12 Best Investment Options in India with Goal-Based Investment Plan in 2022.

Top 12 Best Investment Options Robert Kiyosaki says, “It’s not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for.”  To build wealth, you should aim to invest your hard-earned money in the best investment options available in India. If you don't make the right decision at the right time, you might end up missing on a million-dollar opportunity! But with multiple investment options available in India, how will you decide which is the best investment option for you? Today we have come up with the 12 best investment options in India in 2021 that will help you create infinite wealth.  But before we get into the article, you need to know that each investment option has a certain amount of risk involved. Higher the risk, higher the potential return on investment and vice versa. Hence, you need to choose the right investment option based on your financial goals and risk appetite.  So let’s begin! In this blog we will explore:
  1. Factors to consider while selecting the best investment options
  2. Why is choosing the right investment option important?
  3. Types of investment options 
  4. Best investment options in India for 2021. 
  5. Investment plan for goal-based wealth creation
  6. FAQs

Factors to Consider While Selecting the Best Investment Options

While planning your investment, you need to figure out the right investment option which fits your risk tolerance and financial goals. It should give you the desired return while also achieving your financial goals. Below are the factors that you should take into consideration while selecting the best investment option

1. Liquidity

Liquidity is how quickly an asset can be converted into cash. But why is liquidity important while selecting the best investment option? Liquidity is important simply because: 
  • Short-term goal = Invest in highly liquid assets.
  • Long-term goals = Invest in low-medium liquid assets. 

2. Tenure

The tenure of your investment is the time for which you hold your asset to get maximum returns out of it.  Why is it important to look at the tenure of investment?
  • Short-term goal = Investment options with a short-tenure. 
  • Long-term goal = Investment options with a long-tenure. 

3. Diversification

Each investment option has a certain amount of risk involved, and diversifying your investment portfolios helps in minimising risk. As a popular saying goes, “ Never put all your eggs in one basket”. Regardless of the tenure of your investment, you should diversify your portfolio by investing in various asset classes. 

4. Risk appetite

There is a direct relationship between risk and return on investment.  Why is it important to check your risk appetite before investing? Every individual has a different amount of disposable income for investment. According to the disposable income available, you must decide for yourself whether high-risk, low-risk or medium-risk investment options will suit you the best. Generally, higher the risk appetite higher the return and vice versa. Hence, you should know your risk appetite and choose the best investment option for yourself. However, risk can be minimised by proper planning, research and diversification.

Comparison of Risk Categories

High risk Medium risk Low risk
Meaning  High risk investments are for investors who want to earn high returns and can afford to take high risk.  Medium risk investments are for investors planning to invest for long-term with moderate returns, usually around 7%-10% Low-risk investments are for investors who are planning for safe investment with steady returns.
Tenure  10 years + 3 - 5 years 1 - 3 years
Risk-Reward ratio High Moderate  Low - moderate
Investment options  Stocks,  small-cap, mid-cap and commodities. Large-cap, balanced funds, real estate, bonds  Government bonds, government schemes, Bank Fixed Deposit.

5. Investment Objective

Before you start investing your hard-earned money in any instrument, you need to determine your investment objective.  Why is it essential to know your investment objective? When you are planning to invest, you need to have clear investment objectives, such as: Short term goals:
  1. To save tax
  2. To plan for vacations/vehicle purchase, etc.
  3. To fight inflation
  4. To increase saving
Long term goals:
  1. Buying a home
  2. Child’s marriage and education
So, you must choose an investment option in such a way that it will fulfil your investment objective.

6. Age

Age is one of the most important factors that you have to take into consideration before selecting your best investment option.  Why is it essential to consider your age before investing?
  • When you are young, you have very little to lose and you do not have many responsibilities, so you can go for high risk investment options.
  • For senior citizens, it is advisable to go for low risk investment options.

Why is Choosing the Right Investment Option Important?

Choosing the right investment option will reap you good profits in the future and also help you accomplish your investment objective. It is not rational to invest in any instrument just for the sake of investing. You need to take into account factors such as your goals, investment objective, risk appetite, etc. If you take into consideration all the above factors while investing, you will surely create wealth for your future.

