Top 10 High Return Investments in India
Many of us keep hunting for an investment option that give high returns. Many believe that risk and return go hand in hand. Means, if can take high risk, you can get high returns too. If you take low risk, your returns would be lower. Whether you believe this or not, if you are thinking where to invest money to get good returns, this article is for you. Which are the Top 10 High Return Investments in India? Which is a high return investment in India now?
What are high return investments I am talking about?
You might be investing in various investment options that give returns between 6% to 20% per annum. I am talking about high return investment that are on the higher side of this range.
Top 10 High Return Investments in India
Let us quickly jump-into best investment options in India 2019 with high returns.
#1 – Invest in Direct Equity (Stocks)
SENSEX was ranging at 4,500 about 20 years back and today it is 37,000 which is almost 8 times. It was around 15,000 points 10 years back and today it is 2.5 times. This is the power of investing in direct equity stocks. Yes, there are several pros and cons of investing in direct equity
Pros of investing in Stocks
i) You can invest in any company shares/stocks of your choice.
ii) You need to have a demat account. You can buy or sell any time. It means, you can book profit or loss any time during trading hours.
iii) You can invest in large cap stocks, midcap stocks, small cap stocks or penny stocks that has potential to grow.
iv) Such stocks can grow without any high limit.
v) Investing in stocks are good for medium to long term investment.
vi) If you can invest in blue chip stocks, these can provide anywhere between 15% to 30% annualized returns though not guaranteed.
Cons of Investing in Stocks
i) Identification of right stocks to invest is a major challenge.
ii) Investing in stocks can sometimes erode your capital itself.
iii) This is for high risk investors. Not suitable for low risk to moderate risk investors.
If you are looking for Investments with good returns and high risk, stocks could be a perfect match for you.
#2 – Invest in IPOs (Initial Public Offerings)
There are several IPOs that keep coming now and then to sell the shares and list on the stock market and mobilize funds. IPOs are considered as one of the best high return investment in India.
Pros of investing in IPOs
i) You can invest in quality IPOs. You can check complete IPO reviews like it is being done on our blog. We provide reviews, you take a decision.
ii) If you are able to get an allotment and have good listing gains, you can sell them and book profit. You can hold them for medium to long term like any other stocks.
iii) Recent IPO’s in the last 1 year has provided anywhere between 5% to 40% listing gains. Some of them are trading even now at high profits.
Cons of investing in IPOs
i) Identification of right IPO Stocks to invest is a major challenge.
ii) Investing in IPOs can sometimes erode your capital itself as these can list with negative gains.
iii) IPOs are for high risk investors. Not suitable for low risk to moderate risk investors.
Many stock market experts say short term investments with high returns can be aimed through IPOs.
#3 – Invest in Sector Mutual Funds
Some mutual funds invests only in particular sectors like banking sector or FMCG sector. These are termed as sector mutual funds. Sector mutual funds always gave a high return on the investments, though these are relatively high risk.
Pros of Investing in Sector Mutual Funds
i) Sector mutual funds invests in particular sectors. If you think a particular sector is going to outperform, you can invest in such funds. E.g. Banking Sector is evergreen sector that is outperforming in the last 10 years. Even several multicap mutual funds are in a down trend and showing negative returns. However, such banking funds are outperforming even now.
ii) Sector Funds may not always move along with stock market negative sentiments. Hence you may see sector funds performing positive even when markets are negative.
iii) Sector Funds can outperform and give 12% to 30% annualized returns in short, medium and long term though not guaranteed.
iv) Currently, Banking Sector Funds and Technology Funds continue to rock even when stock market sentiments are negative.
v) If you are looking for a best investment plan for 3 years or 4 years, investing in sector funds could be good.
Cons of Investing in Sector Mutual Funds
i) Sector Fund are high risk as they concentrate only on one particular sector. If such sector is in down trend, you would see them in respective sector mutual funds.
ii) Selecting particular sector that can grow in the future is a challenge. Till couple of years back, Pharma and Transportation mutual funds were good sector mutual funds. Now the trend is changed, hence these sector funds are under performing now.
iii) Sector Mutual Funds are for very high risk investors. Not suitable for low risk to moderate risk investors.
