All of us wonder how we can make money without much effort. But only a few follow the winding path towards becoming rich. To become rich, a person needs to have a good financial plan and also learn how to invest. Once you learn the art and science behind making idle money work for you, you will have a better chance of becoming rich effortlessly. Needless to say, one can become financially stable if they inculcate the habit of investing early on in their life.
The first step towards investing is finding a suitable investment option. The best investment options will help you become financially disciplined as well as independent.
Here is a list of top 10 investment options that can help you become rich:
Stocks or equities are a volatile asset class. Equities come without any guarantees in terms of generating returns. However, equities have performed better than most asset classes over the years because they deliver returns that are inflation-adjusted. To cushion the blow, Individuals can diversify a portfolio by investing in different sectors and companies of different market capitalizations. Those who have a high-risk appetite but want to generate higher returns might prefer to invest in stocks that are high in risk but come with a longer investment horizon. Investment in stocks can be done by opening a Demat account.
At present, mutual funds are considered to be one of the best investment options to make money. Mutual Funds allow investors to choose from a variety of options with varying risk levels. With mutual fund investment plans investors also have the opportunity to diversify their portfolio even with a small amount of money. Mutual Funds give many avenues of investments with varied risk and returns. Keep in mind that risks and returns are directly proportional to each other. But with greater diversification, there is a lowering of risk. We can easily conclude that mutual fund investment is incomparable in creating a substantial corpus or a long-term investment.
Post Office Monthly Income Scheme (POMIS)
The Post Office Monthly Income Scheme (POMIS) is regarded to be a good investment option for an individual who wishes to create a steady income at a fixed rate. The scheme comes with a lock-in period of 5 years. It has a low-risk profile and compounds interest at the rate of 7.6%. These benefits make it an ideal investment option for conservative investors. Individuals can invest any amount between Rs. 1,500 to Rs. 4,50,000 in one account. In a joint holding account, it is possible to invest up to Rs. 9,00,000.
National Pension System (NPS)
The National Pension Scheme is managed by the Pension Fund Regulatory and Development Authority (PFRDA). It is a solution-oriented investment scheme aimed at retirement. It offers a mix of fixed deposits, equity, corporate bonds, government funds, and liquid funds. Because it is a government-sponsored scheme, NPS is regarded as a safe investment option. Individuals can decide the amount of money they want to invest in this scheme based on their risk appetite. Apart from that, individuals can avail of tax benefits up to Rs. 1.5 Lakh on their investment in this scheme.
Public Provident Fund (PPF)
PPF remains one of the most popular ways of investing money. Individuals can easily open a PPF account in post offices and banks. It is possible to open a PPF account online also. It gives you the opportunity to invest as low as Rs. 500. The scheme comes with a tenure of 15 years, with a benefit of compounding their earnings. On completion of 15 years, there is an option of extending by another five years.
Individuals who put their money in the PPF scheme are also entitled to tax deductions. The scheme has an interest rate of 7.9%. The interest generated through this is exempt from taxes, which makes it one of the most sought after schemes among many.
Bank Fixed Deposit (FD)
Bank fixed deposits have always been the go-to option for people who prefer low risk. A fixed deposit in a bank is considered to be the safest option of investment. It is the low-risk investment feature with the option to earn a rate of 6%-8% interest on the deposit. They are entitled to tax deductions on their deposit under Section 80C of the Income Tax Act. However, as there is nothing that comes without risk, the lower returns of FD is slightly unappealing for investors when compared to schemes like debt funds.
Senior Citizen's Saving Scheme (SCSS)
The particular scheme in question is directed at citizens who are above the age of 60 years. A person who has voluntarily retired at the age of 55 years can open an SCSS account as long as they do it within a month of availing their retirement benefits.
Due to its retirement-friendly features, it is considered an essential component of one's investment portfolio.
The SCSS has a five-year tenure which can be extended by three years after maturation.
Currently, the scheme generates interest at the rate of 8.6% p.a. which is paid quarterly. The returns from this scheme are entitled to tax exemptions under Section 80C of the Income Tax Act. In case the interest accrued in a year exceeds Rs. 10,000, an amount will be deducted at source as tax. It is possible to invest up to Rs. 15 Lakh in one SCSS account. A person is free to open more than one account. A penalty of the rate of 1.5% is levied as a penalty on premature withdrawal of deposits after a year. In the case the premature withdrawal is made after two years of deposit, a penalty is 1%.
RBI Taxable Bonds
The RBI Taxable bonds are another way to invest money. They have a tenure of 7 years, and the accrued interest rate is 7.75%. The RBI Taxable Bonds are issued in Demat form and then credited to the Bond Ledger Account (BLA) of the investor. Investors are issued a Certificate of Holding as proof of investment.
The most attractive feature of this investment tool is the element of safety. This draws a number of conservative investors towards this investment option. There is no maximum limit of investment, and any resident Indian can invest in this scheme, individually or jointly.
Putting money in the real estate sector is one of the most popular ways to invest money. Investments made in the real estate sector usually deliver returns mainly in two ways-capital appreciation and rentals.
Depending on the location and the prospects of price appreciation, investors may expect returns on their investment. Although the real estate sector meets a setback once in a while, it usually bounces back. Which makes this ideal for individuals who are looking for an opportunity to invest in for the long-term.
Gold is the traditional way of investing in the older generation. It is considered the "safest" by many in terms of price volatility. An alternative to investing in solid gold is a cost-effective option called paper gold or gold ETFs. Gold ETFs are open-ended mutual fund schemes that invest money in standard gold. Like any other mutual fund, you will be allotted units of shares proportionate to your investment.
Everyone wonders how they can get rich easily. However, what they often forget is that wealth creation is a process and takes time, energy and thorough planning. So, if you wish to become rich, make a plane, and start investing early.
(By Harsh Jain, Co-founder, and COO, Groww)