Types of Investment Options

Investments can be financial investments and non-financial investments. 
  • Financial investments are market linked and include stocks, mutual funds and even fixed income products like PPF account, Bank FDs etc. 
  • Non-Financial investments cannot be traded in the financial markets and its value is derived by its physical net worth. Example: Real estate, Gold etc. 

Best Investment Options for you in 2021

1. Direct equity (Stocks)

Liquidity High 
Tenure Long- term
Risk  High
Who can invest If you want to maintain liquidity and make quick profits.
Risk-Reward ratio High
If you are a high risk taker with a long term time horizon, then direct equity, or stocks is the best investment option for you. Since the share market is highly volatile, you need to pick the right stock with strong fundamentals. To reduce risk in the stock market, you should diversify your investment across different sectors. Stocks have been able to deliver much higher inflation-adjusted returns compared to all other assets.  Hence, investing in equities can prove to be the best investment option in the long run.

2. Equity mutual fund

Liquidity High 
Tenure Long - term
Risk  Moderate
Who can invest If you are looking for a long term investment option with moderate risk. 
Risk-Reward ratio High
Equity mutual fund is a category of mutual fund in which the majority of your pooled money is invested in equity shares of a company.  The money is allocated based on expert research done by the fund manager by conducting a fundamental and technical analysis of the targeted companies. Equity mutual funds have generated much higher returns than debt mutual funds and are the best investment option for you if you find direct stocks as too risky. 

3. Debt mutual fund

Liquidity High
Tenure 1 day to 7+ years
Risk  Moderate
Who can invest If you are looking for comparatively less risky options than shares.
Risk-Reward ratio Moderate
Debt mutual funds are invested in fixed income securities such as treasury bills, government securities, short-term and long-term bonds, etc Debt mutual funds provide safe investment with moderate returns and hence are the best investment option for individuals with low to moderate risk profiles.

4. Public provident fund

Liquidity Low 
Tenure 15 years lock in period
Risk  Low
Who can invest If you are planning to invest in safe investment options for a long duration.
Risk-Reward ratio Low
Public provident fund is a savings cum tax saving scheme for investors with low-risk appetite. The interest earned and the maturity proceeds are also tax-free.  The minimum deposit ranges from Rs. 500 - Rs. 1,50,000 in a financial year. Hence, public provident fund (PPF) is the best investment option for investors with a low-risk profile but a long time horizon. 

5. Fixed Deposit

Liquidity High
Tenure 7 days to 10 years (premature) 
Risk  Low
Who can invest If you have a lump sum amount to invest for a fixed period.
Risk/reward  Moderate
Since RBI is the regulatory authority, FD's are considered to be comparatively safer and are the best investments options in India for retirees (60 years of age) and low-risk profile investors. 

6. Real Estate

Liquidity Low 
Tenure Long term
Risk  Moderate
Who can invest Investors invest with the view of future appreciation of the property.
Risk-Reward ratio Depends on the location of the property.
The house that we use for ourselves should never be considered as an investment. The second property that you buy is an investment.  In real estate, the location of your property determines its growth and appreciation. Real estate investment can deliver returns in 2 ways:
  1. Capital appreciation of the property. 
  2. The rent earned from the property.
Real estate is the most preferred investment option in India even though it is highly illiquid. 

7. Gold

Liquidity High 
Tenure Long term
Risk  Low
Who can invest If you wish to diversify your investment and want to hedge against inflation.
Risk-Reward ratio High
Gold is considered to be the best investment option since it acts as a hedge against inflation. Gold in the form of jewellery has high making charges which ranges from 6% to 14% of the cost of the gold. For those who want to buy gold for investment purposes, there is an alternative where you can own paper gold. This investment is cost-effective and can be done through gold ETFs. ETFs are traded in the stock market with gold as the underlying asset.

