Investment opportunities abound in India. But choosing the right investment to fulfill a certain financial goal from a number of options can become a taxing exercise for the investor.
Many investors decide their investments by lining up the options available and then take an option after eliminating the others after considering the pros and cons, features and returns of each option. However, this method can be erroneous and hence it is necessary to follow a more methodical approach to zeroing in on the right investment.
Compare similar area
One of the biggest mistakes that an investor can make is to bring together several areas that are actually not comparable in nature.
If you compare an investment in a public provident fund with an investment in a systematic investment plan of an equity-oriented mutual fund, there is bound to be a disconnect which might leave you opting for the wrong kind of investment. While the former concerns a debt area, the latter is an equity investment.
It is not possible to compare the returns in these areas because the risk element involved is also not the same. Thus one first needs to compare similar areas of investment.
The presence of investment restrictions is an important factor in the entire scheme of things.
This will limit the number and the kind of investments that a person is able to make in a particular instrument. However, there are no restrictions in some areas, which results in investment being made as and when the required amounts of funds are available.
The restrictions can be either in terms of the amount to be invested or in terms of the number of times that the investment can be made within a particular time period.
Just earning a return is not enough for the investor. It is important that they are also able to enjoy the benefit of the earnings. This can be done when there is a payout or the mode is specified, ensuring that the investor knows when the money is coming to them to help them plan the use of that money.
Again selecting an investment option where the payout does not match the needs can result in a position where the investor is not able to achieve their target.