We all know that saving merely isn’t enough, we need to invest such that we let our money work for us. While it is important to invest, it is more important to invest smartly. Smart investment is making strategic and informed decisions to maximize your returns and minimize your risk.
Guide to smart investment
For a beginner in investment, the first step is to consider low risk investments. The investment goal should be to have decent returns. The investor should then invest consistently in the chosen asset. The next stage of investment happens when the investor starts investing strategically and focuses on portfolio diversification.
If you are a beginner in the field of investment, we would recommend investments giving stable returns. Let us have a look at a few safe investments which carry minimum risk.
|2% – 6%
|1 month- 10 year +
|3% – 8%
|Up to 10 years
|Short term funds
|1 year – 3 years
|Public Provident fund (PPF)
|7.1% (As of 2023)
|3 months- 5 years
We can see that the return rate of Savings accounts is the minimum, Fixed deposits, Short term funds and PPF’s carry medium returns. P2P Lending carries an attractive return rate with flexible tenure.
What is P2P Lending?
P2P Lending or Peer to Peer Lending directly connects investors and borrowers, cutting out the need for any outside intermediaries like banks or financial institutions. It takes place through a digital platform where those who want to invest register themselves as investors and those who want a loan, register themselves as borrowers. In some P2P platforms the investors have the flexibility to choose loan listing, in the others the investment is hyper diversified. There are many P2P platforms in India, however one of the best P2P platforms is LenDenClub
Established in the year 2015, LenDenClub is India’s largest P2P Lending platform. It is regulated by the RBI. An investor can invest a minimum amount of ₹10,000 and the maximum amount of ₹50 lakhs. The investment tenure is 1 year to 5 years and the rate of return is 10% to 12%. The investment product of LenDenClub is FMPP and FMPP Investors have earned returns up to 12% p.a. since launch.
LenDenClub uses hyper diversification to give high returns to investors . Hyper diversification helps to mitigate risk by allocating funds to borrowers as low as INR 1. In that way the investors can lend small amounts to multiple borrowers.
For those in the investment game for a long term, can make smart investments by investing in IPOs, venture capital, cryptocurrencies, REIT’s. It is important to keep your investment diversified and take help of a financial advisor before making high risk investments.
Your investment can also give you best investment plan for monthly income
Here are some tips that will help you make smart investment decisions
- Conduct thorough research– It becomes very important to research the investment asset before investing.You should analyze potential risk and returns. Latest market trends, historical performance and future scope must be studied thoroughly before investing.
- Set clear investment goals- An investment without a clear goal will not provide desired results. You should keep investment objectives, risk taking capability, investment tenure whether you want to invest for short term, mid-term or long term to make a sound investment decision.
- Start your investment early– Early investments give ample time to grow wealth. With year on year investment you can benefit from compounding and gain high returns.
- Diversification of your portfolio- Before investing the investor should study different asset classes such as stocks, bonds, real estate and identify the best ones out of those. The investor should then make a blend of different investments in a single portfolio. This helps in minimizing risk.
- Risk and Reward– Investments that provide high returns usually carry high risk. It is important to assess risk tolerance and consider the trade-off for each investment before making any investment decision.
- Regular market study– It becomes important to regularly review your portfolio and make adjustments based on market conditions. Having a clear entry and exit strategy is important for high risk investments.