The main goal of investing is to generate good returns over a period of time. Investing money not only allows you to multiply it, but also helps you reach your financial goals easily. You may use the accumulated sum for various purposes,such as saving for your golden years, start or expand your business venture, fund your child’s education expenses, or for medical emergencies, besides others.
In case you are looking to build a strong financial portfolio, you may know that there are numerous available investments with high returns. Following are six financial vehicles that you may consider if you seek high returns.
Direct equity refers to investment in the stock or share of a company. Purchasing stocks represent part ownership of the company. Such a type of investment provides for higher returns. However, it is important to note that direct equity comes with a higher risk and hence is only suitable for individuals who have a high-risk appetite. You may invest in shares that are traded at the National Stock Exchange or the Bombay Stock Exchange. In order to invest in direct equity and trade successfully, it is necessary to open a dematerialization account with a brokerage house.
Equity Linked Savings Scheme
Equity Linked Savings Scheme (ELSS) is one of the best investment options to build wealth over a period of time. These are diversified mutual funds, whose returns are subject to market risks. You are likely to generate higher returns if the market performs well,and vice versa. These funds generally come with a three-year lock-in period.
ELSS funds are a highly preferred investment option due to the high rate of return. As opposed to traditional schemes, which generate an average 6-8% rate of return, ELSS funds produce higher returns in favorable situations in the stock market. Another advantage of this type of investment is the tax benefit. You may seek tax deductions under Section 80C of the Income Tax Act, 1961, up to a maximum limit of INR 1.5 lakh per financial year. Additionally, the long-term capital gains of such fundsare tax-free.
Equity funds are a type of mutual fund, wherein numerous investors purchase shares of a fund, and the fund buys stock in various companies. Such funds form an important part of an investment portfolio. If you are looking for types of investments that give high returns, you may consider investing in mid-cap and small-cap schemes. Mid-cap schemes refer to investments made in medium-sized companies, wherein the risk is slightly higher than large companies. Such funds pay dividends and have a great potential for growth. Small-cap funds indicate investments in small companies. These are highly risky, but successful, and may result in a great increase of share prices. Remember, mid-cap and small-cap schemes are highly volatile in nature, and hence you may invest in such funds only if your risk appetite is high.
Initial Public Offerings
Companies make their shares available to the public through Initial Public Offerings (IPOs) on the primary market. You may, therefore, subscribe to the share capital of the company at a certain issue price. The company then allocates shares according to the prescribed rules and regulations. You may buy or sell the shares on the listing date, once they become a part of the secondary market.
If you are looking to earn high returns, IPOs are an ideal investment avenue. An Economic Times Online story confirmed that around 65% of newly listed companies in 2017-18 traded above the issue price, thus allowing investors to earn around three times the investment. It is, however, important to analyze the underlying business before subscribing to their shares. You may examine the company’s prospectus to get an overview of the company – what it deals in and what it wishes to do with the money raised. You may also peruse details about the management team. Doing so will help you determine if investment in the company’s IPO has the potential to fare well.
Unit Linked Investment Plans
Another beneficial option is Unit Linked Investment Plans (ULIPs). These offer a dual benefit of investment and insurance coverage. Part of the premium amount isused to meet your insurance needs, while the remainder is invested in financial vehicles such as bonds, stocks, and mutual funds. The good news is that you may generate good returns by investing in equities. Note that equity funds are a suitable option only if you are a huge risk-taker.
There are countless advantages of investing in the real estate sector, the main reason being the high growth rate. According to the India Brand Equity Foundation (IBEF), an initiative by the Government of India, the real estate sector is slated to grow at 30% over the next decade. It is expected to reach around USD 180 billionby the year 2020. With such expected growth, one can safely assume that the rate of returns on real estate investments is going to be positive. Numerous sectors such as hospitality, manufacturing, commercial, retail, and housin6g, among others hold growth prospects. You may note that such an investment option is less volatile and risky as compared to other investment vehicles. In fact, it may be used as a hedge against inflation.Another advantage of investing in real estate is that you may avail of a tax rebate of up to INR 1.5 lakh towards payment of your housing loan.
There are numerous types of investments available in the market. The key aspect is to choose high return investments based on your risk appetite, tenure, liquidity, and taxation point of view. You may keep the aforementioned investment avenues in mind and diversify your portfolio with a goal to build financial stability.