Best Investment Options

Best Investment Options

Introduction:

Investment is an opportunity for investors to grow their money or wealth but finding the best investment options is also hectic work. In daily life you always come across various lucrative investment options but choosing the best investment option becomes tough for you.

In normal cases, your return on investment varies between 5-36 per cent. There is also a category of risk that means what is your risk-taking capacity. You might ask, why is the risk important in terms of investment? Because there is a concept in the market Higher the Risk Higher the Return but still there is a category of Low-Risk High Return. 

In this article, I’ll try to help you with more analytical data that will help you to decide what are best investment options for you?

Bank Fixed Deposit:

Currently, there are 12 public sector banks, 22 private sector banks, 3 local area banks, 10 small finance banks, 6 payment banks, 30+ foreign banks, 45 RRBs and around 100+ co-operative banks working in India. Every bank has its own rate that they provide to their customers for their fixed deposit.

Here, I am attaching the list of banks with their return and decide according to their return, is this the best investment option for you to deposit your money in FD?

Banks

Interest Rates

Allahabad Bank

4.75% – 6.45%

Andhra Bank

3.50% – 6.10%

Axis Bank

3.50% – 7.15%

Bajaj Finance/Finserv

7.60% – 8.35%

Bandhan Bank

3.50% – 7.50%

Bank of Baroda

4.30% – 6.25%

Bank of India

4.25% – 7.80%

Bank of Maharashtra

4.25% – 7.00%

Canara Bank

4.50% – 6.75%

Central Bank of India

3.95% – 6.20%

Citibank

3.00% – 5.50%

Corporation Bank

4.55% – 6.95%

Dena bank

4.30% – 6.25%

Federal Bank

3.50% – 7.00%

HDFC Bank

3.50% – 6.90%

HSBC Bank

3.00% – 6.25%

ICICI Bank

4.00% – 6.90%

IDBI Bank

3.50% – 7.00%

IDFC Bank

4.00% – 8.00%

IndusInd Bank

4.00% – 7.25%

Jammu & Kashmir Bank

4.50% – 6.85%

Karnataka Bank

3.50% – 6.75%

Karur Vysya Bank

4.40% – 6.80%

Kotak Mahindra Bank

3.50% – 6.20%

Lakshmi Vilas Bank

4.50% – 8.40%

Nainital Bank

4.10% – 7.90%

Oriental Bank of Commerce

4.00% – 6.25%

Punjab & Sind Bank

4.00% – 6.70%

Punjab National Bank

4.00% – 7.05%

RBL Bank

5.00% – 7.75%

SBI

4.00% – 6.50%

Standard Chartered Bank

3.00% – 7.10%

Syndicate Bank

4.50% – 6.80%

UCO Bank

4.00% – 6.70%

United Bank Of India

4.00% – 7.25%

Vijaya Bank

4.30% – 6.25%

Yes Bank

5.00% – 8.55%

Gold: 

Gold is also an investment option for most of the people around the globe but there is a catch over here, which kind of gold is an investment? You have to understand it first. Most people buy gold jewellery and think that they have done an investment, that’s not the right way of investment. 

Then what is the right way to use gold as an investment option? There are two ways to invest in gold:

  • Physical Gold
  • Paper Gold

We will talk about paper gold because as I think this is the best way of investing in gold.

How to buy paper gold?

Available options for investment in gold are:

  • Gold Exchange Traded Fund (ETFs)
  • Sovereign Gold Bond (SGD)
  • Digital Gold

Gold Exchange Traded Fund: 

This is the most cost-effective way to invest in gold. This kind of investment happens through the stock exchange that includes NSE and BSE with gold as an underlying asset.

Price transparency is another biggest advantage of paper gold. The price at which buyers buy the paper gold is almost the same as the benchmark in a physical good market.

To buy paper gold you just need a Demat account with a reliable broker. Gold might be seems a best investment option during economy slowdown. You can buy paper gold in a lump sum way or you can do SIP. To know more about gold investment click here to know more about GOLD INVESTMENT

Mutual Funds:

There are around 44 mutual funds companies in India. So, it becomes hard for you to choose the best one. Most people try to choose those mutual funds which have given the best return over the past years and thought investing in mutual fund is best investment option. But here, I have a question for you.

