The new year brings new hopes and new zeal. It allows you to make a fresh start towards your goals. Being financially secure or increasing your wealth is one of the most important goals you will want to achieve in the year 2022.
So how to achieve this goal? The answer is through investments. You must invest if you want to gain money and achieve your financial goals. Saving money alone will not be enough, especially during these times when inflation is constantly rising. Sound investments will help you grow your finances.
There are many investment options that you can start investing in this new year. In the following sections, we will share with you some of the best instruments in which you should invest.
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Three Types of Investments to Consider in 2022
Investments are chosen based on factors such as preference, risk-taking ability, etc. These investments can be broadly classified as Aggressive, Safe, and Hybrid:
1. Aggressive Investments
These are the investments best suited to you if you have a high-risk appetite, that is, you can afford to take risks in your investments and have the stomach to bear the losses.
This type of investment is thus focused on maximizing your returns and also comes with high risks. The most popular investments in this bracket are
a) Equity Stocks
An equity share, as the word suggests, gives you a share of the company’s ownership. Stocks of companies are traded in the stock market and can be purchased through a broker. The prices of equity stocks are linked to the market’s performance and are volatile.
b) Equity Mutual Funds
A mutual fund is made up of investments of a large number of investors. This cumulative fund is then invested in marketable securities. Equity Linked Mutual Funds are a type of aggressive investment that invests 65% in equity.
2. Safe Investments
These are investments that involve low risk or no risk. These offer full safety of the amount invested and can give you average returns. You can consider investing in safe options, if you have a low-risk appetite and are more concerned about the safety of your principal than the returns.
Here are a few examples of safe investments.
a) Debt Mutual Funds
These are the mutual funds that predominantly invest in debt and related securities such as government bonds, corporate bonds, and other fixed-income options.
b) Fixed Deposits
A bank fixed deposit is the oldest and most secure form of investment available in the market. You have to invest a lump sum amount and will gain a set rate on your principal regularly.
c) Public Provident Fund
This is also a very safe option that is backed by the government. This is a perfect investment if you want to build your wealth for retirement.
d) Post Office Monthly Income Scheme
This scheme helps you give monthly returns on your investment. The interest rate is fixed and stays the same throughout the period of payouts.
Learn more about Post Office Monthly Income Scheme.
3. Hybrid Investments
Aggressive investments focus on equity and the stock markets, while the safe investments, on the other hand, are debt-based. Hybrid investments, as the words suggest, are a mix of both of these investments.
These investments include both debts as well as equity-related instruments and are suitable for those who can take moderate risk.
a) Unit Linked Insurance Plans (ULIP)
This is a type of life insurance product that provides you with financial cover for your life and also allows you to invest in the market. ULIPs allow you to choose from pure equity, debt, or hybrid investment funds. You can also manage your portfolio yourself or automatically.
b) National Pension Scheme (NPS)
This is a market-linked investment plan meant for retirement savings. You can invest in this plan to create a sufficient corpus for your retirement. This option also gives you a choice of funds to invest in. You can either opt for a managed portfolio mix of assets or invest in a debt-heavy portfolio.
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Factors that Decide your Investment Options
Choosing an investment option to invest your money is based on certain factors
1. Your Risk Appetite
This is the magnitude of risk you can afford to take. This is the risk you can accept for a return. Everyone has a different risk appetite. An investment that you consider risky, may not be for your friend. So it is important to make an investment based on your appetite only.
2. Financial Goals
Investments are mostly done to achieve a goal. Goals are of many types and play an important role in choosing the investment. For example, if you have a goal of accumulating money to fund your child’s higher education, then you will need an aggressive investment as it requires a huge sum.
If you have a goal of building a corpus for retirement, then you can choose a safer plan as you need to have surety of the principal.
3. Time Available for Investment
This is the duration for which you have to invest money to get the benefit. Investments can be classified as long-term as well as short-term. Long-term investments are made to achieve goals that have a time frame of more than 5 years, such as buying a new house, etc.
If you want to achieve a financial goal in an immediate future, then short-term investments are a better option as they mature in 1-3 years.
4. Investment Mode
The frequency at which you can invest your money is also an important factor when choosing an investment option. Investments today can allow many options for payment.
For example, if you are a salaried individual, you can opt for the regular investment mode. On the other hand, if you run a business and are not sure about paying regularly, you can use the lump sum mode.
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Best Investments for 2022: Summary
In the below table, we have summarized the best investments for 2022 so that you can decide where should you invest to achieve your goals.
|Investments||Risk||Return||Ideal Tenure||Tax deductions u/s 80C||Tax Status|
|Equity Stocks||High Risk||Varies with the market||NA||No||Taxable|
|Mutual Funds (ELSS)||High Risk||Varies with the market||Minimum 3 years||Yes||EET|
|Debt funds||Low Risk||Variable||Min: 91 days (liquid funds)||No||Taxable|
|Bank FD||Low Risk||Fixed (4-7%)||Min: 7 days Max: 10 years||No||Taxable|
|PPF||Risk-Free||Fixed (7.1%)||15 years||Yes||EEE|
|POMIS||Risk-Free||Fixed (6.60%)||5 years||Yes||Taxable|
|ULIP||Low to high risk||Depends on the funds invested in||Minimum 5 years||Yes||EEE|
|NPS||Low to high risk||Depends on the funds invested in||Till retirement||Yes||EET|
Here, EEE stands for complete exempt status. EEE applies to investments eligible for tax deduction under 80C, and which also enjoy exemption on the accrued interest and maturity values. These investments are best for long-term goals.
While investing regularly is important, you also need to look at the purpose of those investments. Early withdrawals are the primary reason for the underperformance of good investments. You can avoid such mistakes by simply assigning investments to your goals.
Tax saving investments are best for long-term goals, especially those more than five years away. For short-term goals, you can look at other investment options.Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised to exercise their caution and not to rely on the contents of the article as conclusive in nature. Readers should research further or consult an expert in this regard.