Personal Finance

Investment Strategies for the Common Indian

Investment Strategies for the Common Indian

Given the plethora of investment options for the common Indian, a prudent investment mix would ideally give them enough returns as well as provide them with the much needed cushion for sudden expenses in addition to letting them save for the future and building a nest egg for their retirement.

The ideal investment mix must be decided based on risk return characteristics, the duration of such investments, and the liquidity of each. While some investments fare better in some aspects, others are preferable in some cases. Thus, we hope this short guide would help you plan better with recent developments taken into account.

Risk Return Characteristics

Considering that your investments must yield returns at a reasonable risk, you can choose among equities, mutual funds, fixed deposits, and government guaranteed schemes. For instance, equities deliver good returns over the shorter term but carry much risks when compared to mutual funds and fixed deposits whereas government schemes such as PPF (Public Provident Fund) Post Office Deposits, KVP (Kisan Vikas Patra) and for those already employed, the EPF (Employee Provident Fund) and NPS (National Pension Scheme) are the least risky and offer good returns offering between 7-9 percent.

Indeed, for those of you who are employed and risk averse, the government has held steady on the EPF and PPF rates, though only for the time being. However, the government has hiked the limit on NPS contributions which can be considered for longer term comfort at risk averse terms. Further, you can also consider investing in PPF which is again guaranteed by the sovereign government assurance.

Duration of Investment

Continuing in the same vein, government schemes and fixed deposits offer the best bet for the longer term though mutual funds also generate enough returns over the medium term. The trick is to choose a mutual fund that has a mix of equity and debt so that you can enjoy greater returns and avoid being too risky. Having said that, pure equity investments pay off over the longer term as well and are indeed safe provided one stays invested for a longer duration and preferably in Blue Chip stocks.


Until now, we have been focusing on the safe investments which cannot provide for immediate liquidity in case of emergencies. In this regard, equities are the best bet since one can exit the market anytime within a matter of days or hours, and hence, if you want to plan for exigencies, there is nothing like having some portion of your investments in them. Apart from this, fixed deposits in banks are also liquid when one considers the ease with which most banks liquidate them though with some premature withdrawal charges.

Indeed, you should ideally have a mix of investments comprised of one or more of these instruments so that you get the best of immediate liquidity allowance, some tax savings, longer term returns and saving for your retirement, without the worry of losing your money from any number of risk causing events.

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