With the per capita income for FY19 being released at Rs 10,573 it is understood, that the it is not practically possible for individuals to satisfy all their needs through a single source of income. The money flow in the economy follows a circle. Part of income being saved is called savings. When savings are utilized to generate more money it is known as investment. The investment of an individual is capital for a business. But which instrument or sector is the most rewarding one of all? What is the risk appetite of the investor? What tenure is the investor willing to undertake? Only after knowing the answer to these questions is it possible to select the best alternative.
Every individual’s portfolio contains a different set of assets which will yield a different amount of returns. The excessive investment in stocks will lead you to unnecessary risk. Whereas sticking to Fixed Deposit only will not yield expected returns. In order to survive in the volatile market, a portfolio should contain diversified investment instruments.
Fixed Deposits (FD)
Earnings on FD is the interest that is earned on the deposit made. FDs are available in multiple forms. Depending on the tenure, investor, amount, financial institution the interest rate, the nature of the FD is supposed to be decided. An investor can invest from 7 days to 10 years. For calculation of interest and amount to be paid at maturity compound interest calculator is used. For people who are worried about the tax payment there is a solution to that too. According to Section 80C a deduction up to Rs 1.5 lakhs in a tax saving FD.
Here are a few companies that provide you with a high rate of interest on your FD
| Name of the Company | Term | Interest (Regular)p.a | Interest (Senior)p.a |
| Mahindra Finance | 3 years | 7.55% | 7.80% |
| Sundaram Finance Company | 3 years | 7.25% | 9.40% |
| HUDCO | 2-3 years | 7.25% | 7.75% |
| HUDCO | 1 year | 7.50% | 7.75% |
| Kerala Transport Development Finance Corporation Ltd | 1 year | 8.25% | 7.75% |
| LIC Housing Finance | 1 year | 7.30% | 7.40% |
| Shriram City Union Finance | 1 year | 7.50% | 7.70% |
When investing in FDs if you wish to withdraw your money before maturity the interest applicable will be altered. This is due to a change in the tenure of your FD. While calculating the maturity amount tenure is taken into consideration so when your tenure changes the amount of maturity also changes. For holders of current account overdraft facility can be availed for to.
Gold
The current gold rate is Rs 33,120 for 10g of 24k gold. Gold is known to have a special place in the hearts of Indian investors. The tangibility of the commodity gives them the assurance of safety in their minds. It has also proven to be an excellent hedge against inflation. As the price of gold increase with rising inflation. Apart from this gold can be utilised as a collateral for mortgage. Though the rate of interest on these mortgage loans is comparatively higher than other loans.
Even when investing in gold one has dual options. Gold can either be bought in jewellery or in bars. It is suggested to make a purchase of bars since there are no making charges involved. In case of jewellery making charges are included which decreases the amount that you receive from sale of gold.
Gold and equity are inversely proportional. Hence, one can maintain balance by investing in gold which acts as a hedging instrument. It helps to neutralize inflation rather than creating wealth. Investment in gold will be a useful provision for an uncertain event in the future. The reason is these investments are highly liquid. However, investments in gold are taxable. The purchasing price of gold, on a given day, is higher than the selling price. The returns earned from the investment in the gold are entirely dependent on increase and decrease in the price of the gold.
Stocks
Investments in stocks can be done through stock exchanges i.e. NSE and BSE. These investments are not risk-free because of the volatile nature of the market. One can start investing in stocks with smaller capital as compared with FDs. Equity offers the highest returns as compared with other financial instruments. Also, the returns earned are non-taxable. There are chances of making windfall gains in stocks. However, investment in stocks requires high risk-appetite and returns are directly affected by risks. Also, investments in stocks should be long-term.
Sensex in 2008 was close to 17000. So if an individual had invested Rs 100 in 2008 it would have appreciated to Rs 235 in 2019. Recording a surge of 135% in the investment value. At the same time it is quintessential to remember the fundamentals of investing. Take into consideration your risk appetite, analyse the company on its fundamentals, understand its future outlook. Only if your investment rationale is backed with fundamental analysis will you be able to make money in the market.
Conclusion
The aim of investments is to make money from the savings. Several investment instruments are available based on the risk appetite, individual’s goals and time horizon. While investing one should make use of diverse instruments rather than sticking to one instrument. A diversified portfolio will help in maintaining a balance between risk and rewards.
