Clueless about investing in stock markets? Here are some options

If you are unsure about venturing into stock markets, these investment options may change your mind.

Clueless about investing in stock markets? Here are some options

If you are unsure about venturing into stock markets, these investment options may change your mind.

Have you ever wondered why people hesitate to invest money in the stock market? Inadequate knowledge, a limited amount of funds, and misconceptions about stock markets are often the main reasons. The truth is that the stock market has a lot to offer those who are willing to put a little money and time into it. 

If you want to benefit from investing in a stock market without risking too much, here are some good investment options you should consider:

1) Mutual funds: Good returns and limited risk

Investing in mutual funds involves investing in a collection of investments such as stocks, bonds or other funds. Equity mutual funds not only provide exposure to various stocks through diversification but also minimise the risk factor. This is because you buy stocks from different companies in varying industries. So, if a single stock or sector underperforms, it may not have a big impact on the overall performance of your fund. That said, mutual funds do not offer assured returns. So, do your homework before selecting funds. Here are the Types of Mutual Funds and How to Start Investing in Them.

• Dedicated fund managers handle your investments and portfolios 

• Ability to choose the type of funds that you want to invest in

• Certain mutual funds offer tax-free benefits and returns 

• Affordable for small investors to benefit from low trading costs

• Some funds allow easy liquidation of investments

2) Unit Linked Investment Plans in India: Insurance and investment returns

When first introduced, ULIPs were not favoured by the public due to the high charges imposed by distributors and insurance companies. However, since the IRDA capped the annual charges on ULIPs in 2010, they have slowly gained popularity. This is because they serve the dual purpose of providing life insurance and investment returns to investors. Generally, ULIPs can be divided into three broad classifications:

a) Aggressive ULIPs: 80-100% of the fund is invested in equities

b) Balanced ULIPs: 40-60% of the fund is invested in equities

c) Conservative ULIPs: around 20% of the fund is invested in equities. The rest is invested in debt

Related: Should you buy Ulip? Find out

You can choose a variant based on your investment goals and risk profile. For example, a thirty-year-old who wants to buy a life insurance plan that helps him to create a good lump sum for retirement can consider either a balanced or aggressive ULIP. 

3) Exchange-Traded Funds

ETFs are like mutual funds, which pool money from different investors, to buy a diversified portfolio of stocks or bonds. However, unlike mutual funds, ETFs are not bought from a fund company. Instead, ETFs must be bought through brokerage, like stocks.

As most ETFs are index funds, they passively mimic the performance of a particular index, such as Sensex or Nifty 50. But since they are passively managed, they have lower annual expenses as compared to other investment avenues.

4) National Pension Scheme

The NPS is a voluntary retirement saving scheme, promoted by the Government of India, which includes investing in equities. The minimum contribution per year is Rs. 6,000, and can be paid in instalments of Rs. 500. It is a mix of equity, fixed deposits, corporate bonds, liquid funds and government funds, among others. Based on your risk appetite, you can decide how much of your money can be invested in equities through NPS. Recently, the maximum limit of equity investment in this system was raised to 75% from 50%. This allows investors to increase their equity investments in the NPS. 

Related: Retirement Planning for Pros: National Pension Scheme

• Available for all Indian citizens between 18 and 60 years of age

• Offers regular income post-retirement through annuity plan

• Allows flexibility of choosing preferred fund options

• Can avail tax benefits on the scheme 

• Enables switching between different investment funds 

In conclusion 

Historically, equities have been known to offer some of the best returns to investors year after year. But if you are hesitant to invest directly in equities or are averse to high-risk investments, different investment options mentioned above are good alternatives.


Disclaimer: This article is intended for general information purposes only and should not be construed as investment, insurance, tax or legal advice. You are encouraged to separately obtain independent advice when making decisions in these areas.


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