Best Way to Invest Money in India in 2024

7 Mins

Investing money is a smart way to grow your wealth and achieve your financial goals. But how do you decide where to invest your hard-earned money? There are many factors that you need to consider, such as your risk appetite, investment horizon, return expectations and tax implications.
Investing can be a significant decision for any individual, and it is crucial to adopt a holistic approach to create an investment plan that aligns with your financial goals, risk appetite, and investment horizon.

For example, if you are investing for 10 years or more, and you can tolerate some fluctuations in your portfolio value, you can have up to 60% | 80% exposure to equity investments (shares and mutual funds) and the remaining 40% | 20% towards debt instruments (mutual funds, government schemes, bonds, etc.). This way, you can balance the growth potential of equity with the stability of debt.

On the other hand, if you are investing for 6 months or less and you want to preserve your capital and liquidity, you should have more exposure to debt and fixed-income schemes, such as recurring deposits, money market accounts, fixed deposits, etc. These instruments offer fixed and guaranteed returns with low risk and high liquidity.

Here, we aim to give you a list of the best investment options to invest your money in India. Assuming that you are an aggressive investor with a long-term investment horizon of 10 years, the following is a plan that may be suitable for you.

Best Way to Invest Money for Long-Term Investment Tenure

Invest 80% in Equity: Investing in equities can be done through share investing or mutual funds. Equity investments are subject to market risks and volatility. Having a long-term investment horizon will help you average out the market volatility and generate significant returns.

1. Mutual Funds

Equity mutual funds are funds that invest in shares of companies across different sectors and market capitalizations.

Instead of investing the entire 80% of the money in one single mutual fund, you can always diversify by investing in 3 to 4 funds. The choice of mutual funds largely depends on your investment objective and risk tolerance levels. For example, large cap mutual funds are considered to be more stable than midcap or small cap funds. You should ideally try to have a well-diversified portfolio of investments that will help you generate significant returns in the long term. A possible combination of funds that will give you a well-diversified allocation is

Category	Investment Amount
Large Cap Fund	30%
Flexi Cap Fund	30%
Large and Mid-Cap Fund	20%
Mid Cap Fund	20%

2. Shares

Investing in shares is highly risky. As an investor, you should be well aware of the company and the sector that you are investing in. While investing in direct equity, you should do a thorough research about the company that you are investing in. Ideally, you should pick companies with strong fundamentals, strong financials, low debt, and good top management. Shares are highly volatile with respect to micro and macro parameters. Thus, you need to be vigilant while investing in the share market.

Invest 20% in Debt: Invest the remaining 20% of the money in safer options like debt mutual funds or gold funds. Investing in debt will help in averaging out the effect of market volatility.

Category	Investment Amount
Floater Fund	50%
Money Market	25%
Gold Funds	25%

Also, it is important to note that as you near your investment tenure, it is always advisable to move your investments from high-risk to low-risk avenues gradually. For instance, 80% of the equity allocation should be gradually allocated or moved to less risky investments like debt mutual funds or fixed-income securities. This way, you will be able to overcome the market volatility, if any, during the end of your investment tenure.

Best Way to Invest Money for Short Term Investment Tenure

For a short-term investment tenure of less than three years, it is ideal to invest in low-risk investment options. In such scenarios, it is wise to allocate a major portion of your investments to debt or fixed-income assets.

Invest 80% in Debt

Category	Investment Amount
Floater Fund	35%
Money Market	35%
Ultra Short Term	15%
Precious Metals	15%

Invest 20% in Equity

With the remaining 20% of your investment amount, you can take some equity exposure. Large-cap mutual funds are more or less stable compared to other types of equity mutual funds.

Category	Investment Amount
Large Cap Fund	75%
Flexi Cap Fund	25%

As an alternative to the above strategy, you could also invest 80% of your amount in a high-interest-bearing fixed deposit or a government scheme. These schemes offer guaranteed income without any risk. Fixed deposits have recently become attractive with high-interest rates. In the efforts to curb inflation, RBI has been increasing the interest rates. As a result, fixed deposits have become attractive with higher interest rates.

SIP Vs Lumpsum: Best Way to Invest Money

When it comes to investing in mutual funds, you can invest either through SIP or the lumpsum route. Investing through SIP will help you average out the market volatility in the long term. Not everyone has the funds to invest a lumpsum amount at once. Thus SIP is quite popular amongst retail investors.

Furthermore, when you have a long-term investment horizon and invest in equity mutual funds, it is recommended to do it through the SIP route. On the other hand, when the investment duration is short-term and you are investing in a debt or fixed-income scheme, lump-sum investments will make more sense.

Therefore depending on the availability of funds, your investment duration, risk tolerance levels and investment objective, pick the type of investment and schemes that align with your investment requirements.

Aim for Inflation-Beating Returns

When curating an investment plan, it is essential to aim for returns that surpass the rate of inflation. Inflation erodes the purchasing power of your money over time. By choosing investments that generate returns higher than inflation, you can protect and grow your wealth.

Equity investments have historically demonstrated the ability to generate inflation-beating returns over the long term. Debt instruments, although more conservative, may offer lower returns that barely keep pace with inflation. Therefore, a balanced allocation between equity and debt instruments becomes crucial to achieve the desired financial objectives.

Consult a Financial Advisor

While this post provides general guidance on investing money, it is always recommended to consult with a qualified financial advisor / wealth manager who can assess your specific financial situation and goals. A financial advisor can provide personalized advice tailored to your needs, help you understand the intricacies of different investment options, and also guide you through the investment process.

Conclusion

Investing money requires careful consideration of various factors, including risk tolerance, investment duration, and financial goals. Thus, by diversifying your portfolio allocation across equity and debt instruments, you can strike a balance between growth potential and stability.

Remember, equity investments offer significant returns over the long term, making them suitable for investors with a higher risk appetite and longer investment horizons. Debt instruments, on the other hand, provide stability and can be preferred for short-term goals or risk-averse investors.

Regular monitoring and review of your portfolio, along with seeking professional advice, are essential components of a successful investment strategy. By following these principles and adapting your investment plan to your unique circumstances, you can maximize the potential of your investment and work towards achieving your financial goals.