Investment planning is the process of matching your financial goals and objectives with your financial resources. Investment planning is a core component of financial planning. … There are thousands of different investments. The most commonly used are cash, equities, bonds and property.
Investment Plans are financial products that provide the opportunity to create wealth for future. Investment plans offer to help individuals in disciplined and periodic investment into different funds overtime so as to achieve their future financial goals.
Debt mutual funds are considered as one of the safest and best investment plan with high returns as under this fund; the money is majorly invested in high-rated debt instruments such as corporate bonds, government securities and treasury bills.
Types of Investments
Investors usually take investment decisions, based on their risk appetite. Thus, these investments are classified into different risk levels, which include low risk, medium risk and high risk. Here’s a look at these investment options in detail:
Low-risk investments – These are instruments which pay fixed income – irrespective of the changes in the business or economy. Bonds, debentures and Fixed Deposit fall under this category. Also, special investment vehicles – PPF, EPF, SCSS, Sukanya Samriddhi, National Savings Scheme and other small Post Office Schemes which are created by a government statute for specific purposes are low risk as they guarantee the returns. The returns are periodic and pre-determined.
Low-risk investments are not linked to the stock market movements and are usually governed by the interest rate movements of the financiers. However, there is always the returns are always guaranteed.
Government bonds and life insurance policies provide good returns, however, they have long lock-in periods. So, you will have to wait for a long time to earn substantial returns from these investment options. Fixed Deposit is one of the very few low-risk investments that offer stable, high returns and immediate liquidity.
Medium-risk investments – These are investments which might have a certain percentage of risk but these also pay higher returns to investors willing to invest in them. Debt funds, balanced mutual funds, and index funds fall in this category. Such instruments do have an element of debt and stability, but they have their volatility linked to the markets which can hamper your principal amount. The irregularity in earnings can make any fixed income from such investment impossible.
High-risk investments – These are investments where there is no limit to the upside along with the downside of risk-returns. These are stocks of companies, equity mutual funds, even stocks, and derivatives. The return on these instruments can give huge returns as well as chances of losses depending on various external factors to the company and internal ones. The quantity and timing of returns on these instruments are not fixed. Hence, they are at high risk.