What are the investment options for the Indian Middle Class…!!
Indian middle class is the backbone of Indian economy. As India is the domestic driven economy, the Indian middle–class acts as an engine for the economy by creating demand in the economy. Indian Middle class is growing at an impressive pace and will soon overtake US to become the second largest market. As we know that Indian middle class is quite popular for its excessive saving. But trends are changing quite fast, Indian middle class is now keenly interested in investing.
Investment is a crucial part of earning, whether it is planning for the short-term goals or long-term goals. There are various investment vehicles available in the Indian capital market for every kind of investor. Every investment product comes with own risk and returns. So, before investing in any investment product, an average middle–class person must match his/her risk profile with the associated products. All investment products come in two categories – Financial Product and Nonfinancial Product. Financial assets are categorized into market linked (stocks, equity) & fixed income product (Fixed Deposit, PPF and saving). The Non-financial product is like real estate, gold and other hard assets. Let’s look at the best investment for the Indian Middle class:
Investing in equity is highly rewarding, especially in the long term. But Investing in equity is not everyone’s cup of tea. Rewards always come with a risk factor. For an average investor, picking the right stock and timing of your entry as well as exit matters a lot. But the only silver lining is the longer period. Equity has provided great returns in case the investment period is longer. But it’s better to watch the market on a regular basis.
- Mutual Funds:
Mutual Funds are mainly two types, i.e. Equity and Debt Mutual Fund. This is one of the simplest and best methods for an early investor to learn the art of investing. Equity Mutual fund mainly invests in the equity market, whereas the Debt Mutual Fund mainly invests in the debt market. An equity mutual fund is an ideal investment for those who want to take risks or have knowledge about the capital market. A Debt mutual fund is ideal for steady returns. They are less volatile and less risky compared to equity fund. It mainly invests in treasury bills, corporate bonds, government securities and treasury bills. The average return in Indian equity mutual fund is between 12 to 15, whereas the average return in debt mutual fund is between 6 to 10 percent.
- RBI Taxable bonds
It is one of the safest investment vehicles. It is almost risk-free investment. These bonds come with a tenure of 7 years. The bond can be issued in demat form in the ledger account of the investor after the purchase.
- Traditional Saving Deposit:
There is other traditional investment vehicle where an average middle class invests such as NPS (National Saving Scheme), PPF (Public Provident Fund), Fixed Deposit and SCSS (Senior Citizen Saving Scheme). The average return on these investments is between 6 to 8%.
All these fixed income and market linked investment have a role to play in the process of wealth creation. While one helps in the creation of wealth, the other helps in the preservation of wealth. A smart investor can ideally distribute their investment in both these products.
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*Mutual fund investments are subject to market risks. Please read the scheme information and other related documents carefully before investing.