New investors have to choose from a plethora of investment options. Some of these are good for saving taxes, and others fetch regular income. Risks are higher in investments that bring higher returns. The amount that can be saved, however, is limited. Therefore, allocating the savings to these investments requires careful planning.
How much do you need?
Nobody would object having more than they need. But having less than what is required when they retire can be an issue. Therefore, the first step is to plan for the foreseeable requirements in coming years, as well as at retirement. This means planning for each year of the life rather than only the years in retirement. Moreover to be more customized in making a planner some tools and apps facilitate such planning.
Knowing Investment Options and Risks
This requires spending time in studying various investment options available in the market. Five essential factors in any investment are capital, time, returns, risks, and taxes. Some offer consolidated returns, others offer regular returns over the longer period, wherein inflation can bring down the value of money, and net present values may have to be calculated to arrive at the comparable value of the investment. You can also get the help of a financial advisory if you are not sure about which investment to choose?
However here are some investment options which you can consider as a beginner. But they have their own pros and cons.
List of Investment Options-
- Tax Saving Retirement Investments
These should never be foregone. These are also linked to stocks or gold. Therefore,a certain element of risk is there in these, as is the probability of getting slightly higher returns.
- Bonds, Fixed Deposits, and Corporate Bonds
Returns on bonds and bank fixed deposits are the least, and it would never be possible to save enough if these are to be the only investment vehicles. Corporate deposits or bonds may fetch slightly higher returns, but the risks may also be slightly higher. There are taxes to consider on such returns.
- Mutual Funds, Index Funds, ETFs, Stocks
Risks in this category are higher. Correspondingly, returns on these investments are also higher but not steady unlike those on fixed deposits and bonds, though there are mutual funds (subject to market risk) that do offer regular returns.
Here loading and exit costs come into thepicture, as do transaction commissions, brokerages, and leverage or interest charges. Taxes also need to be considered while investing in these.
- Derivatives and Binary Options
Derivatives are quite complex and comparatively new investment options that allow people to limit their losses, and yet earn better returns from the bourses, be it thestock market, commodity market, or money market. Within derivatives, options are considered safer than longs and puts.
Binary options are variants of options that fetch better returns when compared to conventional options. There are variants of binary options as well. Binary options are about predicting the direction of stock, forex currency, or commodity price movement. It may appear like a gamble but with a scientific approach, much higher returns can be ascertained.
Before venturing any trade in binary options, reading a thorough binary options beginners guide can help to know these variants, and identify which of these variants or combinations of variants bring better returns in a market at a given time.
Duration of Investments
Conventional options vary in time, from few minutes to few weeks. Usually, people buy for thelonger term as the probability of the stock, commodity or currency pair reaching the specified price increases with longer duration. However, corresponding returns are lower when annualized.
In Binary options, it is possible to almost double the money within a day or even less experienced brokers and investors are able to extract such returns within a minute too.
In general, whatever remains after investing in tax saving instruments is divided into three parts. Two-thirds of it are in fixed interest or returns carrying investments, and the rest are for riskier investments.
If you are a newbie, a limited portion of the amount allocated for riskier investments can be set aside for playing in binary options. Trading education and reading articles and blogson binary options strategies can help to learn how to earn decent profits from those trades.
There is not just one choice for the beginners to park their funds. After keeping some amount in your bank account for personal expenses, you can put some of your funds in the fixed deposit, Certificate of Deposits, treasuries or mutual funds as they are low-risk investments and will make money in the long run. Invest some money in some riskier alternatives like Binary options or forex with some sound trading strategies to reap the maximum returns. Periodically, taking profit off thetable for other goals such as home purchase, children’s education, etc., is advisable from such trading. For a beginner, technology helps in proper planning and execution of investments, as well as trading in riskier options.
Always consider diversification in investment so that the risk is reduced and returns are increased.