How To Choose The Best Investment Option Or Plan For You?

When starting the investment journey every investor is hit by this one question “how to invest in stocks” or “what are the investment options available in the market”. These questions when answered provide clarity on where to move in the market or simply where to invest.

But as it is with all things, choosing an investment option or plans requires you to try as many things as possible then select what is best for you. There are many factors that surround this question, so let’s discuss it in detail.

Different Types Of Financial Investment Options

There are different types of financial investment instruments available in the market. What are they you ask…

  1. Stocks: These are the most popular investment options among the younger generation. Here you buy a shares of a company
  2. Mutual funds:  Pool of funds collected from investors and then invested in financial instruments which is managed by professional fund managers.
  3. Gold: gold has proved to give substantial gains over the long term.
  4. National pension scheme(NPS): NPS is a government sponsored scheme that allows you to build a corpus for your retirement.
  5. Provident Fund: it is a retirement saving scheme offered by the government of india with the aim of providing a secure post retirement fund.
  6. Bonds and debentures: companies take money from investors and in return give fixed interest to them.

How To Choose The Right Investing Option For You?

There are a few questions that can help you in selecting and choosing where you should invest, so try answering them for better decision making.

  1. What Are My Investment Goals?

    Why do you want to invest it might vary from Retirement planning:
    Long term goals like dream house
    Short term goals like a car
    Fund for Education 
    Achieving financial security

  2. How Much Money Can I Afford To Invest?

    You should not invest all your money and have some kind of emergency fund. Even from your savings just invest a part of it in the market and keep increasing it.

  3. What’s My Risk Appetite?

    Risk appetite is how much money you can risk in the market. If you are young with no responsibilities then try higher risk appetite options but if you are an adult and can not risk much of your money then try investing in less risky options like bonds and FD.

After answering to the above questions, it will be more clear for you to choose a good investment plan according to your goal. And here are some points you should must consider before taking any investment plan.

  • Draw A Personal Financial Roadmap

Before you start investing without any know how about anything, just sit down, relax your mind and take a pen and paper and take a look at your financial situation, it is even important if you have never made a financial plan before.

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Figure out your goals and time period for your investment and be aware of your risk appetite. Know this that there is no guarantee that you will surely make money from your investments, but if you start investing and follow an intelligent plan then you should be able to make a decent return off your investments.

  • Why Should You Be Clear On Your Financial Goal?

Simply told, your investment type is hugely dependent on your financial goals. For example, if you have a low risk appetite and want a stable return with a long term investment then consider a Public Provident Fund (PPF).

In another example, if you want to achieve financial freedom or you need to fund your child’s education then it is a good idea to invest in the stock market. Here you can digest any short term volatility with a longer time period of investment.

So it is a critical decision that you should make before you start choosing the right investment option.

  • Mix Of Investments

Never put all your money under one kind of asset. Always include assets that provide positive returns under different market conditions, this could protect investors against hefty losses.

For example, under a bullish market a great decision would be to buy stocks but under a bearish market you should move away from stocks and try investing in assets like gold which provides a great hedge against the volatility of the market.

Try investing in assets which move in a different direction from each other so even when one asset is going down other assets can protect your portfolio from suffering a great loss.

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We have talked a lot about the importance of asset allocation and how it helps you in achieving your financial goals, this is achieved by mixing various assets in your portfolio.

If you don’t include enough risk then you will not get great returns to fulfill your goals, on the other hand if you include too much risk then you could lose your entire investment. So keep a balance.

  • Liquidity And Withdrawals

Keep in mind that you might need money that you invested, so don’t invest all your capital in assets that are not liquid as it might create a problem as you won’t be able to fulfill your capital requirement when needed the most.

End thought

Fundamentals of investing lies in investing based on the requirements and not just parking your money away. So have a clear view on why you want to invest and what are your goals.This will help you in choosing the best investment avenue that suits your investment needs the best.

Frequently Asked Questions  (FAQs)

  1. How Do I Choose The Right Investment Option For Me?

    For choosing the right investment options you must have clarity about your financial goals, risk capacity and the time period of your investment. When you know these answers then it’s easier to choose the right investment option.

  2. What Type Of Investment Is Best For Beginners?

    There are many options available in the market but if you are a total beginner then you must consider these:
    – High yield savings account
    – Mutual funds
    – Exchange Traded Funds ETFs 
    – Stocks 
    – Fixed Deposits (FD)

  3. Which Trading Is Most Profitable?

    When we talk about the equity market, then as a trader we need trading volume,trends and volatility. Although it is difficult to carry forward, most active traders prefer day trading for their high profitability, although they are the most risky too.

Roonak Khandelwal
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