Let’s contemplate you’ve Rs. 1 Lakh and extra to make investments and would love the absolute best returns, the place would you place the money? There’re numerous schemes and funding plans which might be simply accessible these days.
However, investing isn’t youngster’s play or cakewalk as you may think. If you don’t make investments the money correctly, likelihood is you’ll really find yourself saving nothing. Why’s that? Because of an element that frequent traders such as you and I are unaware about.
And this issue is named Time Value of Money.
Understanding Time Value of Money
Maybe you’ve heard this time period Time Value of Money or TVM for the primary time. Or you’re unaware the way it works together with your money. Therefore, I’ll clarify briefly in easy phrases.
Let’s contemplate you deposit Rs.100 in your financial savings checking account and preserve the quantity for a full monetary yr, from April 1 to March 31. The financial institution can pay you an curiosity of Rs.4.50 or four-and-half p.c. This means, your financial institution stability on the finish of a monetary yr would stand at Rs.104.50.
The determine can differ barely relying upon the kind of financial institution the place you maintain the account and prevailing rates of interest. Generally, 4.5 p.c is taken as the usual curiosity rate worldwide.
Now let’s contemplate you don’t hold the Rs.100 in a financial savings checking account. Instead, you retain it at house. At the tip of the yr, that Rs.100 can be value solely Rs.95.50. That’s as a result of over a time frame, the worth of money goes down. Whatever stuff you can purchase for Rs.100 a yr in the past will now price Rs.104.50. This means, you’re paying extra for the acquisition now.
Since the worth of money drops by about 4.5 p.c yearly, your Rs.100 immediately can be a lot lesser over a interval of years, until it loses worth altogether.
Avoiding Losses from Time Value for Money
There’s just one manner to keep away from losses to your money due to TVM. And that’s by investing money in a way that fetches you highest attainable returns.
Actually, beating TVM is like enjoying a cat and mouse recreation. You want to make investments your money in a way that not solely helps you overcome the drop in money worth but in addition want to achieve one thing additional. That means, your Rs.100 shouldn’t be value solely Rs.104.50. It needs to be a lot increased.
If you make investments Rs.1 Lakh or increased properly, it’s attainable to overcome these losses due to drop in money worth. And in this text, I’ll present you 10 other ways to make investments your your money for higher returns.
15 Best Investment Plans for Higher Returns
There’s one main issue to contemplate earlier than investing your money for increased returns. And that’s your present age and the time for which you want to stay invested. The longer you make investments, increased the returns, is a delusion. In reality, investing on incorrect schemes received’t assist you to circumvent to TVM and drop in money worth.
Therefore, contemplate these 10 methods.
1. Invest Money in Debt
It is the most secure funding possibility and most popular debt devices are FD’s of Nationalized Banks, Post Offices, and Government Bonds and many others.
Let us see how do they function, perform, pay us the curiosity frequently and return our ideas in time. They borrow from us at low charges and lend it increased charges to small, large enterprise, companies, improvement initiatives.
Majority of those debtors, entrepreneurs, firms, really carry out effectively, pay pursuits, and repay loans-principals to banks and nonetheless make a revenue for themselves. That is why all Nationalized Banks, Post Offices, Pay us Interest Regularly and repay our principals with out fail and nonetheless make a revenue.
Actually our so known as Safest Investment Income-Interest paid by Nationalized Banks, Post Offices, is thus created by these debtors, firms, entrepreneurs, who fulfil some social, economical, echnical, sensible, want of man form effectively and successfully.
Thus, wealth is created by some type of entrepreneurship solely which provides worth for the betterment of society at giant. More over changing into a banker, an organization is essentially entrepreneurship which creates worth by bringing collectively two needy teams – lenders the folks and debtors the entrepreneurs, businessmen.
Banks additionally finance housing, assist customers-home consumers in creating an vital asset for them. Banks additionally widen and make sooner buyer attain by financing autos to them.
Right from daybreak of civilization anyplace and all over the place we see that entrepreneurship alone has bettered human lives by innovating, inventing proper from hearth, wheel, lever, farming to planes, and robots and so forth and including worth for betterment of society at giant.
So, debt is a safe funding possibility. It is if you don’t need to take any danger and need reasonable return in your funding, you select debt. It will not be the perfect funding plan.
