We often think that investments are beneficial only for the middle-aged or for the retired class, as they are nearing the stage of retirement where income generated will not be as high as before. However, this is not the case as investments in fixed income instruments are equally important for young professionals as it cushions them against the turbulence of the times to come. People we see investing aren’t exactly poverty struck or from the cream of the society, with less or abundance of funds. They belong to a class of people who respect the value of money and its power and are willing to safely invest them in fixed deposits offered by banks, companies and so on. Moreover, as expected, neither do all belong to the class of pensioners or retired people. There is a need for young professionals to place their hard-earned funds in the market, yet many of them are too shy of the market scenario, for fear of the inherent risk involved in such transactions. There is also a stark contrast in the needs of different individuals. For instance, a retired individual would invest in order to receive monthly income in the form of interest. On the contrary, individuals belonging to the working class would seek to invest in order to set aside funds for financial contingencies.
While investors belonging to the fixed income categories are usually averse to the concept of risk, they look for funds that do not involve too much of the risk quotient, while maintaining as less diversification as possible. They also watch out for investments that are simple in nature, and do not involve a lot of complexity in them. Earlier, investors could bank in on double-digit rates of interest by investing in the bonds of top-notch companies. However, with transcending times owing to the global economic meltdown, this is no longer possible. As investors in fixed income instruments struggle to gain their footing, there is no denying that the future is predicted to be quite shaky and inconsistent as well. Although the Reserve Bank of India hiked its rates of interest quite a few times over the last year, banks were adamant not to increase their rates of interest as it would simply damped their situation of liquidity. Thus, investors ended up with negative returns for their investment. Since the investment requirements of retired and individual individuals vary, here is a lowdown on how you must plan your investments for each category of individuals.
Retired individuals in the normal course, receive a lump sum amount at the end of their professional life. His main objective from investment is to secure a regular source of income from them on a monthly basis. From such an income, he expects to meet his day-to-day expenses and meet other important requirements such as his child’s marriage or further education and so on. He also needs a surplus from these funds so that he can utilize them towards realizing his dreams or for health-related emergencies. Retired individuals usually look for investment modes that are safe in their nature. You can thus, opt for savings schemes with the Government as they provide returns coupled with safety. Besides, you can also choose to invest in company fixed deposits as they offer higher returns, but a high element of risk is involved. Look for companies that have a good credit rating, preferably AA or AAA as it ensures that the company is a profitable and reliable one. Don’t fall prey to the promise of higher returns while selecting a company, as if the company turns out to be a dud, then you will have to wash your hands off the principal amount as well. If you intend to invest in mutual funds, fixed maturity plans or FMPs and short-term income funds are good options.
If you belong to the working class of individuals, stay away from equity if you do not have an appetite to stomach risk. If you have the overhead of home loans or a car loan, because liquidity will be of prime importance to you, any money saved can be used towards financial emergencies or your holiday in a dream destination.