A Look at the Investment Habits of Indians

Posted by Aman Khanna on July 29th, 2016

Investments are such an essential part of everyone’s life. It’s often the first evolutionary step towards a responsible adulthood. Responsibility is something Indians inculcate in their children from a very young age. So, this begs the question, how do Indians fare when it comes to investments? How much do we know of investment banking? Are we planning our futures right?

These are all pressing matters that need immediate replies.

To understand how Indians have fared in the investment sphere so far, it’s important to know what it is to begin with. It’s also important to know of the various factors that contribute into making what can be called a good investment. Be with the interest rates on Fixed Deposits or just the process of opening a Fixed Deposit account. What of the other modes of investment? Which ones do Indians favour? Read on to find out.

 

What is investment?

investment

Investment refers to the process of buying certain investment instruments which are expected to produce profit or income. Clearly, there are various modes of investment that all carry their own advantages and risks. Here are the three broad kinds of investments:

  • Ownership investments: These are among the most profitable investment avenues and are usually preferred when compared to other modes. They includes stock market, real estate, or purchasing precious commodities that acquire value over time.

  • Lending investments: As a lender, this investment type gives you the power to be a kind of a functioning back. There’s obviously more risk involved, but the profits can be maximised in a lot of ways.

  • Cash equivalents: This refers to items that have the same value as cash, and can easily be converted back. This includes gold, diamonds, and also includes money market funds. This type however has a very low return with very low risk.

Now that we know what investments are, it’s also important to know what investment isn’t. Anything that loses quality and value over time isn’t an investment. Your car, TV, or anything else in between cannot be called a healthy investment.

Where do Indians stand?

Many surveys suggest that Indians prefer keeping a majority of their savings in liquid assets. Less than 25% in physical investments which include gold, real estate, etc. and only a meagre 12% go for different financial instruments.

These statistics and rates change according to socio-economic status and current financial condition of a particular group. There’s obviously a huge gap between the rural and the urban population in terms of investment habits.

Most middle class Indians would also prefer a Fixed Deposit account over other options, simply because it provides a steady income and is risk free. However, the complexities that come with interest rates and monthly/quarterly/yearly returns may discourage others from choosing this option. However, the use of online tools such as fd calculators may make it easier.

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Aman Khanna

About the Author

Aman Khanna
Joined: July 29th, 2016
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