Let us transfer additional to extra funding possibility.
2. Gold Investment Plan
Gold is a treasured metallic. But, It stays stagnant, static and it’s static passive asset. 100 grams of gold doesn’t enhance to 105 grams nor decreases to 95 grams. Nor its purity adjustments from 22 Carat to 24 Carat or vice versa.
It doesn’t develop, change, quantitatively nor qualitatively. So, investing in Gold is nothing however mere commodity than asset or funding possibility.
Price fluctuations in these property are solely due to the forces of demand and provide and never due to any change in their intrinsic worth, actual value.
But, Gold although a static passive asset is a particular commodity due to all its qualities, magnificence, indestructibility, condense worth, common acceptance, liquidity and so forth.
A jeweller, an entrepreneur provides worth to gold by making lovely ornaments and sells them at a revenue. But, the identical jewelry loses worth when introduced again for resale.
It has been noticed usually that Gold costs shoot up when there’s recession; shares are stumbling, uncertainty, insecurity and vice-versa.
Statistics concerning Gold costs over final 400 years have established that Gold has all the time preserved the buying energy however have given little or no actual Returns. Exceptional Returns in patches have been nullified by low or adverse returns at different occasions.
So, Gold additionally will not be the perfect funding possibility, moderately it’s commodity and static passive asset. Returns are additionally unsure.
3. Multibagger Stocks
Stocks are by far one of the best ways to make investments your money for higher returns. In reality, numerous folks throughout India indulge in inter-day and intra-day buying and selling on the stock market to make money each day. You could make a minimal Rs.1,000 per day with inter-day and intra-day buying and selling when you get astute information of the stock market, for funding of Rs.1 Lakh and better.
If you research the workings of a stock market and efficiency of sure shares, you’ll discover they fetch the best returns. These are often known as Multibagger Stocks. Refer to any good listing of Multibagger shares and concentrate on 5 to six of those after studying opinions in monetary dailies. Invest on these and commerce each day for higher returns.
4. Mutual Funds
Mutual Funds (MFs) present a superb alternative to make investments your money for higher returns. However, you’ll want to know which MFs are greatest to put your money. The very first thing whereas investing on MFs is to keep away from brokers and distributors.
There’re 4 options- Regular-Growth, Regular-Dividend, Direct- Growth and Direct-Dividend. Among these, I recommend Direct-Growth. That’s since you don’t pay commissions to distributors however purchase on-line instantly from the Mutual Fund home.
And Growth Plan as a result of the Mutual Fund House will credit score extra items to your account definitely worth the dividend you’d get as money. Money invested on MFs in Direct-Growth plans supply the best returns.
If you’re prepared to take excessive dangers, make investments your Rs.100,000 on equity-based Fund of Funds (FoFs) that make investments in overseas markets. This means, you’d be investing not directly on shares on the New York Stock Exchange and different international bourses. Returns on funding can go as excessive as 25 p.c inside a yr. MFs primarily based on equities in India can fetch you up to 18 p.c returns every year and carry reasonably excessive danger.
Debt MFs are reasonable danger and can give you about eight to 9 p.c return on funding whereas Hybrid MFs are mixture of debt and fairness. They present up to 12 p.c returns every year. The lowest dangers are Liquid MFs which is able to present six to eight p.c returns over a yr.
5. Sovereign Gold Bonds
Reserve Bank of India, on behalf of the Indian authorities points Sovereign Gold Bonds or SGBs three to 4 occasions yearly, relying on how effectively the nationwide financial system fares. Each SGB is value one gram of bodily gold. And SGBs are often bought a lot beneath the prevailing market rate of 1 gram 24 carat or pure gold.
The Indian authorities and banks additionally provides further low cost of Rs.25 to Rs.50 if you purchase SGBs on-line and maintain them in dematerialized format.
Generally, the Indian authorities provides a flat curiosity of Rs.200 to Rs.250 each six months on each SGB. There’s a lock-in interval of 5 years for redeeming an SGB. And you possibly can redeem your SGB after a interval of eight years. RBI can pay you the market rate of 24 carat gold prevailing on the time, which is often a lot increased than what you’ve invested.
