Finding new ways of Investments
We, humans, are born with financial dependence and spend our early life acquiring skills to become financially self-sustained. In this pursuit, we focus more on earning and spending rather than exploring best investment schemes that are available in the market. Only our bad times make us realize the importance of investment but by then it's already too late.
In addition to ignorance, awareness is also a hurdle to attain our goal of complete financial stability for everyone. The rich, who form a minuscule portion of the population, can afford to have CAs and accountants to handle their wealth but the middle-income class and lower income class population who are huge in number are left unaware of the huge variety of investment plans already available in the market. Henceforth the only investments option that they are left with are Fixed Deposits, Gold, and Real Estate. It will not be an exaggeration if we call these options outdated and low-return yielding. Let's take Fixed Deposits, for example. It promises guaranteed returns, one can borrow up to 90% of the FDs amount and they offer flexibility in choosing the time frame for which you want to invest for 6 months to 10 years but the disadvantages diminish the positive side of FDs.
- The entire amount is paid in lump sum.
- Being secured investment option, it yields returns ranging from 6.5% to 7.5% only, marginally above the inflation rate.
- Your money is locked up in the bank till the maturity. In case of premature withdrawal, the customer is penalized.
- Most of all, there are no tax benefits with FDs. The returns yielded by the FDs are added to the income of the owner and is hence taxed accordingly.
- Another reason why FDs are becoming outdated investment option is the decreasing bank interest rates. As India is growing, banks are reducing the interest rates and we are moving on a path where one day we will have a banking system like the one in Japan, where bank rates are negative.
If past trends of Gold and Real Estate are seen, they are also not very good return yielding investment. Hence it is the need of the hour to make the general population aware of the wide variety of investment options available and in addition to that, also make them aware of the possible risks involved. Investment Companies must not be the one to decide what is best for their client. Instead, Investment Companies must make their clients aware of the schemes and possible risks involved and the client must make the call because he understands his needs best.
The risk is measured quantitatively when it comes to market risks. One must learn from the investment companies how they distribute funds in different instruments based on the risk involved so that highest returns can be yielded and at the same time ensuring that one bad performing investment can be coped up by other investments in their portfolio. This idea can also be implemented on the wealth of a common man. All in all, a portfolio must be planned so that one's future goals are fulfilled without compromising present financial needs and at the same time through insurance, one must provide financial stability to their loved ones. Imagine our country with everyone having same sort of financial stability, afterall it is also a part of being in a developed society. On the other hand, a huge inflow of money in the mutual fund will boost the growth of the private sector and that in the insurance industry can be used by the government to carry out various development in infrastructure, human resource etc.