Beginner's Guide to Investing: List of investment options for beginners

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Basics of Investing for Beginners

An investment is any instrument that allows you to allocate funds to generate returns and increase your wealth. As a beginner, you must familiarise yourself with the basics of investing before you begin.

There are various types of investments, and a thorough understanding of each type will help you make the best investment decisions. Some options for beginners are fixed deposits, savings accounts, bonds, mutual funds, stocks, PPFs, ELSS, ULIP, and commodities.

To learn the basics of investing for beginners and start your journey towards a secure financial future, read on.

Why Should You Invest?

As a beginner, you may wonder, “why should I invest?”. The answer to that is quite simple – to secure your financial wellness for the long term. One of the top benefits of investing, regardless of the avenue you choose, is that you can grow your wealth over a period of time.

Moreover, with rising inflation, being financially responsible and thinking ahead of time is crucial. By investing, you have the option to mitigate the decrease in your purchasing power caused by inflation while also growing your wealth.

Although a savings account can help you create a reserve for times of need, it may not fully protect you when adversities strike. During such times, the wealth you generate through investments can prove to be extremely beneficial.

However, to reap the benefits of investing as a beginner, it is vital that you learn to invest smartly. Having an in-depth understanding of how an investment works and knowing the basics of investing will help you make better decisions.

The first thing to remember is that as a beginner, not much can hinder you from taking risks. Thus, you have the liberty to experiment with investments. If you play your cards right, you could end up generating ample wealth through the benefit of compounding.

Here is an easy guide on investing for beginners.

Features and Benefits of Investing for Beginners

Expansion of Wealth

With investment options such as FDs, bonds, stocks and many others, you stand to gain returns over a certain period of time, facilitating financial growth.

Higher Returns

One of the main motives of investments is to grow your funds. By diversifying your money across various avenues that offer high returns, you can increase your wealth and take a step closer to financial freedom.

Retirement Security

Investing early on in life can help you increase your wealth so as to live a secure financial life post retirement.

Tax Reduction

Various investments offer tax benefits that will help you save funds that you would otherwise lose to tax payments.

Achieve Financial Goals

Investments help you accumulate wealth that you can utilise to achieve your financial goals. These may include buying a home, paying for your children’s higher education, buying a car or starting a new business.

How to Choose an Investment Option for Beginners?

A lot of factors need to be considered before you decide on where to invest. Here are some things you can keep in mind before you make your investment decisions:

1. Financial Requirements

Before you decide to invest, you need to assess your financial needs. This is crucial because it enables you to ensure that your investments align with your goals. Depending on the term of your goals, you can choose from short-, mid-, and long-term investment avenues.

In addition, knowing how much you need can help you pick the right investment. This way, you can balance returns with risk to make your decision.

2. Risk Appetite

An important factor while making investment decisions is your level of risk tolerance. There are some investment instruments that carry a higher risk. However, these may also generate better returns in the long run.

If you do not mind taking on higher risk, opt for investment options such as stocks, mutual funds, and more. However, if you are looking for safer investment opportunities, you can opt for FDs, bonds and more.

3. Tenor

Before investing, you must be aware of the tenors of various investment options. This way, you can clearly map how long to invest and when you can liquidate your investments.

Understanding the tenors will also allow you to choose the ideal option depending on your investment goals. This will further help you ensure that you maximise your returns based on your finances.

4. Rate of Interest

Each investment option comes with a different rate of interest. These interest rates influence your returns in a big way. By understanding the interest rates of different instruments and their impact on your returns, you can choose the ideal one.

5. Diversification of Investments

It is important to build a diverse financial portfolio based on your investment objectives. Since different investment instruments have different risk profiles, you can distribute your funds across different options.

Doing so allows you to leverage the gains from one investment option over the loss of another. This further ensures that you minimise losses, maximise returns, and secure your financial growth.

Make sure you pick a healthy mix of high, low, and mid-risk investment options. You can even allocate funds across risk profiles based on your age. As a youngster, you can stand to withstand more risk as opposed to when you are a senior citizen.

6. Periodic Monitoring

With changing market trends, closely monitoring your investments is important. This allows you to assess the returns and consider reinvesting them elsewhere if they do not generate the returns you want.

However, you need to consider the type of investment you have as well. Returns from certain avenues fluctuate more frequently, but they may offer better returns in the long run. So, make sure you do not make hasty decisions by seeing low returns in the short term.

List of Investment Options for Beginners

If you are a beginner who is wondering ‘where to invest?’, there is a wide range of options you can consider. Here is a table that will help you get a clearer perspective on the available investment options.

