Saving should be a continuous process. Retrospectively thinking, what can you do in 2016 to get more out of your savings?? I bring you a list of 5 smart 'short to medium term investments' to put your money to work in 2016. It is important to note that while considering investment options, one must also consider the tax liability on them, as a gain from different investment attract different tax rates.
1. Online Peer to Peer Lending
It is an upcoming alternate asset class, which is simple and transparent and uses technology to ensure high customer satisfaction. Peer-to- Peer lending (P2P) platforms like Lendbox, helps to bridge the gap between credit-worthy borrowers and smart investors by removing the banks from the equation. They are able to help those borrowers, whose financial needs are not addressed by banks to get cheap, quick and hassle free loans.
P2P Lending companiesuse sophisticated technology and data analytics to reliably assess a borrower's creditworthiness rather than sticking to traditional banking underwriting procedures. This asset class helps retail investors get direct access to a large group of high return investments which generate monthly cash flows, thus they have the power to make their own decisions when it comes 'to who' and 'what' they wish to invest in, moreover for a specific pre- defined duration as per their own will, as these loans vary from 6 to 36 months. Via Peer-to- Peer lending, investors can earn a higher returns varying between 12% - 36% based on their risk taking capacity.
2. Invest in equity markets or Mutual Funds:
Investing in equity markets is one way to multiply your money, however, it needs deep knowledge and regular monitoring and thus a lot of commitment of your time.
In mutual funds experienced fund managers handle your money and invest in a number of stocks and securities and other asset classes which may not be known or available to individual investors. However, withdrawal from mutual funds is not always easy and the capital required is also usually on the higher side. Most mutual funds offer varied tax benefits which acts as an added advantage for investors.
It is beneficial to invest in Mutual Funds as they are managed by professionals and require less supervision. Investors are updated on the NAV (Net asset value) of their investments at least at the end of every quarter while some funds provide a daily update. Apart from these, it is important to study the past performance of the Mutual Funds and its Asset Managers before you make an attempt to invest in any of the funds currently in the market. However, past performance does not mean that the future will yield the same results. Knowledge about the fund manager is also important. Patience and time frame are the keys in mutual funds. It's no secret-the stock price may change on day to day basis. Thus, effecting the performance of Mutual Funds.
3. Savings Accounts and Term Deposits:
Leaving your money in your savings account with you bank is another investment option, it is the safest option available and you are guaranteed a 4%-7% annual return, it is highly liquid as well.Specifically,in case of emergencies, the complete capital along with the interest till date is accessible for withdrawal any point of time though branches, phone banking, internet banking and ATM's are available 24*7. The other safest option is Term deposits which lock in your funds from 1-10 years and offer returns from 7%-10% depending on economic conditions, However, these are not as liquid
4. Investment in Corporate Debt:
Many corporates borrow funds from the general public for different durations which may vary from six months to as long as five years and even more, this is usually done in the form of debentures or bonds issued by the company.
Normally the interest rates are more than those offered by banks for fixed deposits. However, one going for a bond purchase must enquire about the financial situation of the company in question. Usually, the companies seeking public debt publish their requirements and financial statements in leading newspapers, and financial media outlets as well as asset managers which helps in spreading the word about a fund raise. This asset class tends to be a safe form of investment with returns ranging from 10%-20% per annum.
5. Investment in Government Bonds
The Government also raises debt from the public by issuing Government Bonds which carry an annual interest rate and are usually medium to long term. These bonds can be bought directly from the government or from the bond markets which are not as public as equity markets as they require significant minimum investment amounts. The bond market is very liquid however and the pricing of the bonds relies highly on the country's economic situation and the prevailing interest rates by the country's central bank.