Want high returns on your investments? Here are 6 investment options with potential for high returns Read this story to know more about these investments
Risk and return are closely intertwined. Lower risks generally lead to lower returns, while higher returns typically come with greater risks. One can consider market-linked investments over fixed-income options to achieve significant returns.#sr_widget.onDemand p, #stock_pro.onDemand p{font-size: 14px;line-height: 1.28;} .onDemand .live_stock{left:17px;padding:1px 3px 1px 5px;font-size:12px;font-weight:600;line-height:18px;top:9px} #sr_widget.onDemand .sr_desc{margin:0 auto 0;} #sr_widget.onDemand .sr_desc{color: #024d99;margin-top:10px;} #sr_widget.onDemand .crypto .live_stock .lb-icon{8px 6px 5px 3px !important} #sr_widget.crypto.onDemand a.text{border-bottom:1px solid #ccc;padding-bottom:5px;display:block;width:100%} #sr_widget.onDemand .sr_desc .text p, #stock_pro.onDemand .sr_desc .text p{font-size:12px;font-weight:400;} Among various investment categories, equities stand out as an asset class with the potential for high returns. Historical data has shown that equities have consistently delivered superior inflation-adjusted returns over the long term compared with other asset classes.
Other investment avenues such as real estate and gold may also experience price surges following periods of stagnation. However, factors like liquidity constraints and ease of transaction may often place them behind equities in terms of performance.
Here are some high-return investment options that investors can explore:
1. Direct Equity
Investing in shares or stocks involves participating directly in the equity asset class. Stocks traded on the Bombay Stock Exchange (BSE) or the National Stock Exchange (NSE) represent the secondary market. To start investing, one needs to open a demat account through a brokerage firm.
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Diversifying investments across sectors and market capitalizations can help mitigate risks. At present, Sensex returns over 1, 3, and 5 years are approximately 13%, 8%, and 12.5%, respectively.
Risks of investing in direct equity: Equities are inherently volatile, and there is a risk of significant capital loss. However, over the long term, they have proven to deliver inflation-adjusted returns higher than other asset classes.
2. Initial Public Offering (IPO)
When a company’s shares are offered to the public for the first time, it is done through an IPO, representing the primary market. Investors can subscribe to a company’s share capital at a set price during this phase. Once listed, the shares transition to the secondary market, allowing for buying and selling.An analysis by ET Online showed that in 2017-18, the primary market was highly rewarding, with 65% of newly-listed companies trading above their issue prices, providing returns as high as threefold.
Risks of investing in IPOs: IPO allotment is not guaranteed, and investors may or may not receive any shares they apply for. Furthermore, listing prices can fluctuate significantly as they are determined by market demand and supply, which lack historical trading data.
3. Equity Funds: Mid and Small Cap Schemes
Equity funds targeting mid-cap and small-cap stocks offer higher growth potential but also come with increased volatility. According to the Securities and Exchange Board of India (SEBI), mid-cap funds invest in companies ranked 101st to 250th by market capitalization, while small-cap funds focus on companies ranked 251 and below. These funds must allocate at least 65% of their total assets to equities.Risks of investing in mid and small cap equity funds: Investments in mid- and small-cap companies carry higher risk due to their market size but can also yield higher returns. Such funds should align with an investor’s risk appetite and be used to enhance overall portfolio performance.
4. Equity-Linked Savings Schemes (ELSS)
ELSS is a type of mutual fund that primarily invests in equities. At least 80% of its total assets must be allocated to equity and equity-related instruments. A distinguishing feature of ELSS is its tax-saving benefit, which comes with a mandatory three-year lock-in period.These schemes often focus on small- and mid-cap companies, leveraging the lock-in period to capitalize on long-term value opportunities. ELSS is ideal for those seeking long-term investments coupled with tax savings.
Risks of investing in equity-linked savings schemes: Post the lock-in period, ELSS funds may not always outperform benchmarks. It’s important to periodically review the fund’s performance before deciding whether to continue or exit the investment.
5. Real Estate
Real estate is often considered a relatively stable investment and often serves as a hedge against inflation.Risks of investing in real estate: Property prices tend to remain stagnant for extended periods, followed by sharp increases, after which they plateau again. The asset class has low liquidity, and substantial capital is required to invest in it.
6. Peer-to-Peer (P2P) Lending
P2P lending is an emerging investment avenue that connects borrowers with investors willing to lend money. Interest rates are either set by the platform or mutually agreed upon by both parties.Risks of P2P lending: These loans are unsecured, and there is no direct interaction between the borrower and lender. This increases the risk of default, making it important for investors to thoroughly assess potential borrowers.
Each of these investment options carries its own unique risks and rewards, and careful consideration of one’s financial goals and risk tolerance is essential when choosing an investment strategy.
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This story originally appeared on: India Times - Author:Faqs of Insurances