#4 – Invest in Small Cap Mutual Funds
Small cap stocks are like future mid-cap stocks. There is so much craze about small cap stocks as they have huge potential to grow your money. However, identifying small cap stocks could be challenge. Hence, investing in small cap mutual funds that invest in small cap stocks could be the best idea. Small cap mutual funds are known for High Return Investments in India.
Pros of investing in Small Cap Mutual Funds
i) Small cap mutual funds invests majorly in small cap stocks and have good potential to grow our money.
ii) Small cap mutual funds gave the highest returns among equity mutual funds in the last 5-10 years.
iii) If you can pick-up a good small cap mutual fund and invest for 8-10 years, you can expect 12% to 18% annualized returns though not guaranteed.
Cons of investing in Small Cap Mutual Funds
i) These funds invest in small cap stocks are high risk. In some cases it can even erode the capital, if any, small cap stock invested by such fund has crashed.
ii) Small cap stocks can under perform in the short term of 1-3 years (like it is happening now). You cannot sell them if these are showing negative returns in case you need money for some reason.
iii) Even Small Cap Mutual Funds are for very high risk investors. Not suitable for low risk to moderate risk investors.
Investing in smallcap mutual funds is considered as one of the best high risk, high return investments in India.
#5 – Invest in Midcap Mutual Funds
Midcap stocks are like future blue chip or large cap stocks. However, one can invest in midcap mutual funds that invests majorly in midcap stocks and some amount on other stocks/debt securities. Many fund managers believe that midcap stocks have huge potential to grow money. Many experts say these are high return mutual funds.
Pros of investing in Midcap Mutual Funds
i) Midcap mutual funds invests majorly in midcap stocks and could have good potential to grow money.
ii) Midcap mutual funds gave the highest returns among equity mutual funds in the last 5-10 years (apart from small cap funds).
iii) If you can choose a good midcap mutual fund and invest for at least 10 years, you can expect 12% to 18% annualized returns though not guaranteed.
Cons of investing in Midcap Mutual Funds
i) These funds invest in mid-cap stocks and are high risk. In some cases it can even erode the capital, if any, of such mid-cap stock has crashed.
ii) Mid-cap stocks can under perform in the short term of 1-3 years (like it is happening now). You cannot sell them in case you need money for some reason, if your fund is showing negative returns.
iii) Midcap Mutual Funds are for very high risk investors. Not suitable for low risk to moderate risk investors.
#6 – Invest in Real Estate
I was laughing when I was reviewing some of the articles from experts 5 years back. Every expert says investment in real estate is high risk and one should not go overboard. If you need good returns you need to take risks. I started investing in real estate in the last 5 years and able to multiply a few properties till now. I am classic example that real estate investment WOULD work.
Pros of investing in Real Estate
i) Investing in any of the residential property or plot or commercial property can fetch you good returns in the medium to long run.
ii) Choosing an appropriate (need not be perfect) location for investment is a key for success in real estate investment.
iii) As per my personal experience based on where I have invested and what my colleagues / friends have been investing in Hyderabad, your investment can grow by 50% to 200% in 5-20 years. In some extreme cases it went beyond 5x, but those are exceptional cases and may not be appropriate to discuss here.
Cons of investing in Real Estate
i) No instant returns in Real Estate. It is not like a stock market where you can check your daily prices and check your profits and sell immediately.
ii) This is not for short term investment. You should invest in medium to long term. Don’t get worried that someone is making quick bucks in the short term. It is their turn now. Your turn could be on the way.
iii) Real Estate prices are skyrocketing. If you are beginning in earning and has less savings now, it would take lots of time for small savings to convert into real estate investments.
iv) These real estate investments can be done by anyone, i.e. high risk or moderate risk or low risk taker, however need to invest for the long term.
Top High Return Investments – For specific goals
Till now, I was talking only about high return investments, now let me provide you a few more tips on how you can get high returns on investments done for a specific goal.
#7- Invest in Debt Mutual Funds instead of Bank FDs
If you do not want to invest in stocks or mutual funds, but planning to invest in bank FDs, you can look for Debt Mutual Funds as an alternative option for higher returns.