In mid-2020, the typical value of an SGB stood round Rs.4,000. Meaning, you possibly can maintain no less than 25 SGBs by investing your Rs.1 Lakh and better. This means, you’ll get Rs.10,000 per yr as curiosity yearly and in addition profit from the market rate of gold after eight years, if you redeem the bond. And if wanted, you possibly can promote your SGBs by your Dematerialized or Demat and Trading account to get money inside two working days.
6. Exchange Traded Funds
For some purpose, Exchange Traded Funds or ETFs aren’t that common amongst most traders. That’s as a result of they don’t know what are ETFs and their advantages. Briefly, an ETF is a type of Mutual Fund. It’s a basket of shares.
And like shares, ETFs additionally commerce each day on stock exchanges. Therefore, you should purchase ETFs instantly from an Asset Management Company (AMC) when it comes up with a New Fund Offer or Further Funds Offer. Or you should purchase them instantly out of your Dematerialized (Demat and Trading account).
ETFs enable you to make investments in various sectors with out shopping for particular person shares of particular person firms. For instance, we’ve ETFs that consist of fifty topmost midcap firms or 25 blue-chip firms, gold and different commodities. Their charges additionally fluctuate each day.
If you require money urgently, it’s attainable to promote all or a few of your ETFs on the stock market throughout buying and selling hours. You get the money inside two working days. ETFs can fetch you annual returns up to 20 p.c, if you choose the appropriate ones or purchase throughout NFO and FFO durations.
7. Bank Fixed Deposits
Fixed Deposits have been all the time a favourite of the Indian investor. That’s as a result of they supply between seven and 9.5 p.c annual compounded curiosity relying upon the financial institution and your age.
For instance, the most recent style of monetary establishments often known as Small Finance Banks supply up to 9.25 p.c for male senior residents and 9.50 p.c for girls over 60 years age. For others, the rate of curiosity is about seven p.c, with cooperative banks and India Post Payments Bank paying a bit extra.
Invest your money on an FD to get higher returns, for those who’re on the lookout for one thing that doesn’t contain any obvious dangers. However, be additional cautious whereas deciding on the financial institution. Though cooperative banks present half a p.c extra curiosity, a few of them have crashed since 2019 leaving unusual traders in the darkish over the destiny of their hard-earned revenue.
8. Kisan Vikas Patra
If you’re youthful and looking out to double your money by investing minimum1 Lakh, then Kisan Vikas Patra or KVP is greatest funding plan. This is a Central authorities sponsored mounted deposit scheme that has mounted maturity of 124 months.
It fetches 6.9 p.c compounded curiosity yearly. Meaning, the Rs.100,000 you make investments fetches you Rs.200,000 after 10 years and 4 months. You can purchase KVPs in multiples of Rs.100 and Rs.1,000 every.
You can apply for KVP from any India Post Payment Bank department or submit workplace that provides India Post monetary companies. KVPs are extraordinarily secure and are additionally helpful as collateral whereas taking loans from banks or Non-Banking Financial Companies (NBFCs). However, there’re no Income Tax exemptions for investing on KVPs.
9. National Savings Certificate
The Indian authorities additionally points National Savings Certificate or NSC by India Post Payments Bank. These can be found in denominations of Rs.100 and Rs.1,000 every. These are additionally best for working folks since they entitle you to exemption from Income Tax beneath Section 80-C.
The minimal holding interval of NSC is 5 years. You get 6.8 p.c compounded curiosity yearly. An funding of Rs.1,000 will fetch you Rs.1,389.49 after a interval of 5 years. This interprets as Rs.38,949 curiosity in your funding of Rs.100,000 after 5 years. You can apply for NSCs at any India Post Payments Bank department or a India Post department that provides monetary companies.
10. National Pension Scheme
Want to make investments in your retirement? Invest your money on National Pension Scheme sponsored by the Pension Fund Regulatory & Development Authority of India (PFRDA). However, the one flipside is that you simply’ll have to contribute Rs.100,000 yearly until retirement or hold the money in a financial savings account to pay in your month-to-month NPS contributions.
Despite these flipsides, I might nonetheless suggest NPS as an greatest funding choices for highest returns. That’s since you get to make investments on two completely different pension plans- Tier-1 and Tier-2. If you want, you possibly can choose two completely different pension plans for every tier. And upon retirement, the money goes into annuities. This means, you get a good-looking month-to-month pension upon reaching 60 years of age.
