How To Invest Money? Top 5 Investment Options
How to Invest Money? is the topic of today and If you expect that this Article will make you a millionaire without working hard, without earning or saving something then you are thinking wrong about the topic. But if you are like those people who are little disciplined and can save at least Rs.500/- per month then today by the end of this article you will know some of the steps to make your money grow.
So it doesn’t matter that you can save Rs.200, Rs.2000 or Rs.20,000 per month because in today’s article we are going to see
1: The top 5 investment options.
2: How to pick the best investment option according to you.
But most importantly, proceeding to the topic, if you like the work that I have done on writing this then make sure you advise others also and this will motivate us to write more articles.
How to Invest Money? Top 5 Investment Options
Let’s move forward to really understand what will happen to your money, let’s analyze each investment option based on these 3 parameters…
- Liquidity: Suppose you have an emergency and need money right away. How easily can you get your money back from that investment is called liquidity.
- Risk: Meaning is the possibility that you can lose your money.
- Returns: Means, how much can your money grow.
I will explain with an example. Everybody loves to save money in the form of cash. But, the liquidity of cash is high because when you need it, it is always present to be spent…
Risk is low. It’s not zero because somebody can steal your cash, also returns are negative. Suppose, if you leave cash in your wallet or under your mattress then it is not going to grow. Prices of items will increase, inflation will happen but your cash will remain the same that is why returns of cash are negative. Hope you Understood?
With understanding the above lines, let’s now analyze the following How to Invest Money? Top 5 Investment Options…
- Savings Account:– A savings account is a basic bank account where you have an option to deposit money and withdraw money all while earning some small simple interest. It is very easy to withdraw money from a bank even by using an ATM but because of that, we often get tempted to spend money which is present in a savings account, long-term investments become a challenge. Liquidity is very high because you can take out your money any time you want.
But Risk is zero. Your money is safe with your bank if you pick a trusted bank. But returns are low. You can open a Savings Account.
- Fixed Deposit:- A Fixed Deposit means when you deposit a certain amount of money to a bank for a fixed period. It means, I am not going to withdraw this money until this period ends, and in return, you will get a higher interest rate than a regular savings account. Depending on how long you are giving your money to the bank for deposit. You can deposit for 7 days, 2 years, or 10 years as per your choice. Higher the period, the higher the interest you will get.
Now discussing the parameters. Liquidity is medium because there are some banks that don’t allow you to withdraw your FD before the time period. Plus, if you withdraw your money before your maturity ends then you have to pay a penalty fee. Risk is zero.
The bank has to return back all of your money after your maturity period ends along with the interest. Returns are also low.
We also have an option called Recurring Deposit. Suppose you can not deposit a large amount in FD and you can save Rs. 2000/- per month. So, Rs. 2000/- every month will go to that deposit. So there is an account named Recurring Deposit that you can open with a bank.
But again, if you miss your monthly installments with Recurring Deposit then you will have to pay a penalty fee. But, your money will be safe, the only problems are the penalties you have to pay if you withdraw your amount before maturity or if you miss your monthly installments. Now, how to invest? If you agree with these drawbacks then you should go to set up an FD or RD using net-banking or just walk-in to your bank branch.
- Life Insurance:– So Life Insurance is not a typical investment option, but it is a kind of financial risk cover and option to earn a bonus on premium. Here’s how ?. Life is unpredictable. Tomorrow, if God-forbid someone meets with an accident or any natural mishappening leading to the death of a person then the dependents are going to be crazy. In such a scenario, dependents don’t want to beg for money and spend the rest of their life in debt which is why Life insurance becomes very important.
The risk is zero and the returns are moderate because it can cover your life or it can save your dependents from debt. All you have to do is pay premiums every year and in return, you will be insured a sum of your choice depending on the policy you take. Now, how to invest? There are multiple websites. We are also in the insurance sector with LIFE INSURANCE CORPORATION OF INDIA… we can help you compare insurances so that you pick the best health insurance according to you. All you have to do is register on our website with the “contact us” form and the executive will contact you to get the comparison done.
