer plan.

You probably won’t even miss a contribution that small, but what makes it even easier is that the tax deduction that you’ll get for doing so will make the contribution even smaller.

Once you commit to a 1% contribution, you can increase it gradually each year. For example, in year two, you can increase your contribution to 2% of your pay. In year three, you can increase your contribution to 3% of your pay, and so on.

If you time the increases with your annual pay raise, you’ll notice the increased contribution even less. So if you get a 2% increase in pay, it will effectively be splitting the increase between your retirement plan and your checking account. And if your employer provides a matching contribution, that will make the arrangement even better.

Blooom is a great tool for hands-off investment management of your 401(k). They’ll give you a free 401(k) analysis, telling you where and how they can optimize your investments. Check out our review of blooom; if you decide to use their services, you’ll be charged a reasonable $10 per month.

And blooom has got a special promotion right now: Get $15 off your first year of blooom with code BLMSMART

6. Put your money in low-initial-investment mutual funds

Invest With Little Money - Mutual funds

Mutual funds are investment securities that allow you to invest in a portfolio of stocks and bonds with a single transaction, making them perfect for new investors.

 

 

The trouble is many mutual fund companies require initial minimum investments of between $500 and $5,000. If you’re a first-time investor with little money to invest, those minimums can be out of reach. But some mutual fund companies will waive the account minimums if you agree to automatic monthly investments of between $50 and $100.

Automatic investing is a common feature with mutual fund and ETF IRA accounts. It’s less common with taxable accounts, though its always worth asking if it’s available. Mutual fund companies that have been known to do this include DreyfusTransamerica, and T. Rowe Price.

An automatic investing arrangement is particularly convenient if you can do it through payroll savings. You can typically set up an automatic deposit situation through your payroll, in much the same way that you do with an employer-sponsored retirement plan. Just ask your human resources department how to set it up.

Read More: How To Buy A Mutual Fund

7. Play it safe with Treasury securities

Not many small investors begin their investment journey with US Treasury securities, but you can. You’ll never get rich with these securities, but it is an extremely safe place to park your money—and earn at least some interest—until you are ready to go into higher risk/higher return investments.

Treasury securities, also known as savings bonds, are easy to buy through the US Treasury’s bond portal Treasury Direct. There you can buy fixed-income US government securities with maturities of anywhere from 30 days to 30 years in denominations as low as $100.

You can also use Treasury Direct to buy Treasury Inflation Protected Securities, or TIPS. These not only pay interest, but they also make periodic principal adjustments to account for inflation based on changes in the consumer price index.

And as is the case with mutual funds, you can also arrange to have your Treasury Direct account funded through payroll savings.

Unfortunately, the yields on treasuries have been getting closer and closer to 0% for a while now, and there’s no end in sight to their lackluster performance. This makes treasuries mostly a place to stash cash for safekeeping rather than a way to grow your money.

Bonus idea – Consider a 5% return with Worthy Bonds

For as little as $10, you can invest in Worthy Bonds.  Worthy Bonds are fixed interest bonds that fund loans for creditworthy American businesses.  The bonds have a term of 36-months, but interest is paid weekly and you can withdraw your money at ANY time, without penalty.  Buy as many $10 bonds as you’d like.

The simple idea is that Worthy is going to take the money you use to buy bonds and invest it into companies with a greater return than 5%.  They win, you win and it’s a fixed rate so you know the rate of return every day.

The platform is open to all U.S. investors and can be a great way to diversify your portfolio with a low-risk solution.  Worthy only invests in fully secured loans (liquid assets having a value significantly greater than the loan amount), so the quality of loan and investment is always high caliber.

How To Invest Money: The Smart Way To Make Your Money Grow

How To Invest Money: The Smart Way To Make Your Money Grow

If you want a shot at becoming wealthy, you need to do more than simply earn money.

 

You may be thinking to yourself – this is not the time to talk about investing.

You’re panicking about your job, that argument with your best friend, your cat behaving even more weirdly than usual – and don’t even get me started on your love life.

But really, there’s NO GOOD time to talk about investing. Ultimately, you have to be disciplined enough to hold onto the money you earn – to then take the next step in learning how to make your money grow.

