Top 8 Must Know Investment Schemes from safest to riskiest

Whether you are doing a job or running a business It is very important to save aside some amount for the rainy days. Whether you have a saving capacity of Rs 500/- each month or lakhs you must know the top 8 investment schemes and that too with the risk factor involved. This will help you make an informed decision about your investment. Remember saving in FDs would not do you any good as the inflation will eat up all your savings with time.

So in this article we would talk about only those schemes which can defeat inflation. We would start from safest to least safe but also remember that the riskiest which are in the last has tremendous return potential, I would suggest to read and understand all schemes for better investment decision.

The flexi deposit investment scheme

You should never keep your money in the saving account as it gives only 3.5% interest and inflation is almost about 7% so you are surely losing money in a saving account. Instead of this you must open a flexi deposit. In flexi deposits the excess amount from a particular amount is transferred to another account which gives you interest of Fixed Deposit and whenever you withdraw the amount from saving and the balance comes below that threshold some amount is automatically transferred from Fixed Deposit to saving.

Let me tell you a hack to utilize the flexi deposit to another level. Whenever you have a sudden money need use a credit card. Remember you should use that much of amount through credit card that you can deposit back within its due date. By using a credit card you do not lose the interest of your flexi deposit

Here are some links to apply for top banks credit cards

Sukanya Samridhi Yojna

The Sukanya Samriddhi Yojana (SSY) is a government-backed savings scheme. This scheme offers guardians or parents of a girl child the opportunity to open a savings account in her name before she turns 10 years old. The SSY account offers a very good rate of interest and that is mostly maximum in Government schemes. The current ROI in SSY is 8.2%. Funds deposited in the SSY account can be used for the girl child’s educational and marriage expenses, providing financial security and empowerment for her future. The scheme also includes provisions for partial withdrawals and account closure upon the girl child reaching adulthood, ensuring flexibility and accessibility of funds when needed.

You can deposit minimum Rs 250 and maximum Rs 150000/- in a financial year. Whether you earn Rs 10000/- PM or Rs 1 lakh per month. You must open an SSY if you have a daughter.

To be eligible for an SSY account, the girl child must be a resident Indian and under 10 years old when the account is opened. Only one account can be opened for a girl child, and a family can only open two accounts, one for each girl child.

You can open SSY account in any Nationalized and most of Private banks. You also get tax rebate under sec 80C of income tax act.

Public Provident Fund (PPF)

PPF is also backed by Government and the returns from PPF are also very good. In this scheme the investment horizon is of 15 years and it can be extended for another 5 years block for any number of times. You get tax rebate under section 80C of income tax act. The maturity amount is also tax free. In any emergency like critical illness etc, you can take partial withdrawal as well but after a period of 5 years only.

This scheme is 100% secure and whatever your income is you must enroll in this scheme. The minimum amount is 500/- and maximum amount is 150000/- per year. Currently this scheme is giving 7.1% of ROI.

PPF can be opened with most of the Banks and Post office.

Soverign Gold Bond (SGB)

Sovereign Gold Bonds (SGBs) are government securities denominated in grams of gold. Here’s a simplified explanation of SGBs:

1. Issued by the Government: SGBs are issued by the Government of India as a means for individuals to invest in gold without the need to physically own it.
2. Fixed Interest Rate: SGBs offer a fixed annual interest rate, providing investors with an additional income stream on top of the potential appreciation in the price of gold.
3. Redeemable in Cash or Gold: At the time of maturity, investors have the option to redeem their SGBs in cash at the prevailing market price of gold or in physical gold, depending on their preference.
4. Capital Gains Tax Benefits: Unlike physical gold, where capital gains are taxable, SGBs offer tax benefits on capital gains if held until maturity. However, if sold before maturity, capital gains tax may apply.
5. Traded on Exchanges: SGBs are listed on stock exchanges, allowing investors to buy and sell them in the secondary market. However, liquidity in the secondary market may vary depending on market conditions.
6. Safety and Security: SGBs are backed by the Government of India, providing investors with a high level of safety and security compared to other forms of gold investment.
7. Fixed Tenure: SGBs typically have a tenure of 8 years, with an option to exit after the 5th year. Early exit options are also available under certain conditions, such as for medical emergencies or the death of the investor.
8. You can buy minimum 1g of gold worth and maximum of 4kg of gold worth.

Overall, Sovereign Gold Bonds offer investors an efficient and convenient way to invest in gold while earning interest and enjoying tax benefits, making them an attractive investment option for those looking to diversify their portfolio and hedge against inflation.

