Investment Opportunities In 2022 - Build Your Wealth

“Money is the most universal and most efficient system of mutual trust ever devised.” - Yuval Noah Harari (Author of ‘Sapiens’)

The pieces of paper for which we all spend our lives toiling, and fretting are undoubtedly one of the most important things in this man-made world. 

However, to build lasting wealth you cannot rely only on your active income i.e the income for which you have to slog. Real wealth not only means money but freedom. Freedom to work or not to work and still enjoy life to your fullest. For that to happen, you must invest your money to make it work for you and create more money.

The way people invest is rapidly evolving as new and innovative investment opportunities are cropping up and the willingness to explore them is increasing. People do not want to be tied to the conventional ways of saving and investing. Especially after the COVID-19 catastrophe, the world appears quite different when it comes to investing. 

With added focus on wealth creation and well-being, many investment options are being considered such as insurance-cum-investment products, fixed deposits, gold and other precious metals, stock market bets, land and other real estate deals, various types of bonds, provident funds, cryptocurrencies, and alternative investments like startup equity, inventory financing, and asset leasing. 

Here Is A List Of The Best Investment Opportunities For 2022

1.     Public Provident Fund

This government-backed fixed income scheme is considered to be a   risk-free investment as its returns are guaranteed by the government. It is available at almost all Indian post offices and banks.

You can start your investments with ?500 per annum and the maximum amount you can invest in this is ?1.5 lakh per annum.

You can deposit anywhere between 1 to 12 times in one financial year.

Investments in PPF are tax-free and the interest earned on your investment is also tax-free. Hence, it is a good investment option for salaried people.

2.      Post Office Monthly Income Scheme

This government-backed scheme provides you benefits on the   interest earned on the lump-sum deposit that are payable every month. You get a 6.60% interest rate on both individual and joint accounts.

You can get this scheme from the Indian postal service which offers single account and joint accounts (up to three adults). A minimum investment of ?1,000 is required to open an account and a maximum balance of up to ?4.50 lacs and ?9 lacs are permitted for single and joint accounts, respectively.

Accounts can be closed after five years from the date of opening. However, premature closure before one year is not allowed. The scheme offers an interest rate of 6.60% per annum payable monthly. It is also a low to zero-risk investment scheme ideal for elderly and risk averse people.

3.     National Savings Certificate (NSC)

Touted as a risk-free investment, the NSC is yet another         government-backed fixed income investment scheme which can be bought from Indian public banks, some private banks and all post offices.

A minimum investment amount of ?1,000 is mandatory. However, there is no limit on the maximum investment. You can invest any amount in the multiple of 100 in 12 instalments in one financial year or the desired deposit at once. 

Interest compounds annually at the rate announced by the Ministry of Finance every quarter and is paid at the end of the maturity period.

NSC has a lock-in period of five years. Premature withdrawal is possible in cases such as the death of the certificate holder. This scheme is a good investment option for people seeking stable returns at no risk.

4.     Government Bonds

The Indian government (both central and states) offers bonds to individuals to raise money to sponsor development projects. Government bonds are generally issued for terms ranging from 5 to 30 years.

You must have a bank account to purchase government bonds. You can hold government bonds in a demat account. Government bonds are considered one of the safest investment options because they carry sovereign guarantees. It is best for people seeking risk-free returns. Since the risk is minimal, the returns are often low in these investments.

5.      Corporate Bonds

Corporate bonds or debentures are debt instruments issued by private companies to meet a variety of business needs such as growth and expansion. The corporate bonds are issued by the issuing company in the primary market and then these bonds are traded in the secondary market. Most trading is carried out through organised electronic trading networks over the counter.

Primarily, 3 groups are involved in the bond market.

• Issues
• Underwriters
• Purchasers

The issuers are the sellers of corporate bonds, i.e. the company issuing the bonds. The underwriters in the bond market are the investment banks and other financial institutions which aid the issuers in selling the bonds.

The selling of debt is not an easy undertaking since it might involve the transactions of crores of rupees in one offering. This means that a lot of groundwork in preparation of the offering, such as creating a prospectus and other legal documents, needs to be done. Underwriters are required in the corporate debt market since this debt is associated with a lot of risks. 

The purchasers of the debt are the final players who buy these corporate bonds and in return receive interest from the issuer. Demand and supply, current interest rates and liquidity are some major factors determining the bond’s value and yield. If you want to invest in corporate bonds, you need to have a Demat account where the bonds purchased get deposited after purchase.

6.        Sovereign Gold Bonds (SGBs)

These are government securities issued by the Reserve Bank of India (RBI), SGBs are denominated in gram(s) of gold. They are issued in multiples of gram(s) of gold with a minimum investment of 1 gram.

You must have a PAN Card to purchase an SGB. You can buy SGBs from post offices, banks, stock brokerage companies both online and offline.

You can purchase a maximum of 4 kgs of SGBs for individuals and 20 kgs for trusts. The rate of return is 2.5% which is paid twice a year.

7.      Inventory Financing

There are many promising companies that invite deals in which you can finance inventory for them. By financing inventory for a growing company you can earn pre-tax IRR of up to 12%. It is an asset-backed investment with a maturity of 1-13 months. You can start investing with a minimum of ?15,000. It is a good investment for people who seek higher returns at a lesser risk-level than equity investments. This is an alternative investment and relatively new in the market. It is gaining momentum quickly. 