Similar to stock buying and selling, it’s additionally attainable to make investments your money for increased returns on the Multi-Commodities Exchange or MCX. Actually, commodities are stuff similar to gold, silver, copper, lead and different treasured and semi-precious metals. And after all, probably the most treasured commodity, crude oil as effectively.
These commodities commerce every day. Prices rely upon upswings and downturns in the worldwide market. Commodity buying and selling has helped numerous folks worldwide to turn into millionaires.
You can commerce in commodities with some information concerning the market and buying and selling value historical past. And by studying from a number of on-line tutorials which might be accessible free or for a small price. Unlike stock buying and selling, which happens solely when stock markets are open, commodity buying and selling is around the clock. Therefore, you want to be additional alert on what to purchase, maintain or promote to make large money.
12. Investing on Art
I’m not suggesting you attend an public sale at Sotheby’s or Christies to purchase a Michelangelo or Picasso portray. With a mere Rs.1 Lakh you received’t get something close to that. However, you possibly can make investments in artwork from budding artists whose work and sculptures or different artworks are already in demand.
Visit some artwork galleries in your metropolis and attend a number of artwork exhibitions. You can even find out how to make investments on artwork from numerous on-line assets. Actually, you should purchase a number of items of artwork by investing your Rs.100,000. And for highest returns, promote the artwork at auctions or to particular person collectors at your value. Investing on artwork is the most recent development worldwide and now’s the appropriate time to put your money.
13. Diamonds as Investment Option
Diamond is among the costliest crystals in the world. In India, a one carat common Diamond prices round Rs. 3 Lakhs (the place as a 3 carat Diamond was costing Rs. 50 Lakhs.
Its extraordinarily condensed worth and portability bestow Diamond as a type of emergency funding for the dictators, Rulers, Super wealthy on a panic flight.
Like Gold, Diamond can also be a commodity. It stays stagnant, static. It is static passive asset. If you purchase a 2 Carat diamond, hold it for 20 days or 20 years, it doesn’t develop to 3 Carat nor does #1 diamond turn into quantity 2 diamond.
It has no fungibility. Being brittle, it may very well be simply scratched, broken. Therefore, troublesome to preserve. Large variety of variables in high quality makes pricing troublesome, subjective. Hence, no mortgage is given towards Diamond as safety.
Because of all this no terminal market for Diamonds, ensuing in no liquidity.
So, Diamonds are under no circumstances an funding possibility for anyone. You can purchase diamond and it could be used to show-off of possessing an costly gem.
14. Real Estate (R.E.) Investment
People say, actual property is the perfect and most secure funding possibility, is it?
Real Estate moderately is a excessive funding possibility. You can make investments your money in plot, flat, bungalow, store and different kind of properties. You can discover funding choices from Rs 1 lakh to Rs. 1 Crore relying upon the scale, location and sort of property.
Further, transactions of R.E. are all the time dangerous due to issues in title disputes. There are many frauds seen. Transaction price can also be excessive i.e. round 10% of the price. R.E. has little or no liquidity. You can promote 1 tons of Gold value Rs. 300 Crores & understand the money in couple of days.
But, if you find yourself in dire wants, chances are you’ll not get even ¾ th the worth of a single mattress room flat in an entire yr.
You want by information, lot of Experience, perspective & numerous money to purchase proper kind of R.E., on the proper place on the proper time & value. Over and above, this one wants holding energy of 5 years to 10 years to make R.E. funding secure & worthwhile.
This will not be simple proposition for many of us. Like a stock market or Gold markets, there is no such thing as a market as such for R.E. the place correct value discovery takes place.
Real property can also be static and passive asset.A 1000 Sq.ft. flat, 10,000 Sq.ft. plot, or 10 acre farm land change or develop robotically even when held for 20 days or 20 years.
Real property can also be very particular static passive asset which has essential important makes use of in each sphere of our lives. Owning a home is lifelong ambition matter of sentimental- emotional satisfaction for nearly each one.
Of course R.E. is tangible in actual sense, has some vital makes use of like establishing your private home, homes, faculty faculties, factories, roads, purchasing malls, workplaces and so forth. Thus, entrepreneurship can add nice worth to it.
