Which Investment Option Should You Choose?

 Since there are numerous investment vehicles, it is normal for an investor to get stuck when selecting one. If you are new to investing, then it is likely that you are not sure as to where you should invest your money. Making the wrong investment choice can lead to financial losses, which you would not want. Hence, we recommend that you base your investment decisions on the following parameters: 

i) Age Typically, young investors have fewer responsibilities and a longer investment horizon. When you have a long professional life in front of you, you can invest in vehicles with a long-term view and also keep increasing your investment as your income increases over time. This is why equity-oriented investments like equity mutual funds would be a better option for young investors than fixed deposits. But on the other hand, older investors can opt for safer avenues like FDs. You have to modify your investments as you grow old.

 ii) Goal Investment goals can be either short or long-term. You should opt for a safer investment for a short-term goal and consider the high return-generating potential of equities for long-term goals. Some of your requirements can also be negotiable and non-negotiable. For non-negotiable goals like children’s education or down payment for a house, guaranteed-return investments would be a good choice. If the goal is negotiable, which means that it can be pushed back by a few months, then investing in equity mutual funds or stocks can be beneficial. Do not forget that if these investments perform well, you can even meet your goals much sooner than expected. 

iii) Profile Another factor to consider while choosing an investment option is your profile. Factors like how much you are earning and how many financial dependants you have are also critical. A young investor with a lot of time in hand may not be able to take equity-related risks if he also has the responsibility to take care of his family. Similarly, someone older with no dependents and a steady income source can choose to invest in equities to earn higher returns. This is why it is said that one size doesn’t fit all when it comes to investments. Investments have to be chosen carefully and appropriately planned to get the most out of them. 

The following table summarises the various investment options covered in this article:

 

Investment	Type	Return Potential	Potential to Beat Inflation	Risk Involved
Direct Equity	Active	Very high	Very high	High
Mutual Funds	Both active and passive	Moderately High	Very high	High
Fixed Deposits	Passive	Moderately low	High	No risk
Recurring Deposits	Passive	Moderately low	Low	No risk
Public Provident Fund	Passive	High	Low	No risk
Employees’ Provident Fund	Passive	High	Moderately High	No risk
National Pension System	Both active and passive	Moderately High	Moderately High	Moderate