For example, AUS (India’s leading commercial drones making company) is inviting investors to finance various components for assembling a drone. The maturity period for this deal is 6 months and you can earn a pre-tax IRR of 11.6%. 

In this way, you can finance inventory for promising startups and earn good returns. This contributes to building a healthy ecosystem where the startups can raise money through crowdfunding and the individual investor earns healthy returns. You search such investment opportunities on Grip.

8.       Asset Leasing

Asset leasing is yet another new-age investment opportunity that is creating a lot of ruckus in recent times. These days, companies prefer to work on asset-light models wherein instead of blocking huge capital in purchasing assets such as plant and machinery, the companies take them on lease. 

Leasing is a simple contractual arrangement calling for the lessee (the company inviting lease) to pay the lessor (owner or investor in this case) regular payments in exchange for use of an asset over an agreed period of time. Furniture, vehicles and equipment are among the most common assets that are leased.

Investment in leases allows you to invest in an asset (like vehicles, furniture, electronics) and lease it to a company against fixed monthly returns. Companies are able to use leased assets to scale faster, while the investors are able to enjoy fixed, non-market linked, monthly returns.

Asset leasing is an asset-backed investment opportunity in which you can earn up to 21% pre-tax IRR. 

9.       Equity Mutual Funds

An equity mutual fund is a financial instrument that pools investors’ money and invests it in stocks. Most mutual funds expect a minimum investment of ?1,000. There is no limit to the maximum amount that can be invested.

You need to have a demat account to invest in equity mutual funds.

You can choose amongst the eight types of equity mutual funds available in the market. You can also invest in equity mutual funds known as growth funds. FOr that you need not open a demat account.

The lock-in period of equity mutual funds is generally of three years from the date of investment. Equity mutual funds are popular for delivering the highest returns among all the other types of mutual fund investments. For instance, some equity mutual funds have delivered a 5-year annualised yield of up to 35% and as high as 117% in a year of historic highs in 2021.

The risk level for such investments is medium to high. It is totally fair to take such an amount of risk given the probability to earn high returns is colossal. This type of investment is highly suitable for people in the starting years of their career as they do not have much responsibility and can take high risks. 

10.    Unit-linked Insurance Plans (ULIPS)

 ULIPs are insurance-cum-investment products. The premium paid by the policyholder for ULIPs is partially used to provide a life cover to the insured and the other part is allocated to be invested in debt and equity markets.

You can buy ULIPs from any insurance company or bank operating in India.

Just like with any other life insurance product, you need to provide income proof to buy ULIPs. The minimum investment in ULIP differs from one financial entity to another. Generally, a minimum of ?1,500 is mandatory as premium payment per month.

The maximum investment in a ULIP policy depends on your capacity to pay annually throughout the tenure of the policy.

Charges such as fund management, premium allocation, fund switching, premium redirection, partial withdrawal, and discontinuance among others are all over and above the premium you pay annually for the ULIP.

ULIPs have a lock-in period of five years, after which you can withdraw your funds without any penalty and are also eligible to continue the policy depending on its terms and conditions.

11.   Startup Equity

This is the most trending investment opportunity especially after the super success of spot funding tv shows such as Shark Tanks India and Horses Stable. Angel investing in startups is now possible for a common man. Startup equity gives you an opportunity to be a shareholder in a VC-backed, early-stage, and high-growth disruptive startup.

Great opportunity to participate alongside a leading VC fund/investor, who undertakes thorough due diligence, negotiation, and plays a key role in management once the investment has been made. It is a high-risk high-reward investment and can be started with ?2 lacs.

You can explore such exciting opportunities on Grip - a disruptive alternative investment platform. 

12.    REITs

REITs or Real Estate Investment Trusts enable you to invest in a portfolio of income-generating real estate assets by buying units of the REIT similar to units of a mutual fund. Any income generated by the underlying real estate assets is distributed amongst the unitholders in proportion to their holdings.

Just like equity stocks, REITs are listed and traded on the stock market. Thus, you must have a demat account for investing in REITs in India. 

Currently, there are 3 REITs that allow investors to invest in India. Namely:

• Mindspace Business Parks REIT
• Embassy Business Park REIT
• Brookfield India REIT

The minimum investment criteria for investment through initial public offerings (IPOs) and follow-on offers (FPOs) of REITs that are listed on the stock exchanges are ?10,000 and ?15,000 respectively.

REITs are mandated to give 90% of their portfolio’s net rental revenue as dividends, or interest to their shareholders. Typically, commercial real estate provides returns between 8% and 10% per annum. However, grade A commercial spaces in prime locations can give better returns. You can expect returns on REITs between 8% to 14% in the short to medium-term with minimum risks.

It is an ideal investment plan for people looking for high stable returns.

Conclusion:

If you don’t find ways to make money while asleep then you will be working till the day you die. You must start investing your money as soon as you can. The sooner you do the better you will be able to reap the benefit of compounding. Yes, money compounds or multiplies with time provided it is parked in profitable investments. The good news is that there are many new-age investment opportunities available today that would spoil you for choices. You need not confine yourself to conventional ways of investing rather make your portfolio more diversified. Keep learning. Keep Investing. Live the life of your dreams as you only live once.