Investing in the stock market: minimum risk and maximum return

- Lockin period of JFD of the bank is five years. He may also get the benefit of exemption under Section 80-C of the Income Tax Act. However, investors in bank fixed deposits do not get as much return as corporate FDs.

If your portfolio is leaning towards equity, one thing is for sure, you cannot sleep peacefully due to fluctuations in the stock market. It is also important to include a fixed income instrument in your portfolio. Investing in a debt instrument for the time being can be beneficial for you, as there are many such products available in the market. By investing in it you can get a good return.

Investing in equities pays off well, but there are also risks involved. If you are older and you are moving towards retirement then it is not advisable for you to take extra risk. In this situation, it is advisable to choose an instrument with a fixed income. According to Ajay Bajaj, Certified Financial Planner, there are a number of fixed income investment options available in the market, which will enable the investor to get a good return on one hand. It will also be able to save tax.

Bank and corporate FD

For Indian investors, fixed deposit has always been the best investment option. The most important thing about a fixed deposit is that you will get a fixed rate of return and no risk at all. However, the investor has to pay tax on the interest earned through this type of investment. This instrument is the best investment option for those who fall into the lower tax slab in this situation. People who are close to retirement can also invest in this instrument.

The lock-in period of the bank's FD is five years. He may also get the benefit of exemption under Section 80-C of the Income Tax Act. However, investors in bank fixed deposits do not get as much return as corporate FDs.

If we talk about corporate FD, its interest rate is 1 to 2% higher than bank FD. However, investors should avoid investing in such corporate FDs.

Even if the rating is not good, why not give you a return of up to 15% on it. Which has a good FD rating. But if the return is a little low, it makes sense to invest in it. Fixed Income Mutual Fund is the most diversified fund among Fixed Income Virtual Fund Debt Instrument. It generally advises investors to invest in Find Maturity Plans, Short Term Debt Funds and Gilt Funds in view of recent interest rates and stock market uncertainties.

These schemes are considered to be more beneficial for the investors as they earn higher interest on the FDs placed in them and the option of 6 months to 6 years is available for the maturity period. The fund house has also launched some schemes with a maturity period of 30 to 40 days.

Investing in this type of scheme gives an opportunity to consider inflation along with taxes. Hybrid or Structured Products Many fund houses and private companies are offering this type of hybrid product with a higher share of debt instruments and a lower share of equity. This product includes a loan based hybrid fund scheme. Capital Protection Fund and Monthly Income Plan fall into this category.

In making this type of investment, on the one hand, your investment is secured by a debt instrument. On the other hand, investing in equities also increases your return. Even if you don't get much return on this instrument. But because of the tax relief and low risk, it is a more acceptable option for small investors.

According to experts, investors should invest at least 30 to 40 per cent of their investment in fixed instruments.

Benefits

The biggest benefit of investing in a fixed income instrument is that you get a return every day. While in an equity linked plan the return depends on the stock market. If the stock market trend is down, it is possible that you will incur heavy losses on your investment, while in a fixed income instrument you are sure from the beginning how much return you will get at the end of the year. Investing in PF and other fixed income instruments not only gives the investor a risk free return, but also brings good tax benefits.

Corporate bonds and non-convertible debentures

Large companies issue bonds to meet their own funding needs. The investor usually has to pay tax on the return of this bond. However, the government often allows some companies to issue tax-free bonds to small investors. The investor has to pay tax according to the income slab on the profit earned by the bond.