Systematic Investment Plan (SIP)

Systematic Investment Plan (SIP) is like a savings plan where you regularly put money into mutual funds. Instead of putting in a large lump sum, you invest a smaller fixed amount regularly, like every month. It’s a way to invest in mutual funds without needing a big initial investment. Each month, your money buys units of the mutual fund, and over time, these units grow in value based on the performance of the fund. SIPs help spread out your investment risk because you buy more units when prices are low and fewer when prices are high, a strategy known as rupee-cost averaging. It’s a simple and disciplined way to invest regularly and potentially grow your money over the long term.

SIPs are a bit risky as the returns are dependent on the market. SIPs involve market risk. In short periods you might face losses but in long term SIPs have been very rewarding. You can expect 8-15% of annualized returns from SIP. I recommend you to start an SIP and keep invested for at least 3 years.

Mutual funds

If you have invested in SIPs then you must have gathered some knowledge about mutual funds. Now you can venture in Mutual funds. Mutual funds are like baskets where many people put their money together to invest in stocks, bonds, or both. Professional managers handle the investments and make decisions. When you invest in a mutual fund, you own a small part of the whole thing. They’re a simple way to invest without needing a lot of money upfront, and they spread out the risk because your money is invested in many different things.

Mutual funds diversify your investments while SIPs diversifies the time of investment as well.

Remember you don’t need a DEMAT account for Mutual Funds or SIPs.

There are many type of mutual funds like funds targeting large cap, mid cap or small cap. I would suggest you to buy a flexicap mutual fund which is consistently giving good returns for at least 3 years.

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Exchange-Traded Funds (ETFs)

These are investment funds that are traded on stock exchanges, just like individual stocks. ETFs are designed to track the performance of a specific index, commodity, bond, or a mix of assets. Here’s a simple explanation of ETFs:

1. Index Tracking: ETFs aim to mimic the performance of a particular index, such as the SENSEX or the NIFTY. For example, if you buy an ETF that tracks the NIFTY, your investment will reflect the overall movement of the companies included in that index.
2. Diversification: ETFs offer investors instant diversification because they hold a basket of securities. By investing in an ETF, you indirectly own a small portion of all the underlying assets held by the fund.
3. Low Costs: ETFs typically have lower expense ratios compared to mutual funds because they passively track an index rather than actively managed by fund managers.
4. Liquidity: ETFs trade on stock exchanges throughout the trading day, allowing investors to buy and sell shares at market prices. This liquidity provides flexibility to investors who want to enter or exit their positions quickly.
5. Transparency: ETFs disclose their holdings daily, allowing investors to see the assets held by the fund and their respective weightings.
6. Flexibility: ETFs offer flexibility in terms of investment strategies. Investors can buy and sell ETFs anytime during market hours, use them in various trading strategies, and even short sell them if they believe the price will decline.

In summary, ETFs provide investors with a simple, cost-effective way to gain exposure to a diversified portfolio of assets while enjoying the flexibility and liquidity of trading individual stocks on stock exchanges. To buy ETFs you would need a Demat account.

Note: Mutual funds tries to beat the returns of NIFTY and they do not always succeed. From past many year NIFTY is giving returns of more than 10% consistently and it is way more in last 3 years. So investing systematically in an ETF linked to NIFTY is highly recommended.

Investing Directly into Stock Market

To buy a stock in the market for investment is a risky business. You would need good understanding of fundamental and technical analysis. You should have a decent knowledge of reading charts of the stocks. Investing in stock will also need lot of time and attention as market is very volatile these days. But if you proceed with proper knowledge and patience than you can get very good returns from stocks. Some of the stocks like Tata Motors, Suzlon, Websol, most of Adani stocks and most of Government companies stock has increased multifold in value giving 300-500% returns in just 2-3 years. But some other stocks has decresed upto 50% as well.

So investing in Stock market is a rewarding as well as risky thing. I would recommend following Rachna Ranade on YouTube for Fundamental knowledge of stock market and Kunal Saraogi for reading Charts and investment strategies.

I would also recommend to open a trading account with zerodha because their mobile app Kite is very good for viewing charts. Its simple to use also

Disclaimer: The information provided in this article is for educational and informational purposes only. It does not constitute financial advice, investment recommendations, or solicitation to buy or sell any financial products or securities. Readers are advised to conduct their own research and consult with qualified financial professionals before making any investment decisions. The performance of investment schemes mentioned in this article may vary, and past performance is not indicative of future results. Investments involve risks, including the risk of loss of principal. The author and publisher of this article shall not be liable for any errors, inaccuracies, or omissions in the content, nor for any actions taken based on the information provided herein. Readers are encouraged to verify the accuracy and suitability of information before acting upon it.

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