Is there any kind of guarantee, this funds will continue to generate better returns in future? Definitely, your answer will be no. Nowadays, there is a trend in the media “Mutual Sahi Hai” but not a single investment company or media will tell you why “Mutual Fund Sahi Nahi Hai”.

Why This The Best Time For Investment?

The reason is simple: they do not want to lose their bread on their own. There is a term in the mutual fund world, called expense ratio. You might ask, what is this? So, my dear readers, this is why “Mutual Fund Sahi Nahi Hai”. 

What is Expense Ratio?

The expense ratio of mutual funds is the total percentage of fund assets used for administration, management, ads and all other expenses related to fund expense. An expense ratio is determined by dividing the total fund costs by total assets under management (AUM). Operating expenses reduce the value of your investment and also affect your return or maturity value, badly. 

Formula for Expense Ratio is

Expense Ratio = Total Fund Cost / Total Fund Assets

Example of Expense Ratios

In general terms, passively managed funds such as index funds or exchange-traded funds have a lower expense ratio because funds managers do not participate actively in managing the funds. They just invest the investor’s money into index funds or ETF or we can say that they just replicate the index funds. Investors’ money will increase or decrease according to nifty performance. 

Fund houses normally charge 0-3 per cent of your asset value for managing the fund. It might seem insignificant but when we scale it for 30-40 years it creates a huge impact. 

So, what is the solution for this? Do not worry, I have a solution for this. In the next point, we will discuss that, is called Exchange Traded Funds (ETFs).

Expense Ratios of Different Fund Houses:

Here, I am attaching the topmost direct fund, It does not mean, you are being advised to invest in. 

Direct Funds

Expense Ratio

Edelweiss Greater China Equity Offshore

1.52%

Axis Bluechip Fund Direct Funds

0.62%

Axis Midcap Direct Plan

0.58%

Tata Digital India Fund Direct

1.06%

PGIM India Global Equity Opportunities Fund

0.25%

Nippon India US Equity Opportunities Fund

1.75%

Invesco India Gold Fund Direct-Growth

0.09%

SBI Banking and Financial Services Direct

1.15%

SBI Gold Direct Plan-Growth

0.12%              (AS ON 16-03-2020)

Here I am attaching the funds and their performance report for last few years that has proved themself as a best investment options for their investors:  (AS ON 16-03-2020)

RETURNS OVER THE PERIOD (%)

 

Direct Funds

1M

1Y

3Y

5Y

Edelweiss Greater China Equity Offshore 

-9.36

15.69

15.92

11.0

Axis Bluechip Fund Direct Funds

-12.46

7.5

14.74

9.64

Axis Midcap Direct Plan

-12.04

5.59

13.62

9.22

Tata Digital India Fund Direct

-17.13

-9.0

13.52

8.74

PGIM India Global Equity Opportunities Fund

-10.84

10.84

13.68

5.62

Nippon India US Equity Opportunities Fund

-14.35

7.57

13.64

11.30

Invesco India Gold Fund Direct-Growth

9.12

34.97

14.25

10.01

SBI Banking and Financial Services Direct

-16.98

-.95

12.76

12.84

SBI Gold Direct Plan-Growth

2.36

29.32

12.88

8.96

Exchange-Traded Funds (ETF)

  1. How to Buy and Sell ETFs
  2. Top high Performing ETFs
  3. Why ETFs is one of the best investment options
  4. Disadvantage of ETFs

The ETF stands for Exchange-traded Fund is a type of security that combines the collection of stocks. There will always be a common factor in stocks when they are added in ETF funds.

For example, you are planning to buy a nifty ETF then what is the common factor among the stocks. The common factor is, all the stocks are from nifty not from the mid-cap or small-cap. 

Let’s take another example, you are planning to invest in Bank Nifty. In this case, the similarity is the bank. All the stocks will be from the banking sector.

How to Buy and Sell ETFs

This term is not very popular in India but in countries like the USA but this is one of the best investment option in options available around. If you are planning to invest in ETFs then you must have thought about that process. Here is the process of buying ETFs. 

ETFs are traded through online and traditional brokerage houses. So, if you are planning to invest through ETFs then a Demat account is a necessary one. There are many more brokerage houses in the market from there you can open your Demat account.

