Young investors have varied objectives while choosing their investments buying a home, purchasing a car, their child's education, early retirement plan etc are some of the goals individuals set for themselves early in life. Each of the goals may require a specific type of investment. Further, it is important to time your investments in such a manner that they pay returns at a time when you need the money.
It is important to set your goals from your investment so that your investment can work accurately for you. For example, one must know the time and amount of money that he / she will need in the future. At the same time it is important to evaluate the risk involved in the investment as well as the amount of returns and amount of initial investment required.
ETFs
This is a relatively new path of investment and one is likely to have the fear of the unknown. However, considering the returns that ETFs have fetched for its investors, it is certainly amongst the top five investment options of this era. Much like stocks, an investment in ETF should be for the long run.
Gold
Gold is a high return and traditionally favored investment option and stands good in most economic conditions. Even during times of recession, gold prices increased at an average rate of 19.30 per cent in 2009 and 12.5 per cent in 2010. An investor can buy gold as a long term investment. Long term goals like your child's marriage are well covered by investments in gold. You can also use 24 karat gold coins / chips to make jewelry for the wedding. Or you may sell the gold and use the money to meet any other wedding expenses.
Fixed Deposits
This is another safe investment with reliable and known returns. One can invest in FDs with a predefined goal for its returns. One knows the amount of returns as well as the timing of returns on investment in case of an FD. Hence one can reliably plan expenses and time them with the FD maturity date.
Interest amount of FDs can be timed with repayment of loan installments. So, if you want to buy a car or two-wheeler on loan, you can invest in FDs and match the interest amount with loan installments, either in whole, or part. On the other hand, you can time your purchase to make the down payment towards the vehicle from the proceeds of a FD. In case you are willing to take higher risk, floating rate FDs may be an option for you. In a growing economy, a floating rate FD has a higher earning potential in comparison to traditional FDs.
Mutual Funds
Mutual Funds are another 'must have' in your investment portfolio. The SIP system enables investors to take modest steps into mutual fund investments. You need not invest a lump sum - one can invest an amount of Rs 500 per month only under most SIP plans of mutual fund houses. Since experts handle your money, mutual fund investments are less risky as compared to stocks. They also have a large earning potential. However, it is difficult to predict the amount of returns. It is therefore difficult to time your investment for an exact amount of return.
Stocks
As compared to fixed deposits, investments in equity, has on an average paid 26.5 percent higher returns in 5 years. Even for a longer term, investment in stocks has paid higher returns even in comparison to real estate and gold. Here is a comparison of investment in stocks against other options. Equity investments are good for long term goals like retirement savings, purchasing real estate or buying a car. Mr. A has stocks in a reputed company that earned him high dividends and bonus shares over time. He could pay for his Europe trip through the funds he got from selling these shares. Z used the money from selling his stocks towards the down payment of his vacation home! Now all he has to manage from his salary is his EMI.
Source :Rediff business
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