With the economy heading towards slow down, and the government trying really hard to boost consumption and investment to set sail economy into the prosperous frontiers, it becomes imperative for the retail and the individual investors to have their investments safe and secure, in today’s volatile environment.
As important as an investment is, savings also play a crucial role in the cycle of investment and wealth management. So in order to get the investments right, you should carve out a financial goal that you need to pursue. Based on the goal, opting for investment solutions like Shree Balaji Investment Solutions Financial Advisors can help you in better allocation of the money. It would essentially help you to track your portfolio.
The one thing that we need to keep in mind is the liquidity preference and the risk appetite of an individual. Liquidity preference means the amount of liquid cash that a person would hold to meet the basic necessities of day to day life or keep some surplus for contingencies. Risk appetite means the amount of risk that the investor is willing to undertake in order to attract a higher rate of return on the wealth that is invested in the various asset classes.
A perfect balance must be created between the liquidity preference and risk appetite in order to smoothen up the process of fulfilling the financial goal. Here are some quintessential tips, that will allow you to invest your money in a safe manner and earn a decent rate of return.
1. Savings Account
It is the easiest and convenient way to store the money, which provides great liquidity to the individual and since it has the backing of the bank it is considered to be the safest option.
Although the liquidity might be on the higher side, these do not pay higher interest rates. They provide a return of 4 to 5% per annum.
2. Money Market Accounts
This comprises of money market mutual funds through short term bonds and a slightly higher rate of interest is provided.
3. Certificate Of Deposit
A certificate of deposit is a fixed-term loan that is made by the individual to the bank. Under this scheme, under this, the customer provides a specific amount as a deposit for a specific period of time let’s say 6 months, 1 year or 2 years. In return, the bank pays a specific amount of interest on the maturity of the certificate of deposit.
Generally higher the duration of the CD, the higher is the rate of interest, based on the compounding effect. This option is feasible if you have surplus funds, and don’t require them in the immediate future. This is because the deposit amount gets blocked for a period and there are certain penalties if the amount is withdrawn before the maturity of the deposit.
4. Treasury Bills
The government offers treasury bills for or a 91 day, 145 days or other durations as followed in the marketplace. The longest duration of treasury bills extends to 1 year. An interesting fact about the treasury bill is that it is offered at a discount on its face value. No interest is provided in the interim period, but the investor gets the full face value on redemption.
So basically the difference of price between the face value and the initial amount at which it is offered is the net gain to the investor. T-Bills Are considered to be safe investment options, as it has the backing of the government.
5. Direct Equity
It is a highly volatile investment game since it involves investing directly in the equity of the companies. This is where is to buy a share and the company performs well, the investor enjoys buying a dividend and an increase of share price that has a direct increase in investors’ wealth.
A lot of studies have to be done and fundamental as technical analysis needs to be carried out in order to select the stable companies that offer a higher rate of return, considering the risk appetite of an individual. The tool of stop-loss comes into the picture, as it is in advance order to sell the stock if the price falls below a certain level. It is a method to limit losses.
6. Equity Mutual Fund
Equity mutual funds are those that invest at least 65% of their assets in equity or equity-related assets of companies. That can be active or passive management of the same by the fund managers.
Since you are not directly investing in the stock market but giving the funds to a fund house, this question level is relatively low, returns are also on the mid side which make it lucrative option to look out for.
7. Debt Mutual Fund
These instruments are for investors you are looking for or steady income and less volatility. The investments under this class are done in securities of corporates government or treasury bills.
this is an even safer option than equity mutual fund, considering the risk-reward appetite.
8. PPF or Public Provident Fund
Many people look up to this as a safe investment Avenue as the lock-in period for 15 years, and the interest earned is tax-free. The principal amount that is invested in the scheme is backed by a sovereign guarantee which makes it a highly safe investment to look out for.
9. National Pension System
It is a long term requirement focused on investment Avenue which is regulated by the pension fund regulatory and development authority. The annual contribution starts from as low as rupees 1000. The asset classes which this. Invest in ranges from fixed deposits corporate bonds to name a few. Earnings would range from 8.5 to 11 % depending upon the tenure.
10. RBI Taxable Bonds
These bonds are issued by the RBI which have a tenure of 7 years. It is issued in a Demat format through a bond ledger account. The interest rate is 7.75 %. It is considered to be a safe investment option as RBI has the backing, and steady returns are generated for the investor.
So mentioned above are the various asset classes and the options for the investment solutions in 2020 which will allow you to safely invest your money.