There are the same procedures for buying Index Funds and ETFs.

Step:1

Open an online Demat account with a reputed broking firm.

These are the few names:

  • Zerodha
  • ICICI Direct
  • Upstox
  • HDFC Securities
  • AXIS Direct
  • Angel Broking

Step:2

Open your trading platform and go to the watchlist or search bar, on the top. Type ETF in the search bar and you will get so many suggestions below the search bar. Select the ETF that you wanted to buy.

Step: 3

After selecting your ETF an additional display will come out. Here, you can buy and sell your ETFs. Just click on the Buy button.

Step:4

Fill the quantity that you wanted to buy. Select the CNC (if your plan to hold it for a longer period or more than a day) or MIS ( if you are planning to sell your ETF on the same day)

Price Selection: when you will click on the price column them you have a four option to select

  1. Market Price: Market price refers to the current price of the stock in the market or current trading price. If the buyer is interested in buying the stocks at market price then he/she can go for it.
  2. Limit Price: Suppose, you are not eager to buy or sell the stocks at the current price of the market then the limit order is for you. What you need to do for the limit order is; just write your comfortable price in the price column and execute the order. When the price of that particular stock will touch the pre-filled price. Your order will be executed.
  3. Stop-Loss(SL): Suppose you are a day trader and you want to limit your loss then you should go with the stop loss method. Because stop-loss protects you from a huge loss that may occur due to sudden changes in stock price. 

Example: Ram has bought Reliance’s stock @1450 but he is not sure about the market, it will go up or down. So, he decided to place a stop loss @1440. Means if the stock price of reliance will come 1440 then trader’s stock will be automatically sold out.

Does not after touching the price level of 1440 price has moved up or still went down to 1400 or less. Ram has to carry only 10 rupees per share.

  1. Stop Loss Market(SLM): Stop Loss Market Order wherein you need to specify only trigger Price. Hence the difference is in the execution of the orders.

Step 5:

You are ready to place your order. Now, just swipe the buy button and your order will be placed.

Advantage of ETFs

  1. Trading Facilities: Listed on the stock exchange. So, it can be traded in real-time.
  2. Transparent: Real-time portfolio disclosure
  3. Cost-efficient: Low expense ratio, no front load or exit charges
  4. Convenient: Just needed one Demat account, ETF investment is just a click away
  5. Diversification: Reduce the risk of the portfolio
  6. Better Risk Management: Managed by experts managers

Disadvantage of ETFs

  1. Trader need to pay a brokerage that is not good for new and short term trader
  2. We can not re-invest our dividend automatically 
  3. ETF fluctuates a lot
  4. ETFs has a tracking error
Nifty Index/Index Fund
  1. What is a nifty index 
  2. What is a nifty index fund
  3. Types of nifty index funds
  4. Who should buy nifty index funds
  5. Why nifty index funds are one of the best investment options
  6. Nifty index return over the years
  7. How to buy a nifty index fund
Individual Stocks
  1. What is Individual Stock
  2. Types of Stocks
  3. Who should invest in Stocks
  4. Stocks return over the years
  5. How to buy stock

What is Individual Stock: Individual stock is nothing but single equity stock, for example, Reliance, TCS, Infosys, etc. So, in a line, we can say that all the companies or stocks that are listed on NSE or BSE are individual stocks.

Types of Stocks: Technically there are three types of stocks available in the market for trading that is;

  1. High Risky Stock
  2. Moderate Risky Stock
  3. Low Risky Stock

High Risky Stocks: We can also divide risk into two parts. The first one is Short Term Risk and second is Long Term Risk.

Short Term Risk means, if you are buying a stock for a shorter period then it might be risky for you because the market does not turn around overnight. It takes time to rebound itself.

Suppose you are planning to buy stock for a month or a week and you invested your money into an undervalued stock or sector that is suffering from economic slowdown then such kind of stock will be risky in the short term.

Because in the short run those stocks or sectors might be more bearish. And your portfolio can go in deep red. So, if you do not have the courage to see your portfolio in red then you will immediately square off your holding in a loss and stock market will never be a best investment options for you. 