Liquidity is medium because the withdrawal of money from an Insurance policy is a little hesitating because it ends risk cover and some penalties to withdraw early from the maturity period. But on Maturity, it can give moderate returns. No risk of money loss
4: The Stock Market:- If you are also a common man then you have also stayed away from the Market for a long time thinking that its a type of Gambling or medium to waste money, always a question will be there, what if I lost all my money in the stock market ?’ you are right with only the last question. Some people have lost everything in the Market but it has also made many people very rich but the condition is study and discipline. The Stock Market is the place where you can buy and sell shares of publicly listed companies.
It will be your responsibility to analyze the company which can perform well in the future and then buys the shares of that company. Always the risk associated with the stock market is Very much high
because if our analysis goes wrong and the company does not perform then we can lose our money. Liquidity is medium because it will take around 2 to 3 business days to withdraw your money back. But the returns can also be high.
Rakesh Jhunjunwala has generated a maximum of his wealth by investing in the Stock Market, long-term. It is difficult for me to teach you the stock market but I will advise you to research good, stay long term, and invest in Blue chip companies.
- Mutual Funds:- We just discussed the Stock Market where all the decisions to be made by yourself. But Mutual Fund is a team-work. where a Mutual Fund manager collects money from people like us. Rs. 1000/- from me, Rs. 1000/- from you and a pool money fund is created here. A fund manager then uses this pooled fund to invest in stocks, bonds, and other assets.
There is no need to worry about where it is being invested, the fund manager takes care of all of the investment and charges us some commissions, No need to worry these are small from 0.05% to 2%. You can invest here with a large deposit in a single time or can start a SIP (Systematic Investment Plan) here you can deposit a fixed amount to the mutual fund every week, every month, or every quarter as per your choice and your ease.
There are a lot of mutual funds available in the market. Some of them are good for short-term investments and some are good for long-term investments, depending upon the liquidity ranges from medium to high because in most funds it takes 1-3 business days for you to get your money back
How to Invest Money? Top 5 Investment Options
What is a Liquid Mutual Fund?
Risk in Mutual Funds are subject to market risk, please read the offer document carefully before investing. This statement is absolutely true. There is always a little risk present in Mutual Funds but as you will do your research, you would be fine. And returns are medium.
On average in the past returns have been about 6% to 13%. Now the question is about Liquid Mutual Fund. A Liquid Fund is a low-risk, medium-return Mutual Fund that does not invest in high-risk shares and invest in low-risk bonds or debt securities funds.
The best investment for you depends on your needs and requirements. Do you want to buy a car? or you want to buy your own house? Savings for the education of children? Savings for early retirement? We talked about investment options.
The question is How soon you need your money back will help you to decide which of these 5 options is best for you. My suggestion will be, “you should not keep all of your eggs in one basket”, which means you should invest at least a small amount in all of the options.
So, in your Savings Account, you should have around 25,000 – 50,000 for your monthly expenses and it will be liquid handy cash. Next, maintain an emergency fund which is a minimum of 6 months of your salary as FD. After this, Go with an Insurance policy To provide Insurance Cover and medium growth of your money also. If you still have money to invest then choose a Mutual Fund that offers high returns at high-risk or invest in the Stock Market. But, do your study about Mutual funds and Stock markets, Otherwise, you can really lose your money.
Investing in an Insurance policy is very much important to keep your mind free from debt to be faced by your dependent in case of any mishappening. Moreover, you will also earn much bonus on policy and you will get an Increased Amount on Maturity of that policy. The risk of Investment is also low.
The biggest problem in investment these days is that everyone is trying to sell us something then it is difficult to work on How to Invest Money. Websites, ads on Facebook, on Instagram, asking us to buy things that we don’t need.
And that is why at the end of every month we do not have any savings for our investments. Then who will take care of you and your family?
So the Bonus Tip of this article is this…Never make instant buying decisions. If you have to spend then spend your money on things that make you grow like just a good book that teaches you something.
Because investing in yourself is more than investing in Mutual Funds or Stock Market. In Long term, they will definitely give you good returns. Comment and tell me what you are saving for… car, camera, property, or your own house?
I will be waiting to read your comments. Also, advise other people you know who have no money left at the end of every month so that they even start investing.