Type of Investment	Tenor	Rate of Interest	Best for
Fixed Deposits Fixed Deposits are among the safest investment options. They are moderate-yield investments that offer stable returns with flexible payouts.	5 - 10 years	6.60% - 9.20% p.a.	Risk-averse investors
Savings Account Savings accounts have a low requirement to get started. They are liquid assets that do not have a lock-in period, so you can always access your money.	No particular tenor	2.70% - 7.25% p.a.	High liquidity
Bonds Bonds are debt instruments that represent a loan issued by a corporation or the government and have interest rates higher than that of banks.	7 years	6.97% - 7.75% p.a.	Risk-averse investors
Public Provident Fund (PPF) PPFs are good investment options if you are looking to invest for the long term and expect guaranteed returns.	15 years	7.10% p.a.	Risk-averse investors
Mutual Funds Mutual Funds are investments where a number of investors pool their funds, which are then managed by a fund manager. On the basis of your risk tolerance, tenor and returns expectancy, you can opt for either a Debt Mutual Fund, Equity Mutual Fund or Hybrid Mutual Fund.	No particular tenor	11.90% - 17.00% (Equity Mutual Fund) 5.70% - 10.20% (Debt Mutual Fund) 10.50% - 29.80% (Hybrid Mutual Fund)	Higher returns
Equity Linked Savings Schemes (ELSS) ELSS are mutual funds that provide tax benefits. They are high-return investments since they allocate a large portion of their funds in equity. ELSS are investment options that come with an inherent risk. You can also opt to get dividend payouts to receive a regular income.	3 years	24% - 37%	Capital appreciation and tax saving
Stocks All businesses and profit-making institutions issue stocks to help them operate their business. Stocks are highly risky investment options since their value and returns are determined by fluctuations in the market.	No particular tenor	Market-linked	Capital appreciation
Unit Linked Insurance Plans (ULIP) ULIPs provide both life insurance as well as investment benefits. In this kind of investment, a part of your premium is invested in various funds, thus giving you market-related returns.	5 years	Market-linked	Tax deduction
Real Estate Real estate involves the purchase of a physical space such as a house, land, an apartment, or others. The ownership of a commercial or residential property is a minimal-risk investment opportunity that provides security and also stands to gain profits if sold at the right time.	NA	Market-linked	Portfolio diversification
Commodities Commodity investments refer to investing in resources such as gold, crude oil, silver, agricultural products and others that are tangible in nature. It pools the contributions of various investors to trade in the commodities market.	NA	Market-linked	Inflation protection

Disclaimer: The aforementioned interest rates are based on market estimates at the time of publishing. These rates are indicative and actual returns may vary.

Disclaimer

The information provided by BFDL herein above is related to the Non-Partnered Banks/ NBFCs and is just for the purpose of information and under no circumstances the information provided hereinabove is intended to be source of advice or recommending any financial investment advice or endorsement of any sort.

The information including interest rates with regard to fixed deposit, provided on this website is gathered through publicly available sources over the internet and is considered as accurate and reliable to the best of our knowledge. BFDL disclaims any responsibility or liability regarding inaccuracies, omissions, mistakes etc. as well as offers by the Non-Partnered Banks. The use of information set out is entirely at the User’s own risk and User should exercise due care prior taking of any decision, on the basis of information mentioned hereinabove. You are advised to visit/ contact the respective Banks/ NBFCs to verify the information before making any investment or opening an account. Further, BFDL does not undertake any responsibility or liability to update this information. YOU ARE SOLELY RESPONSIBLE FOR ANY LIABILITY OR DAMAGE YOU INCUR THROUGH ACCESS TO OR USE OF THE SITE OR SUCH INFORMATION OR MATERIALS EXCEPT WHERE THE LAWS AND REGULATIONS OF A PARTICULAR JURISDICTION CONCERNING WARRANTIES CANNOT BE WAIVED. Additionally, display of any trademarks, tradenames, logo and other subject matters of intellectual property owners. Display of such Intellectual Property along with the related product information does not imply BFDL’s partnership with the owner of the Intellectual Property of such products.

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Whether you are a beginner or an experienced investor, your investment should be in alignment with your goals and finances. The amount varies based on your income and needs, but experts advise investing at least 10% of your annual earnings.

As a beginner, you should start investing by understanding your current financial standing and goals. After that, you can assess different investment options for beginners and decide which best suits your goals.

You should choose an instrument by first understanding the purpose of your investment. Then compare the returns and benefits of instruments. Based on that, decide which option is the best. Be sure to check the investment amount and tenor to prioritise your current finances too.

The best investment options for beginners are the ones that are suited to your goals as well as risk appetite. Some common investment options are FD, mutual funds, PPF, and bonds.

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A Guide to Investing for Beginners in India

Basics of Investing for Beginners

Why Should You Invest?