Investments are a ubiquitous term today, but their nuances are anything but simple.
Strategic investing and portfolio diversification are essential for building wealth. As you explore various avenues to put your hard-earned money in, it’s easy to get overwhelmed by the available options.
That’s why we have discussed the most common investment options in this article to help you make an informed decision.
Let’s have a look!
Different types of investments
Before we discuss each avenue in detail, here is an overview of the top 7 investment options in India.
| Type of Investment | Benefits | Risks | Approx. Returns |
|---|---|---|---|
| Stocks | High returns, potential for significant growth | Volatile, influenced by market and company performance | 10% annually or even more |
| Bonds | Steady income, lower risk compared to stocks | Lower interest rates | Government bonds: 2-3%, Corporate bonds: 4-6% |
| Mutual Funds | Diversification, professional management | Management fees, market risk | Varies widely, average annual return: 8-12% |
| Real Estate | Tangible asset, rental income, appreciation | Requires significant capital, adverse market conditions | Rental income: 3-5%, Appreciation: 2-4% annually |
| Commodities | Hedge against inflation, diversification | Market volatility, economic changes | Gold: 6-7% |
| Fixed and recurring Deposits | Guaranteed returns, safety | Lower returns compared to other investments | 5-7% annually |
| Public Provident Fund (PPF) | Tax advantages, long-term savings, guaranteed returns | Lock-in period, lower liquidity | 7-8% annually |
- Stocks
As stocks represent the ownership in a company, you become a shareholder when you invest in stocks. This means you have a stake in that company.
Trade and invest in the most popular stocks on Dhan
Investors tend to buy stocks of companies with strong fundamentals as they offer significant growth potential. However, market conditions often make stock prices volatile and fluctuate significantly. The performance of the company also determines stock prices.
- Bonds
Bonds are debt securities that different governments and corporations issue. The common types of bonds include government bonds and corporate bonds.
Investing in bonds can fetch you interest from time to time, and the principal amount will be returned at maturity. Thus, such investments provide a steady flow of income and are considered less risky compared to stocks.
The key benefit of bonds is their stable return, while they are less volatile than stocks. Bonds appeal to conservative investors who aren’t ready to risk their money in stock markets.
- Mutual Funds
Managed by experienced fund managers, mutual funds pool money from multiple investors and purchase stocks to create a diversified portfolio. Some mutual funds also invest in bonds and other securities.
Equity mutual funds focus on stocks, while debt mutual funds invest in bonds. You can also choose hybrid funds, which blend both investment types.
Are you investing for the first time in Mutual Funds? Check out the Best Mutual Funds for Beginners.
The prime benefit of investing in mutual funds is the diversification of your portfolio and professional management. However, since they invest in stocks, mutual funds aren’t free from market risks.
The key is to do your research and choose a reliable platform like Dhan to make your investments. Dhan Direct Mutual Funds provides a wide range of options—categorized based on asset class for your ease and convenience.
Invest in over 1200+ Direct Mutual Funds on Dhan
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- Real Estate
Investors can purchase residential, commercial, or rental properties to benefit from capital value appreciation or rental income.
Additionally, you can consider investing in Real Estate Investment Trusts (REITs), which function like mutual funds. This option allows you to invest in real estate without the need to own physical property.
Since real estate is a tangible asset, it can generate rental income over time. However, the key drawback of such investments is the requirement of a large capital. Adverse market conditions can affect your rental income and property value over time.
- Commodities
Commodities include physical assets like gold, silver, oil, and agricultural products. Similar to stocks, you can invest in commodities by making direct purchases, trading futures contracts, or using commodity ETFs.
Trade commodities from charts on Dhan and use indicators, drawing tools, and much more.
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The reason commodities are so popular is their ability to hedge against inflation. They also diversify your portfolio but are subject to economic changes and volatility in the market.
Also read: Best Commodity to Trade in India
- Fixed Deposits and Recurring Deposits
Both fixed and recurring deposits are bank accounts that offer guaranteed returns over a fixed period. Some tax-saving fixed deposits are also available, but they come with a lock-in period of 5 years.
Use an FD Calculator to calculate your investment returns.
While you need to invest a lump-sum amount in FDs, RDs involve SIPs. Both of these investments are secure, and their returns are reliable. However, they offer lower returns compared to stocks and mutual funds.
Also read: Top 5 Best Tax Saving Investments
- Public Provident Fund (PPF)
PPF is a savings scheme backed by the government of India. Investing in PPF helps in creating long-term funds for savings, and it offers retirement benefits.
The key benefits of investing in PPF are its tax advantages and guaranteed returns. It is a great tool for long-term savings. You can open a PPF account at banks and post offices. There’s a minimum investment requirement for PPFs.
Invest Now for a Better Future
Investing early harnesses the power of compound growth, helping to mitigate risks and enhance financial stability. In addition to financial gains, investing in personal development and sustainable practices fosters a healthier, more resilient future for communities and the planet.
We have comprehensively discussed the benefits and risks of the most common investment categories in this guide. Based on your preferences, you can explore stocks, bonds, ETFs, and commodities to create a well-balanced portfolio.
Explore Dhan’s easy-to-navigate and use features, and start your investing journey today.
If you’re curious about what super traders and long-term investors are talking about—check out Dhan’s thriving community of #MadeForTrade.
