The stock market offers exceptional returns to investors, but only when it’s done carefully. Whether it’s opening a trade position at the wrong time or investing during the bear trend, unintentional mistakes can make a significant impact on the returns. That’s why every individual should choose a proper investment plan that will generate a stable income flow with ease. In India, different strategies or schemes are available, which will further help you create a wonderful wealth profile in this competitive economy. That being said, we will give you a brief walkthrough on the best investment strategies in India that you can capitalize on.
Investment strategies: What are these?
Not many are familiar with the stock market, let alone the investment strategies in India. That’s why we will first shed light on what these are, so that you can gain more knowledge. These are nothing but systemic plans or approaches that will help you divide your resources proportionately across multiple instruments.
Every investment strategy is based on a few key elements, without which you won’t be able to plan smartly. These include:
- Financial objectives and goals of every individual
- Market conditions, like whether it’s moving upwards or downwards
- Time horizon of the concerned investment market
- The risk tolerance an individual has in case there’s a loss
How will investing strategies help you grow your finances?
Strategic investments will bring a lot of benefits to the table. So, it’s important you analyze your finances and plan accordingly. Before we move on to discussing the various strategies, let’s have a look at their benefits.
- Most investment instruments offer the benefits of compounding. Hence, you can easily grow your wealth in the long run even when the market is vulnerable.
- Use of certain investment schemes like ELSS and NPS will help you build your finances as well as reduce the payable tax amount in India.
- High-performing sectors and asset classes will generate maximum returns, provided you are investing smartly in these.
- Dedicating your income towards long-term investment plans, especially SIPs, will improve your risk tolerance level. This way, you can keep your economy safe from market volatility and profound losses.
5 top investment strategies for every Indian
Income investing
If you are not relying on capital appreciation every year, this is the best strategy for you. Here, all the investments will return a fixed amount of return every month. Dividends, interests, and rents are the three most popular payout channels in income investing.
- If you are planning for a retirement income or have a lower risk tolerance, this is one of the best investment strategies in India.
- It will help you grow your passive income steadily with time, without having to rely on capital appreciation.
- The main investment channels will be bonds, dividend-payout stocks, fixed deposits, and REITs.
- Returns will be more predictable and stable.
Value investing
Popular figures like Warren Buffett have popularized this specific strategy, where your primary focus will be on the undervalued stocks. Investing in them will require detailed market research and long-term patience. But the returns will leave you surprised.
- You need to buy quality stocks from the market, but at a discounted price.
- Knowing about the stock management companies will help you in the long run to make accurate investments.
- If you are planning for long-term wealth creation, this is one of the ideal investment strategies in India.
- When the market suddenly moves downward, the investments will offer excellent stability.
Active trading
Known as a high-risk, high-return strategy, it will help you build your wealth quickly by capitalizing on market vulnerabilities. However, you need to have a very high risk tolerance capability. If you have enough time on hand or want to leverage your years of investment expertise, go with active trading.
- Profits will be quicker, but the risks of financial losses can’t be overlooked.
- The most popular investment strategies in India that you can leverage are:
- Day trading
- Intraday trading
- Swing trading.
- Technical analysis, correct timing, and market knowledge will help you invest accurately and increase your returns.
Growth investing
This is one of the most highlighted investment strategies in India that has gained immense traction in recent years. Here, you will be investing in company stocks or equities that are likely to grow in the coming time. These include technology like AI and IoT, and renewable energy sectors, where there are ample future opportunities.
- It’s more suitable for young investors with long-term growth plans.
- Capital appreciation will be the primary goal for wealth creation.
- The companies where you will be investing need to have strong revenue and earnings growth.
Passive investing
Lastly, we have a strategy where you will be creating a diverse investment portfolio and holding it for a longer span than any other methods we described above. Thanks to ETFs and index funds, it has become one of the most preferred investment strategies in India.
- Nifty 50 and Sensex are the two most popular funds for passive investing.
- Rather than focusing on outperformance, you will have to put more emphasis on market-matching returns.
- This is highly tax-efficient with lower upfront costs and fewer maintenance hassles.
How to choose the best investment strategy in India?
As there are different investment strategies in India, finding the right one is of utmost importance. Otherwise, you won’t be able to maximize your returns, let alone focus on wealth creation. Here’s how!
- Define the financial goals you have to align them with your investment strategy. It will help you make smart decisions with a smaller error margin.
- Evaluate the maximum level of financial loss you can bear without worrying about breaking the bank. In other words, assess your risk tolerance level to become a smart investor.
- Spread the investments across multiple instruments to diversify the returns. It will not only help you grow your wealth steadily but also reduce the impact of market vulnerabilities.
- Check how long you are planning to hold the investments. The greater the time horizon is, the more aggressively you can invest and vice versa.
Conclusion
Investment requires smart calls and in-depth knowledge about the market. Otherwise, you won’t be able to find the best opportunities for wealth creation and maximizing the returns. Since this is quite a risky venture, you can look for professional advice. Wealth First is a leading investment consultant in India that will help you create a stellar portfolio while considering your time horizon and risk tolerance level.