You have to contemplate all of the above circumstances earlier than investing into Real Estate. Real property can also be not greatest funding choices. Keep your curiosity on earlier than we transfer on to extra funding choices.
15. Equity Investment
Buying a share of an organization means shopping for the smallest unit of possession in an organization or an enterprise. Out of the greater than 5000 Companies that are listed on BSE and NSE, there are various good firms rising at a Compounded Annual Growth Rate (CAGR) of greater than 18 %.
This means their Net Profits (N.P.), Earning per Share (EPS) have gotten double in each 3 to 4 years. Consequently, their e-book values (B.V.) and actual value are additionally rising & doubling each 3 to 4 years.
Let us take some examples of firms which have given excellent returns.
For instance, Infosys is a software program large. If you had invested Rs. 1,00,000/- in Infosys (INFI) IPO in 1993, you shares would have been worth of Rs. 30 Crores now. i.e. 3000 occasions enhance. This great development in share holding works out to be at a CAGR of greater than 40 % means the stock doubled in worth each 1.80 years.
IPCA Labs grew at greater than 17 p.c Compounded Annual Growth Rate (CAGR) from 2009-10 and 2013-14 Its Earning Per Share (EPS) of Face Value Rs. 2 grew greater than 2 occasions from Rs. 16.75 in 2009-10 to Rs. 37.83 in 2013-14. Book Value (B.V.) additionally elevated greater than double from Rs. 69.86 in 2009-10 to Rs. 157 in 2013-14.
Net value obtained doubled from Rs. 874 Crores in 2009-10 to Rs. 1980 Crores in 2013-14. Net revenue (N.P.) additionally obtained doubled from Rs. 209 Crores in 2009-10 to Rs. 477 Crores in 2013-14. The share capital was unchanged at Rs. 25 Cr.
This signifies that intrinsic values of Infosys and IPCA shares obtained greater than double throughout these respective durations round Compounded Annual Growth Rate (CAGR) of greater than 18 p.c. The true worth, actual value of those shares elevated, doubled on their very own in 3 to 4 years. There are all the time many such examples and corporations.
This clearly exhibits that shares of excellent rising firms are all the time rising in real-intrinsic values-Earning Per Share, the e-book values. Hence, they’re actually rising Active and Dynamic asset.
So, funding in good and rising fairness is funding in an energetic, rising dynamic asset, all the time rising in actual worth. When the true- intrinsic- actual worth of the asset is rising, the market worth of the asset is sure to go up earlier than later.
All the property besides fairness are like mere commodities. They can’t do something on their very own, stay stagnant and therefore are static, passive property.
Price fluctuations in these property are solely due to the forces of demand and provide and never due to any change in their intrinsic worth, actual value. These property don’t develop, change, quantitatively or qualitatively.
They stay stagnant and static. These are static passive property.
After peeping deep in to the hearts and souls of all these property, it’s crystal clear that human entrepreneurship, desires, experience, alone are all the time answerable for worth addition, wealth creation in this world.
And from the viewpoint of traders amongst the highest most human enterprises are the nice company firms listed on B.S.E. and N.S.E. for the numerous benefits of investing in the listed firms.
We have seen that every one the funding property besides fairness can not change or develop in their real-intrinsic values. Hence, all these property besides fairness are stagnant, Static, Passive, Assets.
For getting any returns from these property, you’ve to solely rely on the forces of demand and provide moderately than any development in their intrinsic worth which is inconceivable. Mere and whole dependents on the forces of demand and provide for value enhance, returns, are speculative, dangerous, unscientific strategy.
It is crystal clear that the human entrepreneurship alone has been and all the time can be answerable for creation of all of the wealth in this world.
The greatest avenue for funding in this good entrepreneurship is investing in good rising fairness shares of excellent rising listed firms rising in actual value, intrinsic worth on a regular basis as seen in the examples of Infosys and IPCA LABS.
Hence, fairness shares of excellent rising firms, rising all of the occasions, in intrinsic worth actual value alone are Active, Dynamic, Creative, Assets and therefore undoubtedly the perfect Investment Option and Asset Class.
Remember, investments aren’t simple. You want to assess how a lot money your Rs. 1 Lakh will fetch over a interval of years utilizing the Time Value of Money formulation and see how that matches together with your monetary targets for future. These high 10 methods to make investments your money in India ought to fetch higher returns.