What are the Smart ways to invest money?

If you have reached this article then probably you are looking for ways to invest money, right? So, let’s do it. When you start earning, you don’t have much with you; but if you start saving small it can become a big amount in years, even if you invest as low as 100 per month due to compounding. There is no fixed amount while investing money so choose your own amount, time and way which we will discuss next.

Investing your money is a crucial step towards securing your financial future. Here’s a breakdown of various investment options, catering to different risk appetites and financial goals.

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Smart ways to Invest Money

As we already told, different person has different earning and different savings. Along this there is a risk factor as well. Let say someone is earning 1,00,000 INR per month and he invest 1000 in a risky investment and lost all, still it is not much for him. On the other hand, if someone is earning 10,000 per month only and lose the same 1000 then it’s a lot for him as his earning is very low.

Even this comparison is not completely valid, as the spendings of each person can be different based on his family support and status. If the person earning 1,00,000 have 95000 spending in loans, EMIs and expenses being a sole earner. On the other hand, if the person earning 10000 have no expenses as they are paid by another family member earning more, so he has whole 10,000 to invest vs 5000 of other person.

So based on that we can have low risk to high risk to very high risk investments:

1. Low Risk Investments

Fixed Deposits (FDs):

• FDs are the safest and the oldest investment since ever banks formed
• Offers guaranteed returns over a fixed period starting from 6% for young citizens to 8-9% for senior citizens
• With different tenures starting from as low as 6 months to 5 years and more offering different interest rates and tax benefits
• Relatively safe, making them suitable for Investors who don’t want to risk but yet want to earn interest

Government Bonds:

• Government Bonds are form of investment where government is providing the bonds in return for money with interest over investment for government projects.
• Debt securities issued by the government in the form of bonds, are considered very safe.
• They Provide a steady stream of income as they have a fixed rate
• Floating interest rates bond can also be looked if available
• Sovereign Gold Bonds are also a form of Bonds backed by the government

Public Provident Fund (PPF):

• A long-term savings scheme with tax benefits
• Designed for long-term financial goals, with a 15-year maturity period.
• Offers tax benefits under Section 80C of the Income Tax Act.
• Interest earned and maturity amount are also tax-free (EEE status).
• Offers guaranteed returns and is considered a safe investment.
• Partial withdrawals are allowed after completing 5 financial years in case of medical, marriage needs
• Loan facility is available from the 3rd to 6th financial year over a part of the total investment

Senior Citizens’ Savings Scheme (SCSS):

• Available to Indian residents aged 60 and above.
• Designed for senior citizens, offering higher interest rates.
• Provides a secure and regular income stream.
• Those who have taken voluntary retirement scheme (VRS) or superannuation can invest if they are between 55 and 60 years old.
• Deposits are eligible for tax deductions under Section 80C of the Income Tax Act. Interest earned is taxable.

Post Office Monthly Income Scheme (POMIS):

• Government backed scheme, providing monthly income.
• Available in all of the big Post office in a city to all citizens
• The maturity period is 5 years.
• The invested amount does not qualify for tax deductions under section 80C.
• Provides a steady monthly income, especially suitable for those seeking regular returns.

Digital Gold

• Now a days many banking apps and investment platforms like Jupiter, FI, Paytm offer Digital Gold which is backed against 99.9% purity
• Latest market rates are available to trade 24 hours
• Very low charges while you sell in name of the maintenance and holding charges, charged by the provider
• Less risky as the gold rates are almost rising every year

2.Medium-Risk Investments:

Mutual Funds:

• Pool money from multiple investors to invest in stocks, bonds, or other assets.
• Offer diversification and professional management.
• Vary in risk levels, from conservative to aggressive.
• Made up of multiple stock holdings based on the concept of keeping eggs in different baskets so the investment is also distributed in different stock by fund manager
• Mutual funds like ELSS (Equity Linked Saving scheme) are for tax saving with 3 year lock in period
• Different funds from companies like Motilal Oswal, Canara Robeco, Quant mutual, Bluechip are the popular ones
• Interest rate for earning range from 9% safest to risky 24-28% as the shares are across different market caps like Small Cap, Large Cap and Midcap fund
• Different mutual funds have the different ratio based on the calculated risks of each fund

New Fund offers(NFOs)

• NFOs are a way of getting hands on new mutual fund at early level to have more returns
• moderately risky between equity and debt funds based

Real Estate Investment Trusts (REITs):

• Real Estate Investment Trusts (REITs) offer a way to invest in real estate without directly owning physical property.
• REITs are companies that own, operate, or finance income-generating real estate.
• They pool capital from investors to invest in a diversified portfolio of properties.
• REITs generate income from rent or property sales.
• They are required to distribute a significant portion of their taxable income as dividends to shareholders.
• Allows small investors to participate in large-scale real estate projects.
• REITs are like mutual funds that specialize in real estate. They provide a way to earn income from real estate without the hassles of direct ownership.

Unit Linked Insurance Plans (ULIPs):

• Unit Linked Insurance Plans (ULIPs) are a type of insurance product that combines insurance coverage with investment opportunities.
• ULIPs offer both life insurance coverage and the opportunity to invest in market-linked funds.
• A portion of your premium is invested in funds of your choice, such as equity, debt, or a combination of both.
• The remaining portion of your premium provides life insurance coverage, offering financial protection to your beneficiaries in case of your untimely death.
• ULIPs typically have a lock-in period of 5 years.
• Premiums paid are eligible for tax deductions under Section 80C of the Income Tax Act.
• Maturity proceeds may be tax-free under section 10(10D) of the income tax act, subject to certain conditions.

3. High Risk Investments

Stocks:

• Represent ownership in a company.
• Offer the potential for high returns but also carry significant risk.
• Requires research and understanding of the market.
• Stocks of companies can go from low to high if invested for long periods of 10, 15 years and above
• Highly Risky as any frauds in the company can cause the price of shares to drop affecting the stocks value
• Many companies offer additional benefits on purchasing of products to their stakeholders
• Stocks are taxable and can attract Short Gains tax over a period of less than 1 year and Long Gains tax for above

Cryptocurrencies:

• Crypto currencies are the Digital currencies that are highly volatile.
• Offer the potential for substantial gains but also carry significant risk.
• Very high profits over traditional stocks or mutual funds and can have more than 100% profits as well 100% loss
• Best for GenZ who love to follow the trends and can keep an eye on the markets
• Different types of Crypto available like Bitcoin, Ethereum which is safer, along with Stable Coins that are backed against US Dollar value and changes accordingly
• Meme coins, Utility coins, gaming and much more
• Can be traded on Exchanges, Hold on wallets or ledger
• Taxable at 30% in India

Alternative Investments:

• This can include things like venture capital, or private equity. These investments are generally for very high wealth individuals and carry high levels of risk.
• Big Investment Bankers and companies do this to make money by supporting new companies

It’s important to remember that all investments carry some level of risk. Before making any investment decisions, conduct through research and consider your individual circumstances.