A Breakup of Where Indians Invest Their Money

14-June-2021 |

Indians have more money today than ever, and they are looking to invest. The advent of technology has soared financial literacy, and individuals are now moving on to more lucrative opportunities that offer higher returns and help branch out their risk portfolio through diversification.

These non-traditional asset classes allow individuals to explore options that can serve a dedicated purpose, such as stocks to build wealth over time or a regular income plan to ensure financial stability, or perhaps a savings plan to accumulate a sum to fulfil financial goals.

Here we explore where people invest money in India:

 

Equity

Securities markets have largely remained bullish over the previous decade with no signs of stopping, and more investors are looking to capitalise on the frequent rallies. Stocks, albeit high-risk instruments, are a rewarding investment, and relatively safer choices such as blue-chip stocks have mostly thrived with stable yet significant profits.

A high yielding investment option for individuals can be an initial public offering (IPO), i.e. when companies first offer their shares in the open market. Applications are received for these shares, which are priced as a range, and allottees of such shares often receive sizable returns on their investments within a short period of time.

 

Mutual Funds

Mutual Funds are a fractional-ownership investment option consisting of a pool of money raised from numerous investors and diversified between multiple asset classes across different degrees of risk. These funds are a great choice for investors who do not wish to spend time concocting a personal diversification scheme but want to put their money into a managed risk environment.

Mutual funds are also known to offer Systematic Investment Plans (SIP) to investors who wish to contribute smaller amounts at regular intervals as against a lump sum amount in a single payment. This enables investors to invest and compound their savings at the same time while also incorporating rupee cost averaging, which enables investors to average out their savings during a period of fluctuations in the market.

 

Bank Deposit

 

  • Fixed Deposit: A sizable majority of the population of India invests in fixed deposits. These are low-risk, low-return investments that can also be used as collateral for acquiring debt. Fixed deposits offer a variety of investment periods ranging from seven days to ten years. This gives individuals the opportunity to invest short term money as well as lock away funds for an elaborate period without having to deal with market fluctuations and risk.

  • Recurring Deposit: Recurring deposits are another investment opted by Indians where monthly contributions supplement savings while simultaneously earning interest on the capital. RDs are similar to SIPs in nature; however, they offer much lower returns on investment, although with lower risk to match.

 


Bonds

Bonds are debt instruments issued by corporations and the government to raise funds for a particular objective. They are low-risk investment options that offer near-guaranteed# returns and fixed incomes in the form of interest payments over a predefined period of time. The government offers tax-free* options as well that carry decent interest rates and are insured by the government to offer stress-free investment opportunities for individuals with lower risk appetite.

Employee Provident Fund


A provident fund is a retirement scheme investment where a portion of an employee’s salary, which is matched by the employer, is contributed towards the fund. The fund is accompanied by a sovereign guarantee# safeguarding the capital, and with long lock-in, periods compounding creates a generous pool of wealth while also providing tax* deductions.

 

Assured Income Insurance Plan

An assured income insurance plan is a guaranteed# money investment plan often preferred by those who wish to stay away from risk and put their money into options that can warrant the security of their earnings and, perhaps, develop slowly but surely. Additionally, these plans have a life cover component that guarantees# financial protection for the family in your absence.

Tata AIA Life guaranteed# returns plans and regular income plans are good choices for an individual with a low-risk appetite looking for options that can provide them with a guaranteed# income upon maturity as well as life coverage, with the added benefit of the return of premium.

 

Life Insurance Plan

Indians have been seen investing in life insurance plans in order to secure their future, to seek out a safe option for their own retirement and even to secure their families in the event that they are no more. Insurance plans are a great option to diversify investments; they are extremely low-risk instruments and offer great financial security coupled with tax* benefits.

 

Traditional Asset Classes

Conventional assets such as gold and real estate still remain one of the largest investments made by Indians, with gold accounting for almost 48% of all investments made in physical assets. These assets have proven to be safer investments throughout history; however, most individuals in India do not look to these options as an investment opportunity, rather a part of culture and legacy. 

 

Conclusion

The rise of the Indian economy is improving financial inclusion, and being the second largest population in the world, India plays a significant role in the global financial market. Increasing financial literacy is allowing young Indians to invest in exciting new opportunities that offer significant returns over a much shorter period of time, though attached with some risk, only to rival the higher risk appetite of the youth.

The introduction of modern investment platforms offers comprehensive analyses and detailed comparisons between different options, enabling Indians to better understand the financial landscape of an economy and allocate their earnings guided by their goals.

 

L&C/Advt/2021/Jun/0828

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