What do you usually look for in an investment? Do you prefer a high return providing investment or one where your funds are secured? Whatever is your investment preference, you should invest accordingly. While Mutual Funds are one of the preferred investment options, they involve market risk. Although investing in Mutual Funds is a good option, it might not suit the requirement of all investors. This blog talks about investment options other than Mutual Funds that can help you achieve your investment objectives.
Different Investment Options Other than Mutual Funds
Every investment carries a degree of risk. But those investments that provide higher returns always carry more risk. Similarly, Mutual Fund investments depend on the market forces. Hence, you cannot predict their returns with ty. While some investors want higher returns than mutual funds, others aspire for secured investment options. So, here are 7 popular investment prospects other than mutual funds.
1.1 Equity Shares
Talking of alternatives to mutual funds, equity shares strike the mind instantly. Equity investments refer to the buying and selling of stocks that are listed on a stock exchange. You can easily trade on a stock exchange through a Demat Account with your broker.
- If you invest in equity shares of a company, you become the owner of that portion of capital.
- The market prices are entirely dependent on the forces of demand and supply. Hence, they can be unpredictable and volatile.
Equity investments can definitely give you much higher returns compared to Mutual Funds but, they carry a huge market risk that might even lead to heavy losses.
1.2 Government Securities
Government securities are debt instruments issued by the government to raise capital from the public to meet their project requirements. G-secs include securities like government bonds, sovereign gold bonds, etc.
- These bonds have a fixed rate of interest and a fixed maturity date
- Government bonds pay periodic coupon payments
- Government bonds carry negligible risk as they do not depend on the market prices and are backed by the government.
Although they carry low risk, the return on government bonds is also less. So, if you are looking for a low return but secure investment option, government bonds can be your go-to investment.
1.3 Bank Fixed Deposits
A fixed deposit is a debt instrument offered by banks and NBFCs.
- Bank FDs are the most popular investment option in India.
- Normally the tenure is from 7 days to 10 years.
- They provide a fixed interest rate throughout the tenure of investment, and you can also choose to reinvest the interest to earn compounding benefits.
- They are considered low-risk investment options because no market risk is involved, and bank FDs up to Rs. 5 lakhs per bank per investor are secured by DICGC.
- FDs provide considerably low returns and can hardly cover the inflation rate.
Due to low risk and low returns, FDs are most suited for risk-averse investors. They can help you safeguard your capital and also earn a steady interest.
1.4 Public Provident Fund (PPF)
A PPF is an investment cum tax saving instrument
- They are long-term investments that provide tax-free returns of 7.1% p.a.
- You can also get the benefit of compounding due to reinvestment of the interest amount
- PPF investments are backed by the government and hence carry negligible risk
- The minimum investment period in PPF is 15 years
- Limited withdrawal is allowed after completion of a lock-in period of 5 years
- You can also claim a deduction of PPF investment from your taxable income up to Rs. 1.50 lakhs per year
It is a good alternative way to invest money for those who want a safe and secure investment option that pays a fixed rate of interest. But, PPF investments are illiquid due to the lock-in period and limited withdrawal permissions.
1.5 Real Estate
Real estate investment means purchasing a property other than the one you live in.
- It involves the purchase and sale of property for profit
- You can earn in the form of rental income on the property and also gain through capital appreciation
- Real Estate investments carry high risk and have extremely low liquidity
Although real estate can provide high returns, it requires a considerable amount of investment. If you can afford to block your capital, it can be an alternative to mutual funds in India.
1.6 Gold ETFs
Gold ETFs are the dematerialized form of physical gold. The price of Gold ETFs reacts to the market price of physical gold.
- One unit of gold ETF is equal to 1 gram of physical gold.
- Gold ETFs are accessible through your Demat Account and are affected by the price volatility in the market.
- It allows you to invest in gold in an electronic form, but your investments depend only on one commodity. You cannot diversify your investments with gold ETFs.
While Gold ETFs can provide good returns, they carry market risk and lack diversification.
1.7 P2P lending
Peer-to-peer lending is one of the best investments other than mutual funds.
- P2P platforms provide a marketplace for direct lending between individuals
- You can receive regular cash flows with monthly repayment from the borrowers.
- P2P lending is regulated by the RBI and provides higher returns compared to other debt-based investments
- It does not require a huge amount of capital and provides greater flexibility to the investors with limited exposure per borrower.
- Online P2P platforms facilitate peer-to-peer lending transactions.
P2P lending can provide a high return opportunity with moderate risk. Being debt-based, it doesn’t carry any market risk and can provide returns along with the flexibility of investment.
Mutual Funds vs. P2P Lending 2023
Mutual Funds pool the money from different investors and build bulk capital for investment. A fund manager is appointed by the Mutual Fund to manage your investments. They invest in both equity and debt-based securities. Based on their investment portfolio, they are grouped into debt, equity, and hybrid mutual funds. Alternatively, you can invest in P2P lending with the LenDenClub platform. So, let’s compare the investment prospects of Mutual Funds and P2P lending with LenDenClub.
2.1 Mutual Funds
Here are the key features of Mutual Fund investments and the drawbacks of investing in Mutual Funds:
- You can invest in the type of mutual fund that suits you.
- While debt funds provide lower returns but comparatively safer investments, equity funds like ELSS (Equity Linked Savings Scheme) carry considerable risk.
- You cannot control your investments as the fund manager invests your money.
- Mutual Funds charge an expense ratio each year from your investments to meet their expenses, including the fund manager’s salary.
- Some funds may also charge an entry and exit loan on your investment.
- You must have heard the famous caveat, “Mutual fund investments are subject to market risk.” This means that Mutual Funds carry a higher risk
2.2 P2P Lending with LenDenClub
While Mutual Fund investments look lucrative, investing your money in P2P lending can provide the best returns at moderate risk. Here’s how LenDenClub empowers your investments:
- An RBI registered NBFC-P2P makes LenDenClub a genuine investment platform
- Higher returns up to 12% p.a. can help you grow your wealth at a fast pace
- Regular cash flows through monthly repayment by the borrowers
- Being a debt-based investment makes it free from market risk
- LenDenClub charges a nominal amount as a registration fee reducing your overall cost
- Flexible investment tenure ranging from short to long term
- With a minimum and maximum investment of Rs. 500 of Rs. 2,000 per borrower, you can choose multiple borrowers
- Your total investments on the platform can range between Rs. 500 – Rs. 50 Lakhs allowing you to take maximum benefit of diversification
- Low Default risk of 3-4%
- The benefit of compounding by reinvesting the interest income
P2P lending with LenDenClub provides the best investment other than mutual funds with all these benefits. It carries a lower risk and provides regular returns over the investment tenure. So what are you waiting for? Register Now to start investing!