Investment Avenues for Indian Investors

In our article today, I will try to list the different types of investment avenues available in India where investors can put in their money.

The figure shown below is pretty self-explanatory. However, I will quickly explain the specifics.

Indians can invest broadly into five categories of investments – Equity, Debt, Real Estate, Commodities and Miscellaneous.

Please note that though insurance should not be considered an investment avenue, in the Indian context, we still use it as a long term savings tool – hence the inclusion of insurance below.

Figure below explains all the investment options available. Click on the figure to open a bigger size image in a new window.

 

Equity

 Please note that investments in equity should only be done for the long term (anything more than 5 years) to earn decent returns. Risk of investing in equities is high and so the returns are also high. You could dabble in the stock market broadly in three ways.
  1. Directly by buying and selling shares on the stock exchanges BSE/NSE
  2. Take the plunge via the Mutual Fund route – wherein the options available are : equity diversified, balanced, tax saving ELSS funds, thematic, exchange traded or index funds
  3. Investing in ULIPs(insurance plans) via their equity funds.

Debt

Debt investment can be done for the short term and long term as well. Risk here is very low and so return is low as well. Investing in debt can be done by the following ways.

  1. Fixed Deposits, POMIS, NSC, PPF, NPS, Bonds, Kisan Vikas Patra, Senior Citizen Saving Schemes
  2. Debt mutual funds (balanced, floating rate, gilt, liquid  and liquid plus) also offer another way to do so.
  3. Traditional insurance policies (money back, whole life, endowment) and the debt portions of ULIPs can be a mechanism as well.

Real Estate

This is again for the long term with a high risk and very low liquidity factor. Liquidity is defined as the ease with which you could sell your investment for cash quickly. Investing in property can be done by :

  1. Buying apartments and plots in either residential or commercial areas
  2. Or buying Real Estate Mutual Funds.

Commodities

 For small investors, exposure to gold is the right step to invest into commodities. The risk is moderate/high in this class of investment and it is highly volatile as well.

  1. One could buy gold and silver bars/coins or jewellery and
  2. Invest in Gold exchange traded mutual funds.

Art

Investment into Arts is not every small investor’s first dream but having invested into the first four, one could think of putting their money into art as well. This should be on less priority as compared to the above four.

These broadly define the options available with investors for investing their hard earned money.

Author: Radhey Sharma

Radhey is a Certified Financial Planner and an expert in the disciplines of insurance, retirement, investments and tax. His hobbies include gardening, traveling and reading self development books. The information contained on this blog is general advice and may or may not be suitable to the reader. Kindly take professional help before you apply what you read.

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  1. Like the article, hope fully i will receive the hyperlink of these kind of articles in future.

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