There are two categories of avenues that investments can be categorized into – Financial Avenues and Non-Financial Avenues. While financials are the ones like mutual funds, money market instruments, fixed income products, etc, Non-Financial instruments are real estate, commodities, gold, etc. 

Generally, investors prefer investing in a mix of both avenues to achieve the appropriate and optimum level of diversification. This way they also gain exposure to their choicest investment instruments. 

Top 10 Investment Instruments that Investors consider Investing in;

1. Direct Equity

Direct equity refers to investing in direct stocks of a company that you wish to invest in. Investing in direct equity is not simple and demands the utmost attention and skill. It is quite a risky game there is no cushioning against a wave of downfall if it may occur to the profits of a company. You need to be very careful about picking up the right stocks, at the right time, with the right amount and a long list of all the rights. You must enter the market at the right time and exit at the most appropriate time as well. Investing in direct equities requires an investor to open a Demat account that allows him or her to trade in the market. The plus point with investing in direct equities is that you can expect a high return over a long term of investment say 10 to 15 years when can even deal at par with increasing inflation. 

2. Mutual Funds – Equity

One of the best alternatives to investing in direct equities is investing in equity mutual funds. investing in equity mutual funds comes with the biggest benefit of investing with a strategic approach that generates great returns with a hedge against risk. Equity mutual funds are predominantly invested in equities of companies with at least 65% contribution to equity. These instruments are professionally managed by a fund manager and are known to be better diversified. 

Fund selection becomes a crucial thing at this point as it will be the major factor responsible for both risks and returns. As an investor, you must do comprehensive research and dig down deep into the history of instruments you are planning to invest in. For example, when you invest in mutual funds, you must have a look at the past few years of performance, the market presence of the fund house, dividend payment style and investment strategy. 

This way you will better be able to have an understanding of the things that will actually hold some value while you invest in that fund. Another factor that needs to be considered while selecting funds is your risk profile. There are basically two types of investors – low-risk appetite investors and high-risk appetite investors. Depending on your risk profile, you need to make the fund selection. If you are a low-risk appetite investor, you would want to stick to instruments that are moderately rewarding and less risky. 

3. Mutual Funds – Debt

Debt mutual funds are best suited for investors looking forward to investing in less risky investment instruments. These are known to generate steady returns over the course of investment and are mostly fixed-interest instruments. Major investments are made in treasury bills, certificates of deposit, corporate bonds, commercial papers, and other money market instruments. 

4. National Pension Scheme (NPS)

This government-led scheme is one of the most highly offering fixed returns schemes. The scheme, as the name suggests, is focused on retirement planning and funding and is regulated by PFRDA i.e. Pension Fund Regulatory and Development Authority. There are two tiers under which you can maintain an account as per your fund requirements. The NPS tier-1 account has a minimum balance requirement of Rs. 1,000 which has recently been lowered from earlier Rs. 6,000. 

5. Public Provident Fund (PPF)

Public Provident Fund or PPF is one of the most sought-after fixed interest investment options in India after a fixed deposit. It has a huge lock-in period of 15 years but accounts for a tax-free interest that gets compounded over the years. Given the current market situation and volatile trends, PPF is also one of the safest options available to investors. 

6. Fixed Deposits

Bank fixed deposits and post office recurring deposits also fall under the category of fixed interest rate instruments that come with a lock-in period. These instruments guarantee the safety of money and a fixed return over the principal investment. The interest earned over FD’s is, however, taxable in nature and can be withdrawn monthly, quarterly or half-yearly as per requirement. 

7. Senior Citizen Savings Scheme (SCSS)

The Senior Citizens Savings Scheme or SCSS is quite popular among the retirees or people nearing retirement. The scheme is only open for people who have already retired or are senior citizens. If you are 60 years of age or more, you can simply visit your nearest bank branch or post office branch and avail the scheme. The scheme has a lock-in of 5 years extendable to 8 years upon maturity. The current interest rate of SCSS is 8.3% and is a fully taxable scheme. There is a ceiling to the principal investment of this scheme i.e. 15 lakh rupees. 

8. RBI Taxable Bonds

RBI taxable bonds are available to investors with a lock-in period of 7 years at a current rate of interest of 7.75%. A Demat account is required in order to avail of these bonds and can be issued in the form of Demat forms. The holdings can then be issued and credited to a Bond Ledger Account of the investor for further processing. A certificate of holdings is issued in the name of the investor against the money he or she has invested. 

9. Real Estate

Real estate refers to the physical property investors buy to avail and earn benefits from it. It must be considered that if you own a house that you live in, then it is not your real estate investment as it is not generating any returns. If you possess a property other than the property you are living in then you are invested in real estate. There are several forms of real estate investment like commercial property, flat, floor, house, open ground, etc. 

10. Gold

Of all the options listed above, Gold has been the most trending investment option the passing year especially in the latter half. Sharing an inverse relation with the stock market, gold is known to perform well during a market slowdown. Gold is an excellent way of diversifying your portfolio that not only hedges against risk and volatility but also safeguards against rapidly increasing inflation.

Happy Investing!