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If you are planning on enhancing your corpus, it is vital that you put your surplus funds to good use by investing them. The question that hence arises is “what is an investment?”. An Investment is injecting your spare funds into financial instruments that would eventually yield profitable returns and lead to the creation of wealth. 

 

The income generated from such investments can be used to fulfil financial obligations such as repaying borrowed funds, saving up for retirement, paying for educational expenses, purchasing commodities and others.

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Shriram Finance is one of India's biggest retail NBFCs, offering financial products across categories like loans and investments. The NBFC offers high-yielding fixed deposits with competitive interest rates.

Bajaj Finance Limited is a multifarious NBFC with over 50 million customers and exceptional credit rating from reputed agencies that can vouch for its credibility. With a diversified portfolio in lending, Bajaj Finance Limited provides a comprehensive range of financial services to its customers.

YES BANK, a full-service private bank, aims to emphasise on sustainable growth. It offers various financial services pertaining to MSME, retail, corporate clients, and more. The bank looks to expand its operations and customer base within the growing digital landscape.

PNB Housing Finance Limited is a housing finance company (HFC) with a network of branches all across the country serving for over three decades. The HFC offers loans for the purchase, reparation and upgradation of your home as well as loans against property to corporate entities and individuals.

Bajaj Financial Securities Limited (BFSL), a subsidiary of Bajaj Finance Limited, offers a spectrum of investment options such as Demat and trading, margin trade financing, IPO (Initial Public Offering) and US stock investments. With a vast product portfolio, BFSL has been a trusted brand for capital market solutions.

A pioneer in tapping underserved markets in rural areas, Mahindra Finance Limited caters to the financial requirements of its customers with its wide variety of financial services. Mahindra Finance Limited is recognised as one of the best banking, financial services and insurance providers due its pan-India presence.

AU Small Finance Bank offers best-in-class banking solutions to its customers. These include services such as fixed deposits, savings accounts, debit and credit cards, insurance, loans, and more.

The Ujjivan Small Finance Bank is one of the trusted banks in India. The bank caters to the needs of all investor profiles, and instruments featuring multiple benefits.

What are the different types of Investments?

Now that we’ve discussed what is an investment, let’s look into different investment options. Usually, investments are classified basis the kind of returns generated. The two broad categories of investments that you can venture into are as follows:

1. Fixed Income Instruments

Fixed income investments generate returns that can be a source of consistent income to meet daily expenses. Such investments help maintain a steady flow of income since they are unaffected by market fluctuations and provide guaranteed returns. 

Here are some fixed income investments you can look into: 

  • Fixed Deposits

A Fixed Deposit (FD) is a guaranteed return investment plan that provides assured returns at a fixed rate of interest for a particular period of time. Based on how frequently you would like to receive your returns, you can either opt for a cumulative FD or a non-cumulative FD. Through a cumulative FD you will receive your interest returns at the end of your chosen tenure, whereas with a non-cumulative FD, you can plan your interest payouts as per your preference. 

  • Public Provident Fund

Public Provident Funds (PPFs) are a good investment plan if you would like to invest for a longer term and save up on your taxes. PPFs are backed by the government and therefore safer to invest in if you have a lower risk appetite. They provide tax benefits on investments and ensure stable returns. 

  • Senior Citizens Savings Scheme

A Senior Citizens Savings Scheme (SCSS) is specifically designed for people above the age of 60 to provide a substantial source of income after retirement. An SCSS provides tax benefits and is a secure form of investment that offers higher interest rates. 

  • Government Bonds

Government Bonds are issued by the Reserve Bank of India to balance the fiscal deficit in the economy. These bonds are issued to raise funds for development of infrastructure and government spendings. Government bonds are long-term investment options that range from 5 to 40 years and have fixed interest rates. 

  • Corporate Bonds

Corporate Bonds are issued by companies to raise capital and build a balanced portfolio. These bonds can be bought by investors at a predetermined interest rate. The interest payouts are paid to the investors at pre-established time intervals. Corporate bonds offered by high-rated companies are less likely to default on their payments, thus making them a safe and reliable source of fixed income.

2. Market-linked Investments

Market-linked Investments are directly tied with the fluctuations occurring in the market thereby making them risk-prone when compared to fixed income investments. However, they offer higher interest rates to compensate for the risks involved. Such investments can help you diversify your portfolio and enable the amassing of wealth. 

Given below are some market-linked investments for you to consider investing in: 

  • Mutual Funds

Mutual Funds are financial instruments wherein the funds put together by stakeholders are invested in securities such as bonds, stocks and others. An investment adviser manages the funds and allocates them in various securities with an intent to generate gains and serve the best interest of the shareholders.There are different categories of mutual funds based on the investment objectives decided at inception. 

