Most investors in India want to invest into options that can get them sky-high returns in the shortest possible tenure and without risking the principal money invested. As a result, these investors are always on the lookout for risk-free investment plans that can multiply their money many-folds within a few months or years only.
However, investment products that offer high returns are usually more prone to market risks. Investment risks and returns are proportional to each other, i.e., higher the risk, higher are the returns and vice versa.
So, while choosing an investment option, you must first match the risks associated with the product with your risk profile.
There are a variety of investments options that offer low risk and yet have the potential to deliver relatively high inflation-adjusted returns in the long term. Such investment products fall into categories of financial and non-financial assets. Out of these, financial assets can be further divided into market-linked products (such as ULIPs and ELSS) and fixed income products (such as Public Provident Fund and fixed deposits). On the other hand, non-financial asset investments comprise those into real estate and gold.
Hence, if you too, are a risk-averse investor and want to invest in high-yielding equity options, here are three investment products to consider.
Unit Linked Insurance Plans or ULIPs are a unique proposition that focuses more on risk minimisation and capital preservation of your investments. Essentially, ULIPs help deliver both high investment returns and life insurance cover throughout the investment tenure, under a single plan.
Further, popular ULIP plans from reputable insurers such as Future Generali allow you to invest varying proportions of your money into a mix of equity and debt options. Which in turn, implies that you can switch the amount invested between different fund options and remain mostly invested in high-yielding options that are less affected by volatile markets.
Overall, ULIPs are an excellent choice for meeting crucial long-term goals such as dream home, child education, corpus building and retirement. Therefore, when it comes to investing in products for wealth creation, you must compare the costs and returns of different using a ULIP return calculator.
In recent years, ELSS or Equity-linked investment Schemes have emerged as one of the most popular investment options for salaried professionals. ELSS are diversified equity mutual fund products, which offers you tax deductions of up to Rs. 1.5 lakh under Section 80C of the Income Tax Act, along with a significant return on investment.
While the introduction of Long-Term Capital Gains tax (up to 10 percent) on the equity returns from the scheme is perceived as a roadblock, ELSS continues to remain an attractive investment opportunity.
Along with ULIPs, these schemes, leverage equity as an asset class to deliver high returns for the long term. Also, you can control investments according to your risk appetite, i.e. go for a more extensive portfolio if you have a matching investment risk profile and vice versa.
Equity Mutual Funds are a popular choice of investment in India and rightly so. These schemes allow multiple investors to pool their money into equities and avail returns in equal proportions. Like ELSS and ULIPs, mutual funds will enable you to diversify your capital across a variety of asset types and securities.
As a result, these plans help reduce your risk and deliver more sustainable, less volatile investment returns (if you stay invested for long-term). Essentially, you can purchase any number of units under these mutual fund schemes at their prevailing Net Asset Value (NAV) and cash them out at a higher NAV for a profit.
Invest Long Term to Avail Low-risk Equity Returns!
As an investor, you must focus on capital preservation and risk minimisation to create wealth from equity investments. An ideal investment portfolio, therefore, comprises of a variety of fixed income components, in addition to higher equity exposure.
To maximise your returns from equity investments, you can look to invest long term into instruments such as ULIPs or equity mutual funds. These options help keep your investments relatively safe from market volatilities while garnering higher gains because of rupee cost averaging over the investment tenure.
Overall, you must make diligent choices when it comes to choosing an investment option and asset allocation within that instrument. To do that, you can take help from an online ULIP return calculator as well.