8. Sukanya Samruddhi Account

Liquidity Low 
Tenure 21 years
Risk  Low
Who can invest Parents of a girl child who wish to save funds for her marriage and education.
Risk-Reward ratio Low
Sukanya Samruddhi account is an initiative by The Government of India to empower girl child. Parents of the girl child can invest and save for her marriage and education and also avail tax deduction on the invested amount. It is one of the best investment options which currently provides an interest rate of 7.6%

9. National Saving Certificate

Liquidity Low 
Tenure 5 years
Risk  Low
Who can invest If you want a tax saving investment 
Risk-Reward ratio Low
The National Saving Certificate is a fixed income scheme by The Government of India. It encourages people to invest and provides tax exemption up to Rs. 1,50,000 under  Section 80C of Income Tax Act.

10. National Pension Scheme

Liquidity Low 
Tenure Matures at the age of 60
Risk  Low
Who can invest If you are looking to save money for your retirement with tax benefits, then this investment option is for you.
Risk-Reward ratio Low
NPS is a pension scheme regulated by the Pension Fund Regulatory and Development Authority of India (PFRDA). Any Indian resident in the age group of 18 to 60 can open an NPS account. You can also claim tax deduction up to Rs. 1,50,000  under section 80C of Income Tax Act. NPS is one of the best investment options for individuals who want to save money for their retirement and also avail tax benefits. [Suggested Reading: 10 Best Tax saving options in India For 2021]

11. Recurring Deposit Account

Liquidity High
Tenure Short term
Risk  Low
Who can invest If you are looking to save in a systematic manner.
Risk-Reward ratio Low 
A recurring deposit is probably the best investment option offered by banks which allows you to deposit a fixed amount every month and earn guaranteed returns on your investment.

12. Money Market Funds

Liquidity High
Tenure Short term
Risk  Low
Who can invest Investors who want to earn more than savings account without taking risk.
Risk-Reward ratio Low
A money market fund is a debt mutual fund that invests in short term debt securities such as treasury bills, commercial paper, etc.

Here is a quick summary of all the investment options available for you!

Investment Options Risk Types Tenure Risk- Reward Ratio
Direct equity High  Long term High
Gold Low Long term High
Equity Mutual Fund Moderate-High Long term High
Real Estate Moderate Long term Depends on the location of the property.
Debt Mutual Fund Moderate Medium-Long term Moderate
Fixed Deposit Low Medium- Long term Moderate
Public Provident Fund Low Long term Low
Sukanya Samruddhi Account Low Long term Low
National Saving Certificate  Low Medium term Low
National Pension Scheme Low Long term Low
Money market funds High Short term Low
Recurring Deposit Account Low Short term Low

As a bonus, here is a basic investment plan for goal-based wealth creation

Goals Remarks Suitable Asset Class
Emergency funds Emergency Funds Amount = Your monthly expenses including household expenses, leisure, EMIs etc X 6 months Fixed Deposit, Liquid Funds
Buying house You can accumulate funds for downpayment which is generally 20%-30% of the property value. SIP in Mutual Fund + SIP in Blue chip stocks
Child’s education Child’s higher education is getting expensive these days. So, from the year your child is born you should start saving and investing through SIPs in various asset classes. SIP in Mutual Fund + SIP in Blue chip stocks
Retirement corpus If you wish to retire early, you have to plan your retirement journey well in advance. Saving a small amount of money in a systematic manner today will reap good returns in the long run. SIP in Blue chip stocks
Buying a car Instead of taking a vehicle loan, plan for buying a car without any financial burden Fixed Deposit + Recurring deposit
[Suggested Reading: Best Short Term and Long Term Investment Plan for 2021]

Concluding Thoughts

As the popular saying goes "A penny saved is a penny earned." But because of inflation, the value of the penny saved is much less than the value it had before. Hence, you need to make your money work hard for you.  Of all the above best investment options, the most effective and popular investment option to fight against inflation is equities. To invest in equities and earn high returns, open a Demat account with Samco - India’s best equity stock broker and get the benefit of a 3-in-1 Demat – Trading – Mutual Fund investing account and Free brokerage trading for 1st month on all trades placed from the Samco app for the first month!

…Happy Investing…

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