Investment Option |
Benefits |
Drawbacks |
Fixed Deposit |
Returns are guaranteed |
Interest earned is limited |
Readily available |
Not a tax-efficient option as, interest income exceeding Rs 10,000 in a financial year is taxable |
Ease of buying |
Lock-in period, penalty on pre-mature withdrawal |
Public Provident Fund |
Can start with a small amount. |
Lock-in period of 15 years and cannot be partially withdrawn before the end of the 6th year. |
Returns are guaranteed. |
No tax benefit. |
Offers income tax benefits. |
Predefined interest since they are not market linked. |
Real Estate including property and land |
Can provide regular rental income. |
Time, money and effort to identify the right property. |
Physical and emotional satisfaction of owning a property. |
Expensive to purchase. |
Helps in saving tax on the loan taken for buying property. |
Needs active management in terms of upkeep of property. |
Can be used for leaving a legacy. |
Involves a lot of legal processes in buying/selling |
Causes emotional stress if project timelines get extended. |
High search cost. |
Predicting a rise in real estate prices is difficult. |
Time consuming to find a buyer to sell it at the price you want. |
Gold and precious metal including jewelry |
Tangibility provides reassurance. |
Very expensive to buy. |
Unaffected by volatility of stock market, can provide diversification and hedge benefits. |
Difficult to store safely |
Easy to find a buyer |
High transaction costs. |
If you sell it, you will lose some value. |
Emotions attached to gold make it “a difficult to sell” investment. |
Appreciates less as compared to other investment products |
Government & Corporate Bonds |
Assured returns. |
Interest rate risk: Rise in interest rate can decrease the market value of a bond. Falling interest rates mean that newly-issued bonds will have lower returns |
Low volatility. |
Limited returns, hence not suitable for long term investing |
Default risk: Risk of receiving less than expected or no payment (in case of corporate bonds).
However, credit ratings are available to help investors assess the likelihood of default. |
Equities (popularly known as stocks or shares)
|
Potential of earning high return in the long term.
|
Highly volatile. |
Ease of buying / selling.
|
Returns are not guaranteed. |
Requires effort, research and time. |
Can be costly. |
Can be unavailable to purchase |
Mutual Funds |
Simple to invest in. |
Returns are not guaranteed. |
Offer in-built Asset Allocation and Diversification. |
Customization of portfolio not possible |
Can start with a small amount |
Risk of over-diversification if one invests in similar schemes |
Ease of buying/selling |
Highly liquid |
Offers tax benefits |
Professionally managed |
Highly regulated |
Commodities |
In certain circumstances, negatively correlated to broader stock market hence provides diversification and hedge benefits |
Difficult to buy and sell |
Holding a commodity can provide protection against geopolitical risks (The risk of negative impact on an investment's returns due to political changes or instability in a country). |
Collectibles |
Can be an alternative to traditional forms of investments as it can appreciate significantly in certain circumstances. |
Difficult to buy and sell. |
Ease of buying. |
Difficult to assess value and can be expensive |