And the best way to grow your money is by learning how to invest.

It’s as simple as that.

When you become an investor, you’ll be using your money to acquire things that offer the potential for profitable returns through one or more of the following:

  • Interest and dividends from savings or dividend-paying stocks and bonds
  • Cash flow from businesses or real estate
  • Appreciation of value from a stock portfolio, real estate, or other assets

As you learn to become an investor, you will begin to devote your limited resources to the things with the largest potential for returns. That may be paying down debt, going back to school, or fixing up a two-family house.

Of course, it may also mean buying stocks and bonds, or at least mutual funds or exchange-traded funds.

Thanks to advances in technology, you can start to invest with as little as $5 a month and a smartphone. It’s our job to help you filter out the noise, learn the basics, and make good investment decisions from the start.

With no fees on accounts with low balances and easy automatic investing, Wealthfront is our top pick for the best all-around investment account. If you want to learn more about them, read our Wealthfront review.

So here are the basics of how to invest — wisely.

How to Invest Money?

How to Invest Money?

Why should you invest?

Working as a salaried employee, a business person or a professional helps you earn an income to lead a comfortable life. And after taking care of all your immediate needs, you are most likely left with some disposable income too. What do you do with this disposable income? Do you splurge on some luxuries? Do you hold it as cash or leave it in your bank? Or do you deploy it suitably to earn you a decent return? This is where the question ‘how to invest money’ comes in.

Investing your money is as important as earning an income. Prudent investments help secure your life financially by achieving your financial goals for the present and the future. Investing helps you to generate a parallel stream of income, create more wealth, and earn returns to beat inflation. It ensures that you lead a comfortable life even after retirement when your regular income stops.

Types of investments in India

Today’s India is a beehive of financial activity, offering different types of investment opportunities covering a broad spectrum of investment avenues. You can simply keep cash at home or opt to invest in:

  • Insurance plans
  • Mutual funds
  • Fixed deposits, Public Provident Fund (PPF) and small savings accounts
  • Real estate
  • Stock market
  • Commodities
  • Derivatives and foreign exchange
  • New class of assets

Each of these investment avenues has its own characteristics and it is up to you to decide where to invest money and utilise these avenues to achieve your financial goals. While you do this, keep in mind your need for liquidity, wealth creation, parallel sources of income, the safety of capital and life insurance.

Investing money for beginners

The list of investment avenues described above is relatively exhaustive. However, all of these may not be suitable for those new to investing. Investing money for beginners is tricky if you are not conversant with the nuances of investment avenues. It might make sense to limit your investments to insurance-linked financial instruments, mutual funds and fixed deposits, PPF and small savings accounts.

Best ways to invest your money

  • Insurance plans

    These instruments are excellent for young beginners with a steady source of income. You can go for pure protection plans like term insurance that provide financial cover to your family in case of your unfortunate premature death. The other option is to go for plans that combine savings with insurance, such as Unit Linked Insurance Plans (ULIPs). Other insurance plans include health plans, critical illness plans and accidental insurance plans.

  • Mutual funds

    Mutual funds are a trendy investment avenue amongst beginners. Mutual funds offer you the advantage of investing indirectly into stock markets through the expertise of professional managers. Being busy with your job, profession or business, you might not have the time to follow the stock market and make any direct investments. This is where mutual funds come into play. You have several choices such as equity mutual funds, debt mutual funds, balanced funds and other such instruments. You also have plans that offer dividend income or growth options. You can make a choice based on your financial goals and risk-taking abilities.

    Mutual funds provide ample opportunities to take care of liquidity, income, growth and safety.

  • Fixed deposits, Provident Fund (PF) and small savings

    Fixed deposits, Provident Fund (PF) and small savings accounts are safe instruments providing moderate returns. These offer better liquidity and safety. If you are a salaried person, you can opt for voluntary PF in addition to the employee PF. Small saving schemes are also suitable for beginners to earn a decent income.

  • Tax benefits

    Various investment avenues offer tax benefits*. It is essential for you to evaluate the tradeoff between tax benefits and returns when investing.

    Investing money in India is not that difficult if you follow the tips to invest money outlined above. Remember that the prudent way is to understand investments and start early.

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