Investment is a sign of good money management as it ensures your financial security. Proper investment not only rewards you with more money but also provides you another income stream. It is the only way to fulfill your family’s endless dreams with growing wealth and passive income. However, one needs to choose the perfect investment instrument that assures good returns. There are several investment instrument options available in the market, pick the one that suits your financial needs.
Basically there are two categories of financial instruments- fixed income and equities. Fixed income can be opted by investors who are risk-averse and ready to enjoy fixed returns whereas equities are best suited for long term investors and risk takers. Here are some of the financial instruments one can go for to achieve their financial goals.
Savings Accounts
Savings accounts are considered as the safest place to store your fund. You will get easy access to your hard earned money and these are usually insured. Whatever amount you store in your saving account will be fully insured. As these accounts provide you a high level of safety to your funds, the interest rates are very as compared to other financial instruments. But, if you want to store your emergency fund secure, you can go for this option.
Property
Investment in properties is something that ensures guaranteed profits.Its a good idea to buy property as it not only becomes a lifelong asset but also offers great returns on investments. The prices of properties are rising day by day so you are quite sure about good profit, in case you need to sell your property.
Certificates of Deposit (CDs)
These are special types of deposit accounts that provide comparatively higher returns than regular saving accounts. These accounts allow you to invest a fixed amount of money for a fixed duration. The longer the period of deposit, the higher the interest rate on your investment will be. This is also considered as the safest option to invest your amount. It is better to withdraw your amount at the time of maturity as early withdrawal can get you a penalty.
Stocks
Stocks are basically a part of a company’s assets. So, if a company makes profit, you will be able to receive dividends and can sell your stocks at a greater profit. Beginners who want to explore the stock market can invest in stocks. However it comes with a lot of risks, it allows you to get good returns as the company grows over time. You can manage the growth of your money by investing it right.
Bonds
Bond is termed as a debt issued by the government or a company to pay a specified amount in future along with interest. The term of investment can range from a few months to 30 years. Bonds are considered safer than stocks as bondholders are paid before stockholders in case of company’s bankruptcy.
Mutual Funds
Mutual funds are the most popular investment instrument option one can go for.
Through mutual funds, investors can invest their funds in stocks and bonds. The investment cost is very low in mutual funds which makes it suitable for small investors also. One can make small investments every month in the form of SIPs. One can set the frequency of SIP according to the financial need, it can be monthly, quarterly or bi-annually. There are many advantages of investing in mutual funds which allows you to enjoy good returns. The profit you will earn will be taxable.
Money Market Deposit Accounts
These accounts provide high interest rates than any other savings accounts. These are considered as safe and easy accessibility to your money. There are several benefits and services added to it related to withdrawals and transfers.
Annuities
Annuities are basically a type of contract issued by insurance companies where the holder will get paid at specified intervals, generally after retirement. The amount you will withdraw at the time of maturity will be taxable. In case you need your earnings before the maturity period, a penalty will be added to it. Annuities are safe and have the death benefit which is equivalent to the amount the buyer bought at.
Precious metals
People who love jewelry can invest in precious metals such as gold, silver and platinum. If we take gold as an example, it acts as an excellent investment platform because of its continuous rise in its prices. If you purchase gold of Rs 20,000 today, the prices will be much higher in a few years. You can wear them in your special ceremonies and sell if you need money. So, one can go for this investment option as well.
How to choose the right financial instruments?
Below given are some points to help you choose the right financial instrument for yourself-
List down all your financial needs for which you are making investment.
Make a true analysis of your risk profile.
Perform a deep research on the investment instrument you want to go for.
Ask experts for detailed knowledge, advantages and disadvantages of various options available in the market. They will help you in deciding the best one for yourself.
Market is stuffed with a variety of investment instruments so check all the possible factors to consider before you choose one. Find out which option is providing you the best returns on your investment, calculate risk level, duration, accessibility etc. Go through all the instrument options given above to make the best investment decision for yourself.
Many people mistaken insurance as a financial instrument. Insurance acts as a protection cover whereas financial instruments allow you to invest your money for a few years and get good returns on your investment. Every investor has a different risk profile, so you need to understand your profile, your financial goals to choose the best investment instrument. Maintain your portfolio, set your financial goals, choose the best investment option and here you are all set to create a lot of wealth.
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