  • Demat 

A Demat account or dematerialisation account is crucial if you wish to trade or invest in the stock market. This account acts as a reservoir for investments such as securities, bonds, mutual funds, shares, ETFs and others that you hold in electronic format. A Demat account helps you avoid the hassle of paperwork and maintains a record of your online investment seamlessly.

  • National Pension Scheme (NPS)

Introduced by the Indian government, the National Pension Scheme encourages saving for retirement so as to have a regular source of income. NPS provides flexibility to venture into investing in assets like bonds, securities, equity and so on as per your convenience. It also offers tax benefits of up to ₹50,000 to both salaried as well as self-employed individuals under section 80CCD (1B).

  • Sovereign Gold Bond (SGB)

Sovereign Gold Bonds are government securities substituted for physical gold. The price of these bonds are directly linked to the market value of gold. Such bonds are convenient since they help avoid additional costs such as making charges and the risk of storage that you would otherwise have to incur if you purchased gold. 

  • Unit Linked Insurance Plans (ULIPs)

Unit Linked Insurance Plans provide dual benefits of life insurance coverage as well as market-associated investments. ULIPs use a part of the insurance premium to invest in the capital market as per your risk appetite. The income thus derived helps in capital appreciation while you benefit from an insurance cover. 

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Why Should You Invest?

Regardless of how old you may be, it is imperative to understand what is an investment and why there is a need to invest. Knowledge of investments is a prerequisite to advancing into investing. A financial crisis may disrupt the smooth functioning of your finances which is why it is important to safeguard yourself against any such mishaps through investments. 

Here are some of the reasons why you should invest: 

  • Creation of Wealth: 

Investing in financial assets that yield high returns can lead to the creation of wealth. With your wealth growing, you will be able to invest further and build your corpus over time. 

  • Retirement Security: 

Investing at a younger age can help you grow your funds exponentially, and act as a source of security and stability during your retirement. 

  • Tax Deduction:

A number of investment options offer tax benefits that can help you save up on tax payments and increase your profit earnings. 

  • Fulfilment of Financial Goals:

Wealth generated through investments can help you fulfil your financial goals such as repayment of borrowings, financing educational expenses, saving up to buy physical assets, etc. 

Key Things to Consider When Investing

Once the answer to what is an investment has been thoroughly comprehended, it is wise to pay attention to certain fundamentals. Investing requires a great deal of careful planning. A smart investment plan is the one that encompasses all necessary factors and helps combat financial inconsistencies.

Here are a few key factors that you need to consider while investing: 

  • Risk Profile

Based on your appetite for risks you can opt for investment options that cater to your financial requirements. If you have a higher risk appetite you can choose to allocate your funds in market-related investments that have higher returns but are accompanied by risks due to their close association with variations in market conditions.

  • Financial Goals 

Your financial goals help you get a clear idea of what investment options would work best for you. If you are looking for options that help you fulfil your long-term goals, you can invest in financial instruments such as PPFs, and others that can accommodate your funds for a longer duration and provide you returns at the closure of your term. 

  • Source of Income 

Your income is a vital part of your livelihood. If you wish to receive a stable source of income to help you meet your daily expenses, you can opt for fixed income investments such as fixed deposits etc and tailor them to suit your financial needs. 

  • Capital Growth

One of the major reasons why you should invest is to grow your capital. Investing in assets that are linked to the market can help you receive high returns and expand your funds. Slightly riskier investments such as stocks and mutual funds offer greater dividends while compared to other investments. Diversifying your funds across various investment options can foster financial growth. 

FAQs About Investments

Which investment is safest for the long term?

Investments such as fixed deposits, government bonds, PPF and others are considered a safe option for the long term.

How do beginners start investing?

As a beginner you must first understand what is an investment .You need to carefully plan out your investments based on the goals you wish to achieve. Depending on the immediacy of your goals, you can opt for investment options that serve your needs. 

How can I grow my savings?

Through a detailed analysis of your financial requirements and the market conditions you can chart out a good investment plan that will help you grow your savings.

What kind of small investments make money?

All investments are made with the intent to make money. Investments such as stocks, securities, bonds and others, although risk-prone, are likely to gain higher profits. On the other hand, FDs, PPFs and others are safer and yield assured returns.

Is it better to save or invest?

Savings help you put aside your excess funds for use in the future. They do not generally yield high returns. Therefore, if you are looking to grow your funds, you must consider investing since it leads to the creation of wealth.

Why is investing important?

It is essential to invest for a number of reasons such as the fulfilment of financial goals, deduction of taxes, creation of wealth, post retirement security and so on.

For what different goals can an investment be made?

Investments can be made to fulfil a variety of goals such as the repayment of debts, purchase of commodities, paying for educational expenses, fulfilling personal commitments such as buying a house, starting a new business etc. 

Which is the best online investment plan ?

In this day and age, almost all types of investment options are available online. Thus making trading and investing further convenient and readily available at your fingertips. 

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