“A penny saved is a penny earned”- the age old saying holds true till date. Earning money and spending all of it without saving is not a very wise decision for a person. It is said that one must save at least 20% of the earning every time. Nothing great can be made without investments whether it is a dream vacation, the basic necessities of life like car or house or even a healthy retirement plan. There is no single way for the best investment plan; it all depends on individual choice and future plan based on his/her basic needs, personal priorities and financial goals.
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The best way for investing one’s money can be based on the following factors:
1. Finance goals – One should have short term/long term goals which one have planned and should plan accordingly to achieve it.
2. Risk horizon – One should judge and decide if he/she is capable of taking no risk, low risk, moderate or high-risk investments.
3. Investment period – One should decide if he/she wants to invest for a shorter period or a longer period of time.
4. Investment amount - How much one can practically afford to invest out of their entire savings.
Well, one should know that they should be investing their money as soon as they become financially independent, but often they do not know the medium to do so and thus lose the opportunity to take advantage of investing early. There are various medium and modes of investments. One should understand their need and plan accordingly to invest in any of the available investment plans as per their objective.
In today’s life, the right form of investment is very much crucial to achieve one's objective in form of short/long term goal or to have a robust future ahead.
In an early stage of career, one should have a basic personal financial portfolio to achieve one’s own goal. There are various forms of the investment plan and the financial portfolio should be created in such a way that it gives the best return in future.
On a wide diversification, investment plan is classified largely into two parts.
1. Short-term investments and Long-term investments.
2. Fixed Interest bearing and slightly riskier ones to get maximum returns.
To get good return one can add any of the following investment plans in their financial portfolio.
Low Risk and low return:
1. Bank fixed deposits: This is one of the traditional methods of investing money. One can get maximum 7–8% p.a. interest. They can put a part of their money in bank F.D (fixed deposit) which earns a relatively low return but keeps one’s money fully secured.
2. PPF (public provident fund): This is a good long-term investment option. Presently the rate of interest is 8.1% but locking period is 15 years. One will get tax benefit U/s 80 C and this investment plan gives a comparatively high return. The advantage of this plan is that one will be able to make a regular monthly investment irrespective of their daily financial needs and it will give a good amount of money after 15years. One can also avail Personal Loan against the money deposited and can withdraw it in case of emergency needs.
3. Post Office Savings Scheme: This is a purely Government scheme and has no risk attached to it. The only disadvantage in this particular plan is that it doesn’t have much of online support and deposit or withdrawal of cash results in standing in a queue for a long time. Its inefficient paperwork process results in the delay of work.
4. Gold: A traditional and one of the favourite methods of Indians to invest their money is to buy Gold in any form. Study of market fluctuations is a key for this investment, it is considered as a good long-term investment option as it has been observed in recent past that price of Gold never drastically dropped.
Risky investment plans give the good return for growing money however it is subject to market risks:
1. Equity Linked Savings Scheme – Here the locking period is of 3 years. It is eligible for tax benefit U/s 80 Returns from ELSS is tax-free. Some risk is attached to it.
2. Mutual funds - This is a very good option if one can afford to take a risk. Debt mutual funds are a safer option than equity funds. In order to get good returns, one needs to invest money in Mutual Funds for a longer period and SIP (systematic investment plan) is a good way to do it.
3. Direct equity - This involves huge risk, one needs to be very cautious while putting their money in equity. The returns are based on market fluctuations.
5. Real Estate - Buying and reselling land and buildings is often considered a safe bet by investors. It’s a great investment option that is certain to gain value with time and one can use it for their own wealth building strategy.
Armed with all these information, one can start to build their own investment plan!