The possibility of higher returns attracts many people in India to invest in the stock market. They make strategic investments to get high returns while also keeping the risk factor in check. If you invest your hard-earned money in equities too, you know well what kind of mindset people have when investing directly into equities.
Everyone is on the lookout for a company’s stock that can double their money in a few years with the least risk involved. However, not every stock investor has a plan in place to utilize the capital gains from equities.
Think of it this way…
What if the money you invested in certain stocks gives you more returns than expected? What if everything goes in your favor?
After gaining considerable capital from the equity investments, many people end up wasting it than utilizing it wisely.
It is important for you to put your money where it’s worth is truly realized. You might have started to think – ‘What can I do with the capital I’ve have gained?’
One smart way to reinvest your gains is in financial instruments, be it equities, retirement plans, mutual funds, or liquid funds in India.
To do this, you will find yourself at the forefront of selecting an investment avenue once again.
You need to match your risk profile with that of the financial assets and check your current liabilities accurately.
Here are a few investment options you can choose to reinvest your capital gains:
Child’s Education Plan
As a parent, it is crucial to plan for your kid’s future. You want them to get the best quality education to build a solid foundation for a successful career. One way to back their higher education plans is to keep a proportion of your capital gains aside in your bank account. However, this won’t give you good returns other than the little interest the bank will pay for it.
If your child’s higher education is a long-term goal, plan to invest in a suitable child education plan that gives higher returns than a savings bank. With this plan, the cost of your child’s higher education won’t be a constraint for you to make the best education available for them.
Retirement Plan
Unlike work life, people dream of living their retirement life like a long vacation. Free time to travel the world, pursue your hobbies, and take good care of your health, who doesn’t want that? However, for that, plan to create a stable source of income.
One of the best ways to enjoy the golden years of your life in style is to start planning for your retirement as early as possible. You can invest in a retirement plan that will help you take care of post-retirement financial needs and relieve you from common retirement woes. Buying a retirement plan is a disciplined yet affordable way to build up your retirement savings.
Mutual Funds
The popular tagline, “Mutual Funds Sahi Hai,” holds true when it comes to investment choices. Investing through mutual funds is one of the best ways to get higher returns over a long time. It is a market-linked investment option wherein your money is invested in various financial instruments: equities, debts, and stocks. You will get returns based on the performance of the chosen fund.
Also, the risk factor associated with mutual funds varies as per the fund you have chosen. Take the case of equity mutual funds, which are market-linked securities providing higher ROI as compared to many other investment options in India. EMF also offers better returns since the risk involved is high. These days, stock markets are highly volatile, because of which taking the SIP route to invest in equities is much better than direct equity investment.
On the other hand, there are liquid funds in India, which are debt-oriented mutual funds. They invest in securities that are about to mature in a few months. Therefore, the market fluctuations do not have a significant impact on these funds in general.
Based on your risk tolerance, you can plan to invest your capital gains in mutual funds. If you feel hesitant in making these investments, you should ask for help from experienced financial planning advisors such as FinEdge.
The Bottom Line
The capital gains from your previous equity investments can be best utilized when reinvested in these options.
They are market-linked, which means their returns may vary over the tenure as per market volatility.
Consider consulting with an expert to help you find the right investment which brings you maximum monetary benefit.
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