HomeInvestmentBest Investment Options for Beginners in India 2024

Best Investment Options for Beginners in India 2024

Investing is not just a science; it is an art of the finest order, one that not only helps you accumulate wealth for future safety but also helps you meet your goals at periodic intervals while combating inflation and earning stellar returns at the same time. Does that sound like a tall order? Undoubtedly it does!

However, there is one fact that cannot be disputed by even the most hard-nosed expert, namely the law of starting young and staying patiently invested for the long haul.

It is basic logic; the longer you stay invested, the more you stand to gain through the power of compounding and long-term spreading out of risks simultaneously.

Hence, the earlier you start investing, the better it will be for accomplishing future goals including buying that snazzy new home, driving a luxury car, and taking a foreign vacation among others.

If you are a rank beginner in the world of investments, you should keep certain factors firmly in mind. Firstly, you should assess your financial position before commencing any investment. Work out how much you can allocate for investing every month.

Make sure to account for all your expenditures and keep some money for basic savings before allocating money for investments. Secondly, assess your risk appetite, i.e. how much risk you are willing to take for your investments, and then create your investment plan likewise.

If you are investing in the early stages of your career, then you can consider adopting a strategy with higher risks since you have the benefit of time and compounding to even out the risks in place.

Thirdly, remember that there is no such thing as a low-risk and high-return investment option. Returns and risks are linked directly, i.e. the higher your risks, the higher the possibility of earning good returns.

Choosing the Right Investment Plan for Your Needs

While choosing any investment plan, you should match your risk profile to the risks associated with any investment product. Some investments come with higher risks although they can generate returns that may surpass inflation comfortably in the long run. Investments are usually subdivided into two categories, namely non-financial and financial assets.

The latter may be further segregated into products linked to the market such as mutual funds and stocks and products that generate fixed income such as FDs at banks and PPF (Public Provident Fund). Non-financial assets may involve real estate and gold.

6 Best Investment Options for Beginners in India

Here are some of the best investment options for beginners worth considering:

1. Equity Investments

Stock investments may not be suitable for everyone since they are comparatively volatile without any guarantee of earning returns. It is also tough to choose the best stocks while timing entry and exit impeccably. The only positive here is that equity has delivered returns that are higher than inflation levels over a sustained period from a historical perspective.

However, there are still risks of losing a major chunk of your investment or capital unless you choose a stop-loss system for keeping losses at bay. In the stop-loss method, advance orders are placed for selling any particular stock at a specific price point. To lower risks at one level, investors may consider diversifying throughout various market capitalizations and sectors. You should open a Demat account for direct equity investments.

2. Equity-Based Mutual Funds

Equity-based mutual fund plans make investments majorly in equity stocks, i.e. a minimum of 65% of assets should be deployed in equity and equity-linked market instruments as per the SEBI (Securities and Exchange Board of India) guidelines. Equity funds may be passively or actively managed.

In the latter category, returns are majorly dependent on the ability of the fund manager to churn out solid returns. ETFs and index funds are managed passively and they track their benchmark indexes. Equity schemes are segmented based on factors like market capitalization, sectors in which investments have been made, and so on. They are also classified based on domestic or international investment blueprints.

3. Debt Mutual Funds

These mutual fund plans are ideal for those who wish to invest in instruments with lower risks and volatility. Debt funds majorly invest in fixed-interest market securities such as government securities, corporate bonds, treasury bills, money market instruments, and commercial papers. They are not completely free of risks since they have both credit and interest-rate-linked risks to bear.

You can invest in mutual funds via SIPs (systematic investment plans) which enable you to build up wealth through smaller investments every month. Investments can be started for amounts as less as Rs. 500 each month and you can enjoy higher liquidity, i.e. the ability to withdraw your investment at any time.

If you wish for higher tax benefits, then you can invest in tax-saving mutual funds such as ELSS (equity-linked savings scheme) which comes with tax deductions up to Rs. 1.5 lakh under Section 80C.

However, these plans have 3-year lock-in periods which you should always account for. It is a good idea to invest in mutual fund plans based on your risk appetite for the future. If you start early, you can amass significant wealth with the power of compounding and rupee cost averaging which automatically diversifies and spreads out the risks.

Some other Investment Options

If you are seeking some safer best investment options to add to your portfolio, then you can consider the following:

4. NPS (National Pension Scheme)

With an eye on the future and your retirement, you can invest in NPS and the minimum amount for remaining active has come down to just Rs. 1,000 annually. This is a mixture of corporate bonds, fixed deposits, equity, government funds, and liquid funds. You can decide how much to invest via NPS inequities based on your tolerance and appetite for risks.

5. PPF (Public Provident Fund)

PPF is one of the best investment products to add to your portfolio. These accounts have 15-year tenures and help you earn sizable returns through compounding. The interest and principal are both guaranteed by the Government and are free from taxes as well. Rates on interest are periodically reviewed by the Government and you can get deductions up to Rs. 1.5 lakh on PPF investments under Section 80C.

6. Fixed Deposits

You can invest in a bank fixed deposit (FD) which is insured up to Rs. 5 lakh with effect from 4th February 2020, as per the DICGC (Deposit Insurance and Credit Guarantee Corporation) regulations. Coverage previously stood at Rs. 1 lakh (maximum) for both interest and principal.

You can choose half-yearly, quarterly, monthly, or yearly payouts or cumulative interest options for your fixed deposit. The interest that you earn will be added to your annual income and taxed based on your applicable income tax slab. There are however tax-saver FDs that come with fixed lock-in periods.

At an early stage in your career, if you are sure of your job stability and monthly income, you can invest in real estate. You can buy a home with a home loan that gives you sizable tax benefits under Sections 80C (principal repayment) and Section 24 (interest repayment up to Rs. 2 lakh).

Investing in a home will be a valuable future investment since it will be appreciated while you will be able to repay the loan throughout the early years of your career until you reach a relatively stable and comfortable position. These are some of the best investment options for beginners who should check out.

Ajeet Sharma, the founder of Financegab and a well-known name in the field of financial blogging. Blogging since 2017, he has the expertise and excellent knowledge about personal finance. Financegab is all about personal finance which aims to create awareness among people about personal finance and help them to make smart, well-informed financial decisions.


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