Money that is not invested gradually loses its value. In simple terms, idle money is money lost. To earn higher returns in a shorter span, investors are moving towards equity markets. At the same time, high-yielding investments come with a considerably high risk. For avoiding mishaps with your investments, you need to answer a couple of questions before investing your hard-earned money.
- What is the best way to draw an investment plan that helps you grow your wealth?
- How can you identify high-return investments in India that carry low risks?
This blog aims to answer all your questions in detail and help you to plan your investments strategically!
1. What Points Should You Consider Before Investing?
A strategy that suits you, and optimises your risk and returns is called an investment plan. Just thinking about which investment option offers high returns is not sufficient. For building a fruitful investment plan, you need to assess many points like:
- Investment Objective: Investors can have varied objectives for investing like:
- Buying a car or a house
- Saving for a child’s education and marriage
- Travelling or fulfilling your dreams
- Growing your wealth
Whatever your objective is, your investment should be good enough to fulfil the same.
- Risk Appetite: Every investor wants to invest in low-risk high-return investment plans. But, investments that provide higher returns always carry more risk. Hence, you need to understand your risk appetite and develop a balanced investment plan
- Tenure of Investment: Depending on your investment objective and risk appetite, the tenure of investment will vary
- Availability of Investment Capital: It is important to understand the flow of your income and how often you can invest. Suppose you have a huge chunk of savings; it is better to invest in a lump sum. Alternatively, salaried individuals should invest a portion of their savings every month
- Requirement of Funds: Before investing, you should budget your monthly expenses and set aside a contingency fund. This will help you maintain liquidity in your hands while growing your capital
For Ex: You want to invest money so that you can buy a car within three years.
- Since your objective requires a considerable amount of capital, you should invest in medium-term options that carry low risks
- Fixed-Deposit investments are almost risk-free and also allow you to grow your capital through fixed interest payments
- Hence, a fixed deposit is one of the best investments in the short and medium terms
- Alternatively, you can consider P2P lending with LenDenClub in the medium term, which provides fixed interest income up to 12% p.a.
2. 5 Best & Safe Investments with High Returns in India, 2022
Now you would ask, ‘What are the safe and high-yielding investment options?’ Here are 5 high-return investments in India and their key features.
2.1 Public Provident Fund (PPF)
- Invest up to ₹1.50 lakh every year. Save tax on this amount by claiming deductions U/s 80C under the old tax regime
- Long-term investment for 15 years. After 15 years, you can extend the tenure in a block of 5 years
- Earn tax-free interest @ 7.10% p.a.
- Almost no risk, by the government
- Interest is reinvested giving the benefit of compounded returns
- Limited withdrawal is allowed after 5 years of investment
- Can apply for a loan against PPF account security
2.2 Peer-to-Peer Lending
- Peer-to-peer lending is a direct lending facility provided by P2P platforms like LenDenClub
- By investing in P2P lending, you can earn high interest income that can easily go up to double digits
- You can diversify your risk by selecting multiple borrowers limiting your exposure to each one of them
- There is no market risk involved in P2P lending but, you may face the risk of default by the borrower which is also accounted for through measures like strong credit check, diversification and a collections mechanism
- You can invest your money based on the borrower’s profile and can choose to invest for different tenures based on your requirements and risk appetite
- You can do this by simply registering with the website. Once your KYC is complete, you can set up your account and start lending
2.3 Stock Markets
- You only need a Demat account for investing in the stock markets
- Flexible investment tenure and probability of high returns. But the risk is considerably lower in the long term
- The BSE Sensex grew by more than 111% over the last 5 years to reach its peak value in October 2021
- Stock Markets are very risky and volatile
- It is very tough to predict the movement in a stock or the stock indices
- Anybody can invest in the stock markets, but to reduce your risk you should know about the market indicators and key ratios
- If you know how to conduct a thorough fundamental and technical analysis, it can be very helpful
- Never invest your emergency funds in the stock market
- STT is charged on equity transactions and capital gains are taxed at special rates
2.4 Mutual Funds
- Mutual Funds are investment plans that pool together the funds of various investors to make a common corpus
- Mutual Funds broadly invest in equity and debt funds
- They can be divided into Equity, Debt, and Hybrid Funds, where equity funds carry the highest risk and debt funds carry the lowest risk
- As per moneycontrol.com, more than 10 equity mutual funds provided returns above 50% during the last 2 years
- Best to invest for medium to long term
- Equity Linked Savings Scheme (ELSS) are also mutual funds that invest primarily in equity markets
- You can claim deductions from your taxable income, for ELSS investments up to ₹1.50 lakh per year U/s 80C
2.5 Tax Saving FDs
- These are like regular FDs but have a fixed tenure of 5 years
- No withdrawals are allowed before maturity
- You can easily get an overdraft against the collateral of this FD
- Deduction allowed from taxable income U/s 80C up to ₹1.50 lakh per year
- Interest earned on maturity is fully taxable at Income Tax slab rates
- Relatively less risky compared to other investments
While you should choose the best investment as per your requirements, experts suggest making an investment portfolio where you invest some percentage of your investments in each investment option. This can diversify your risk and optimise your returns.
3. Things to Consider While Choosing Investment Option
There are many high-return investments in India, but not all of them can help you achieve your financial goals. Here are the questions you should answer before investing:
- Does the investment option suit your goals for investing?
- Do you need high returns or security of your corpus?
- Do you want to invest in the short, medium, or long term?
- Do the past trends of your investment show returns on investment?
- Do the returns only beat inflation or even grow the capital?
While investors have multiple concerns and dilemmas, one such investment that can answer all the above questions is peer-to-peer lending. LenDenClub is a P2P platform hosts the best investment plans with high returns at considerably lower risk compared to equity and mutual fund investments. P2P investments do not involve any market risks and are purely based on lending. With LenDenClub, investors get the following benefits:
- An RBI registered NBFC-P2P
- Transactions are made through an Escrow Account managed by a trustee
- High returns that can go up to 12%
- Flexible loan tenure and strong credit modeling
- AI-powered auto investment facility
- Default Rates as low as 3-4%
- Trusted platform with 1.5 million active investors
Register with LenDenClub and start investing now!