Investments are important, simply because you can make more money. In today's world, the money earned will not be sufficient enough to provide a comfortable life. There's so much competition in every job and most of the Indians lie in the category of lower middle class. The hard earned money is barely adequate to manage the living expenses.
Indians have plenty of options for investing, ranging from some traditional options to some recently popular ones. Here is a list of the types of options available for Indian investors:
1.) Mutual Funds - Mutual Funds have become a popular investment option in the past few years. Many people pool in funds to invest in a way to earn optimum returns. The investment security depends on the type of mutual funds. Equity mutual funds invest primarily on stocks and equity-related instruments, whereas debt mutual funds invest primarily on bonds and papers. There are also hybrid mutual funds which invest in equity as well as debt. Also, mutual funds are very flexible as we can begin and stop investing as per our convenience.
2.) Stocks - Stocks are the most common type of investments in India. Stocks are basically the shares of a company, which anyone can buy and participate in the company's growth. Stocks are publicly listed in the stock exchange by the companies and any investor can buy stocks from there. Stocks are ideal as a long term investment.
3.) Fixed Deposits - Fixed deposits are the deposits made for a specific time period. The interests incurred will be the extra amount earned. Fixed deposits offer complete protection of the capital, with guaranteed returns. These are ideal for beginners and for those who are not willing to take risks. Fixed deposits are offered by banks.
4.) Recurring Deposits - These are similar to fixed deposits, but instead of investing a large sum for a fixed amount of time, smaller amounts are deposited every month, for a specific period of time. RDs are also safe and provides guaranteed returns.
5.) Public Provident Fund - PPF is a tax-saving investment for a fixed period of 15 years. This gives the investor a tax break, and the amount after 15 years can be withdrawn without paying any taxes. The Indian Government fixes the PPF rate every quarter.
6.) Employee Provident Fund - EPF is similar to PPF, where a part of the employee's salary will be deducted and during retirement he/she can withdraw this amount without paying any taxes. This is a retirement oriented plan. EPF rates are also decided by the government every quarter.
7.) National Pension System - This is again similar to EPF and PPF, but provides the investor an option to invest in equity as well. This can earn him/her higher returns. This is also a retirement oriented option. The amount withdrawn after retirement is not entirely tax-free as a part of it has to be used to purchase an annuity that will give the investor a regular pension.