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Wealth-creation products are available in various forms. However, before choosing the ideal investment avenues, define clear-cut goals. If you start this journey without any purpose, the chance of failing is high. It is because most people sacrifice too much of their present needs to save money for their future. But that should not be the approach in the first place. 

In this guide, you will learn where to invest money to get good returns and eventually select your preferred investment tools according to your risk appetite.

1. Short-Term Debt Mutual Funds

Compared to equity funds, these investment tools involve far lower risks and generate stable returns. Specialised products like ultra-short duration funds, liquid funds and money market funds are popular types of short-term debt funds. 

Here, your money gets invested in fixed-interest-generating securities such as government securities, treasury bills, corporate bonds, etc. Although financial advisors consider this option to be stable for people trying to grow money quickly, we recommend that you consult an investing expert before proceeding as it involves a slight possibility of credit risk.

2. Bank Fixed Deposits (FDs)

One of the oldest prevailing and most trusted investment options for Indians is FDs, where the banks guarantee their consumers a predetermined return at the end of the tenure. Undoubtedly, FDs do not involve any risk, but the major downside is their interest rates. It barely manages to overcome the inflation rate. 

Another significant disadvantage is banks charge a hefty penalty if a person intends to withdraw money before the maturity term. Hence you need to compromise liquidity, and simultaneously, if you stay invested for a shorter span, you do not benefit much from the power of compounding.

When you start saving money for an upcoming event that is predicted to take place roughly within five years, it is a medium-term investment venture. People look up to these investment facades, especially when planning to buy a new house, purchase an expensive car on EMI, get married etc. 

If you are among those pondering where I should invest money to get good returns, consider the following alternatives:

1. Post Office Time Deposit (POTD)

The Department of Posts offers this investment scheme where you can deposit a lump sum for a five-year lock-in period. To open a time deposit account you must be over 18 years old to open a time deposit account. For minors, their parents can open a joint account with all due credentials in place.

Based on the chosen tenure, the post office determines the interest rate, which can be as high as 6.7% for five years. As these plans are backed centrally, you can be assured of guaranteed maturity benefits.

2. Hybrid Funds

These are mutual funds with a 3-5 years lock-in period, and here the accrued funds are allocated in various asset classes. However, the most common combination of assets is the equity and debt funds that help build an optimal hedge against stock market volatility.            

Hybrid funds are viable for your investment portfolio as these instruments offer a perfect mix of stability and growth potential. Also, you get to explore the various aspects of investment as the funds are often put into gold and real estate.

3. National Savings Certificates (NSC)

As you can guess by the name, it is a Government of India-backed investment option for citizens across the country. Similar to FD and Post-Office Term Deposit (POTD), it comes with a 5-year maturity term. The cumulative sum of interests gained at a 6.8% yearly interest rate will be credited to the beneficiary’s account only after the lock-in phase.

If you prefer higher security over substantial returns, choosing NSC over hybrid funds will be the right option. It is an ideal scheme to arrange funds required to pay off liabilities or accomplish a significant feat like a child’s higher education, provided you have sufficient active income and want to undertake significantly low risk.

4. Debt Funds (Mid-Term)

As we listed debt funds earlier in the section where we discussed short-term savings options, this inclusion may need to be clarified. However, corporate bond funds and PSU funds are ideal medium-term fund options for people wondering where to invest money to get good returns within five years.

The three funds mentioned above are designed for low-risk-taking investors as they eliminate market volatility by generating steady revenue. Moreover, the corpus remains secured as the RBI regulates the flow of assets in associated banking institutions and public sector firms.

1. Direct Equity/ Stock Market

When buying shares of a specific company listed on the stock exchange, you directly contribute to their capital requirements. Then, assuming future growth by seeing a company’s performance, you purchase a specific portion of its equity. Later, you can sell them after retaining the holdings for as long as you want and enjoy the profit in the process.

Investors favour stock markets as they involve low beta values. This is because the values of shares vary based on the said sector’s performance in the market. However, suppose you intend to invest in stocks. In that case, you must be active with the process as the nature of investment is volatile and going passive for long can incur significant losses.

2. Real Estate

Investing in corporate and residential real estate via regulatory bodies like RERA can be an excellent long-term investment option. This is because real estate prices are evident to appreciate over time, and consequently, there will be an opportunity for rental yield. 

Although you will require putting up more money in real estate compared to other investment alternatives, certain factors like growing consumerism and rapid urbanisation in tier-2 and tier-3 cities will help you garner profitable returns in no time. Also, if you meet the eligibility criteria, you can get financing options from lenders to purchase real estate.

3. Mutual Funds

Mutual funds cross our minds while contemplating where to invest money to get good returns. Though the equity market is a lucrative sector, it is difficult for a new investor to understand how the critical determinants like dividend history, shareholder pattern, debt ratio, investment strategy, etc., work. 

Therefore a more practical way for them to register consistent benefits is via mutual funds. Upon investing, the fund managers distribute their money among many stocks. It will increase the chances of profitable returns over a long duration.

4. Gold

Investment in physical or digital gold can help you beat inflation successfully. Numerous options are available to acquire gold nowadays, the most popular being ETFs. 

By avoiding the purchase of physical gold, you can save storage expenses as well as the making charges added at the time of designing jewellery. We have added this asset class to our list as it continues to appreciate and can be a value-addition element to your overall investment portfolio.

5. PPF

The most crucial aspect that adds to PPF’s popularity among Indians is its tax-free nature. You can open a Public Provident Fund (PPF) account by visiting a post office or bank. 

The invested funds continue to grow over a prolonged lock-in period of 15 years. So if you are wondering about any demerit of this kind of investment, this low liquidity factor is probably the only cause of concern. 

A person is allowed to withdraw from the accrued funds after six years of opening the account. Before that, however, you can borrow a sum from a bank against the remaining PPF account balance. After the maturity term, you may stay invested for another five years or withdraw the matured amount then and there.

6. ULIPs

ULIPs are unique life insurance plans that act as a protective tool while generating profits from the bonds and equity for the investors. As you pay premiums, most of it guarantees death benefits while a substantial portion is invested in the stock market. 

You must have learnt that premature withdrawal from ULIPs attracts high penalties. However, insurers now provide these plans with increased flexibility, so people prefer them over mutual funds. 

Money management gets compromised if a person lacks sufficient knowledge of investments and solely relies on a few conventional saving methods. Hence it is crucial to develop a firm idea regarding the pros and cons of each investment instrument before jumping to a conclusion on what may best suit the purpose. 

We hope that this guide on where to invest money to get good returns will help you make an informed decision on your upcoming investments.