If the agony of the recession is fresh in your mind and your stomach churns at the thought of suffering losses, you would rather want to play it safe in the investment world. If you agree with this quote, “Money talks, but all mine ever says is goodbye” and hence want to be a safe investor, maybe you want to give it a thought again.
The truth is, you can’t always stuff your money under a mattress.When it comes to investing, there is often this misconception that higher returns can only be earned through extremely aggressive investments. However, it’s possible to invest aggressively, even if your risk profile says safe, without losing money.
What can you do? Read on the four ways about how to invest aggressively while still protecting your money or rather when your risk profile says safe.
Invest in Market-Linked Debt Instruments
Debt instruments are ideal investments for a safe investor like you. This asset class mainly includes investments like top-rated corporate bonds, fixed deposits, Government bonds amongst others.
Debt instruments are characterised by two things:
- Safety of principal
- Fixed and regular income
The certainty and safety element of these instruments gives them the potential to cushion your portfolio from adverse market reactions. Remember, if you invest in debt instruments, you ensure that they form the foundation or bedrock of your portfolio.
While the returns from debt instruments are guaranteed and fixed, they are not high enough to give you that edge over taxation and inflation. To grow your money in the long run, you need the stimulus that comes through equity investing.
Invest through Managed Investments
Managed investments can be a great way for safe investors to wade into the waters of investing, as it doesn’t take much to get started. These investments also make it easier to manage risk by spreading your investments across a range of products and assets.
Managed investments like mutual funds and Unit Linked Plans (ULIPs) have plenty to offer. A unit linked plan provides the dual benefits of insurance and investment in a single product and gives you the freedom to decide where you would like to invest your money.
For instance, you can shift your investments between equity, balanced and debt funds based on your goals and market conditions. If the market is experiencing a great amount of volatility, you can switch your investments to debt. Thus, a unit linked plan allows you to monitor your funds effectively and maximise your returns.
Ensure Low Taxability
While charting out your investment plan, make tax planning an essential part of it. By ensuring low taxability or tax saving, all elements of your investment plan work together in the most tax-efficient manner possible.
Moreover, using the right investment option can effectively help reduce tax liability. Again, unit linked plans rightly fit here as they are the most tax efficient investments as you get tax-benefits under section 80C and 10D.
Invest A Fixed Amount in Equity Every Month
Investing a fixed amount every month in equity helps in two ways. One, you get into the habit of investing regularly without wrestling with market mood. Two, it imparts financial discipline to your life.
It also benefits by averaging your purchase cost and maximising returns, thanks to rupee cost averaging. Rupee cost averaging ensure that you buy more units of mutual funds when the prices are low and less when prices are high. Another advantage is, equity investment over the long period helps you to earn returns on the returns earned by your investment. Thus, as your money starts to compound, you start building wealth.
Even the above investments come with a certain degree of risk,but there is also the security of getting a specific amount after a defined time interval. Remember to stay invested for the longer horizon to maximise your returns.
So, research, understand and choose the best investment to stabilise your future.