Pros of investing in Debt Mutual Funds
i) Debt mutual funds invests in fixed income instruments of government or corporate depending on the investment strategy.
ii) There are various debt mutual funds in India. Some invests in Govt securities and some invests in corporate securities and commercial papers. Some are low risk and some are high risk. One has to pick debt funds based on their risk appetite and tenure to get high returns.
iii) Debt mutual funds can provide 6% to 10% annualized returns based on the debt fund chosen by investor though not guaranteed.
iv) Depending on the tenure one can choose a right debt mutual fund. If you are investing for short term of say 1 month or 3 months, liquid mutual funds could be better. If you want to invest for 3 months or 6 months, ultra short term debt mutual funds could be better. If you are thinking where to invest money for 1 year, short term debt mutual funds could be good.
Cons of investing in Debt Mutual Funds
With the recent NBFC crisis and scams, some of the Debt Mutual Funds that invests in corporate instruments like NCDs or Corporate commercial papers have turned high risk. Some of the debt mutual funds have written-off due to delay in payment from some of the corporates.
If you are looking for some of the short term investment plans with high returns, investing in liquid/short term debt mutual funds could be a good idea.
#8- Invest in Tax Saving ELSS Mutual Funds if you want to save tax
There are various tax saving investment options to save tax u/s 80C. However, ELSS are meant high return mutual funds where one can save income tax.
Pros of Investing in Tax Saving ELSS Mutual Funds
i) Investment in ELSS mutual funds qualifies for tax saving u/s 80C upto Rs 1.5 Lakhs.
ii) Tax Saving Mutual Funds have lowest lock-in period of 3 years among other tax saving investment options in India.
iii) Tax Saving ELSS Fund’s work like any other equity funds and can provide 12% to 15% annualized returns though not guaranteed. They provide high returns compared to any other tax saving investment options.
Cons of Investing in Tax Saving Funds
i) Investing in Tax saving funds are risky as they invest majorly in equity.
ii) Returns from ELSS mutual funds are taxed based on LTCG beyond Rs 1 Lakh. Hence returns are not 100% tax free.
#9 – Invest in PPF to have safe tax saving investment option
If you want to invest in safe investment option and save tax, PPF could be the best bet for you. Investment in Public Provident Fund (PPF) is guaranteed by Govt of India, hence it is a safe investment option.
Pros of investing in PPF
i) Investment in PPF qualifies for tax saving u/s 80C upto Rs 1.5 Lakhs every year.
ii) The current PPF interest rate is 7.9% from 1st July, 2019 onwards. Such rates would be fixed by the Ministry of Finance every quarter.
iii) PPF has lock-in period of 15 years and you can extend for 5 year block period. Means if you and your spouse each can open PPF and invest Rs 1.5 Lakhs per year (totaling to Rs 3 Lakhs per annum) and invest for 20 years (15 years Lockin period + 5 year extension), you can accumulate over 1 Crore rupees.
iv) Returns from PPF are tax free.
Cons of investing in PPF
i) PPF has highest lock-in period of 15 years, which is highest among various tax saving options (other than Sukanya Samriddhi Yojana). You can make partial withdrawals after a certain time with terms and conditions.
ii) Interest rate can change every quarter. You cannot estimate your maturity value accurately.
In spite of having some drawbacks, PPF is considered as one of the safest investments with high returns in India.
#10 – Invest in Sovereign Gold Bonds instead of Gold ETFs or Gold Funds
What investment experts have been saying about gold? The only message one keeps getting is don’t invest in gold. I have been recommending investors to invest in Sovereign Gold Bonds provided they need gold in future. Some experts criticized my approach. I would re-iterate that you should invest in these gold bonds provided you are in need of physical gold in the future along with expectation to get some returns.
Pros of investing in Sovereign Gold Bonds
i) One can invest in sovereign gold bonds that would be in denominations of grams of gold. It would mature in 8 years. One can exit after 5 years too. You would get equivalent value of gold grams on maturity date.
ii) One would get 2.5% interest rates per annum till maturity.
iii) If you are planning to buy gold in future for ornaments or for your daughter’s marriage, investing in these bonds could be the best bet.
Cons of investing in these gold bonds
i) You cannot redeem before the 5 year period.
ii) Investment in gold has not given any good returns in the last few years, except in the last 2 months.
Readers, what you do think about these High Return Investment Options in India?
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Top 10 High Return Investments in India