Hyderabad: People are often keen to invest in the stock markets, mutual funds, and various lucrative financial instruments available in the money market.
But a recurring doubt that haunts many is the Return-on-Investment (RoI) quotient of financial instrument where they would want to offload money into.
"I want to invest up to Rs 15,000 in the stock market, says Satyam, a retail investor.
"Which would be a better option?" he asks and he goes on to ponder: "Is it stocks or mutual funds?"
Financial expert Tumma Bhardwaj advises that retail investors should adhere to a hierarchical investment approach in the equity-based money market.
"It is called a systematic 'equity plan'. This approach should be chosen only when it is believed that the investment will be held for a minimum of seven years," Bhardwaj says.
"You should choose this only when you have a good understanding of the stock market and are in the selection of shares and is able to observe them from time to time," the ace investor cautions.
As an alternate strategy, Bhardwaj opines it is best to invest and hold a diversified portfolio of mutual funds.
"The risk is higher when investing directly in shares," he says.
Kumar, a 46-year-old, earns Rs. 45,000 per month. He wants to know if it is the right move to buy an insurance policy of Rs 1 crore.
The expert said that he should make sure that the insurance policy covers all his obligations.
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"Insurance is usually sufficient until the age of 65. Depending on his needs, he should decide," Bhardwaj says.
Madhavi, a homemaker, wants to invest Rs 25,000 for her 14-year-old daughter, keeping in view the future requirements.
In Bhardwaj's opinion, Madhavi should buy a life insurance policy in her name for a reasonable amount. He also suggests term policy for people who have similar requirements as Madhavi's.
"Consider the term policy for this. Think about investing after that. Invest the Rs. 25,000 you want in a Balanced Advantage and Hybrid Equity Funds," he advises.
Pradeep wants to invest Rs. 2 lakh in Gold ETFs with a lock-in period of six years.
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"Is it likely to see a growth of at least Rs 8 lakh by then?" he asks.
Bhardwaj, however, rules out the possibility of fetching such high returns by investing Rs. 2 lakh in Gold ETF.
"If you want to invest Rs 2 lakh for six years, you need to get around 26% return. It's not that easy. Even with risk-averse investments, returns of around 8-13% can be expected. If you want to use this money to buy gold .. you can opt for Gold ETFs. Or, if you do not mind the loss, invest in diversified equity funds. With an average annual return of 12%, you can expect to earn Rs 3,94,764 in six years," he suggests.
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