So you had started deciding your future investment plans? That’s great, nowadays it’s very easy to invest anywhere, at any time in a matter of a few minutes. Which can also be a burden.
But…how the heck do you decide which investment alternative to choose? There’s so much info out there on the web, and everyone’s telling you to do different things. Who do you listen to? Who is preaching the best?
That’s the thing you should focus on. A wrong move now, can become a serious roadblock later on. Okay, let’s move on!
There are many alternatives for investment but…..
What is the best source to invest for highest returns?
Of course, stock market.
When it comes to “profitability” The other 2 can’t beat the stock market.
However, investing in mutual funds is the indirect way to invest in the stock market where Mutual fund manager manage your money, promising the best returns in consideration of fees.
The average returns from top performing funds trail between 15% to 20% annualized for last 5 years, let me name few of them:
- Reliance pharma fund – 21%
- SBI FMGC funds – 17%
- ICICI Pru-tech funds – 14%
Some mutual funds had performed well in past but that doesn’t guarantee that they will continue performing well in future too.
However, directly investing in the stock market is also not everyone’s cup of tea. No doubt, it is the highest returning source to many Investors but it’s risky as compared to another alternative.
If you’re already investing in the stock market (if not, you should start investing), then you may know that you can buy any amount of companies. 1 stock or 1000 – no limitations. Which makes equity a flexible investment.
You can also liquidate cash for shares at any time in few minutes. Above all this, it gave the best returns in past many years.
Real estate is worst in this scenario. It had performed even worse than FD returns. And for a common household person, it’s not possible to lock lakhs of money in a tangible asset which will take ample time to liquidate, in case we need the money at the time of adversities.
So where to invest?
Again, it depends.
If you great enough to analyze the market and stocks then invest in stock market. If not, my suggestion would be to invest in Index Funds.
What’s this Index Mutual Funds?
An Index Fund is a type of mutual fund with a portfolio constructed by buying all the stocks of any specific index, such as the Sensex. In simple words – Investing in all the stocks in Sensex for a certain period of time.
And Yes! It is the best way to invest in the stock market if you know nothing about the stock market.
Have a look – how much return Sensex has delivered in last 5 years:
It’s 77.16%, that means a return around 15% annually, non-compounded.
And I bet, Index will always guarantee better returns with less risk. Due to less managerial requirement, these funds are free from human errors and comparatively it retain fewer charges equal to 1% as compared to other Mutual funds Scheme (2% to 3%).
What if Index stops growing?
It will not.
An Index like Nifty, Sensex will keep growing up in coming future. And due the growing awareness of equity, people investing in equity will increase which will eventually boost this Index further.
Remember, Index only works if you invest your money for more than 3 years because even Index can give bad returns for a year or couple but in the long run, it’s a gold mine for Investors who are looking for a long-term investment with no or less risk.
So the conclusion, which I had already stated earlier, is – If you great enough to analyze the market and stocks then invest in stock market. If not, my suggestion would be to invest in Index Funds.
Mutual funds and Real estate suck!
I found that some readers are not agreed with some Investment options. Following are some question raised by people (which I found useful for other readers also):
Disagree about real estate is worst investment . Actually depends on cyclicals.Its bull market phase so presently can say stocks are better option.Trust me it all changes during bear phase.
“Real estate is worst in this scenario”
Yes! I said it.
And I also said:
“…..for a common household person, it’s not possible to lock lakhs of money in a tangible asset which will take the time to liquidate at the time of adversities”
And here I mean to say that for an average person who is struggling to find the best investment opportunity considering that he can’t invest in all at a time.
Returns over one year are annualised so Reliance Pharma fund has provided 21% returns every year for 5 years. thats way more then what sensex has provided.
Yes. I agree but it is based on a single sector which tumbles its long-term consistency as sector gets them in cyclic trend, especially pharma. And index based investing depends on all the sectors, therefore, less risky for those who don’t know what to do.
However, people are showing great interest in Mutual funds:
Let’s meet you in comments. I read and respond to every comment.