In the modern financial system there are so many investment avenues to choose from today in financial market and it has become difficult for anyone to decide about these avenues. Some of these investment avenues offer attractive returns but with high risks and some offer lower returns with very low risks. An overall analysis of these investment avenues with risk and return trade is presented in this article. These investment avenues are:
Equity: Equity is an investment avenue which is able to offer the highest possible returns but is very risky as there are huge probabilities of investors even losing some part of the invested capital too. This can offer returns in range of 15- 50% annually in good times and negative returns of 5-15% also.
Mutual Funds: Mutual funds offer moderate returns but are less risky compared to equity investments. They can offer a return between 12-30% annually in good times. May be even higher in good times and negative returns of 5-10& annually.
Bonds: These have very lower risk so offers lower returns. The return from bonds ranges between 7-10% annually.
Commodities: These investments are made in commodities such as rice, wheat, metals. This is very tricky investment. Return from these investments varies between 10-35%. One should be able to understand the weather, crop cycle and market dynamics.
Bullion: Bullion are part of commodities. One can invest in gold, silver and platinum. These fetch high returns but are also very volatile.
Futures & Option: These investments can offer 5-10% return even in a day. This market is also very tricky.
Real Estate: One can also invest in real estate. This investment offers attractive return. But the price fluctuation in bad times very high. And one needs lakhs of rupees to get started in this market.
Govt. and RBI Bonds: These offer fix rate of return over period of time.
Company Bonds: These are similar to the government bonds expect these are issued by private corporations and bear higher risk than that of the government/sovereign bonds.
Post Office Investments: These are the risk free investments. And offer lower return.
Insurance: Insurance have become one of the most important investment avenues in India. Unit Linked Insurance Plans are very popular in India besides the traditional endowment policies.
Provident Funds: This one of the safest long term investment option. This is mainly for retirement purpose.
There are so many other options available such as carbon trading, currency trading, power trading and so many. One should choose investment avenues according to her/his financial goal and knowledge about the financial instruments.