So, stay away from these stocks and sectors, if you come under this investors category.

Example of Short Term Risky Stock:

hero moter stock returns
Source: Google

Each and everything is perfect in this stock. There is no issue in management, shareholding pattern, almost debt-free, no corporate governance issue and the company is also the market leader in the two-wheeler segment. Still stock is trading at 52-week low zone.

This is happening just because of economic slowdown and sectorial slowdown. This is not the only concern of Hero Motors but all the stocks in this sector are having the same problem.

Long Term Risk means, this is almost vis-s-versa of short term risk. Suppose you are buying a stock for the long term. And you selected this stock just because of its current performance.

Current performance means, 1-week return, 1/3/6 months return, good quarterly result, market hype and influenced by business news channels.

 These all factors can motivate you to buy this stock but this is the catch, where most of the investors got trapped. So, it’s my gentle request to you to please avoid such activities.

Example of Long Term Risky Stock:

vodafone idea stock returns
Source: Google

 

According to me, this is the perfect example of long term risk. Things have not changed for this company overnight. Company has faced lots of changes in the telecom industry. 

Not only that, but Vodafone-Idea also has tax issues with the government like AGR. Company is constantly posting losses in its quarterly and annual results.

The stock price of Vodafone-Idea has been constantly falling for the last 5 years.

Why Vodafone-Idea was a Long Term Risk?

The bad day had started for all the telecom companies after Jio came into existence. 

Before Jio, the telecom market was mainly dominated by Airtel, Idea and Vodafone but after the Jio market scenario of telecom has drastically changed.

The major players of telecom were constantly losing their market share and Jio was grabbing that. 

After a few months of Jio launching, most of the telecom companies started merging with their competitors to sustain their business but this strategy also did not work for most of the tele companies and they have been wiped out from the market.

When we analyze the stock performance of Vodafone-Idea, it is completely visible that the bad days have started from Voda-Idea since 2015.

 So, if you are thinking about long term investment then you should have this basic knowledge of trend analysis and market sentiment.

Moderate Risky Stock: As it sounds ’moderate risk’, So moderate risky stocks are those stocks, which are stable in nature and their price does not fluctuate much.

 All the mid-cap with good financial performance, effective corporate governance, zero debt, growing business, etc are kept in this category. 

Moderate risky stocks are good for those investors, those are expecting 30-35% return over the year. 

But to get a 30-35% return you have to be cautious in the market. Your investment timing should be appropriate because you will not be able to fetch this much of a return by just investing money. 

Right Way to Invest in Moderate Risky Stock

  • Select a few good companies with a sustainable business model
  • Try to find the market leader in their segment
  • Trace their price and do some technical analysis
  • Keep a close eye on the company’s news, single or bad news creates a huge impact on stock price
  • Have patient to price come down do not buy at a higher price

Low Risky Stock: In a single line we can say that all the Sensex stocks are low risky stocks.

The reason is, only the top-performing and stable companies of India are kept in Sensex. 

There are various parameters for selecting a stock for Sensex. So, if you are going to buy Sensex stock then you are going to choose the safest stocks in the market. And Definitely, buying a Sensex stocks best investment option. Especially you are planning to invest in the stock market.

One thing you have to always keep in mind before investing in any stocks, the thing is the price. Until you are not buying a stock at a good price until it will not be the best investment options for you. 

If you want a good return over your investment then you have to learn the art of buying stocks at a cheaper price. The cheaper you buy the higher you gain, keep this thing in mind. 

Golden Rule: Always buy undervalued stocks

Right Way to Invest in Low Risky Stock

  • Select companies with a sustainable business model
  • Try to find the market leader in their segment
  • Trace their price and do some technical analysis
  • Keep a close eye on the company’s news, single or bad news creates a huge impact on stock price
  • Try to buy those stocks, are trading at 52 weeks low (This Recommendation is Only for Sensex Stocks)
  • Have patient to price come down do not buy at a higher price

Who should invest in Stocks? Before writing anything, I just want you to answer. Is there anybody in this world, who does not want to earn? You know what your answer is. That is why you should invest in the stock market.

Conclusion: World is full of opportunities and much best investment options too. So, it is your take, where you are going to invest your hard-earned money.

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