The rate of returns depends on the investment amount and risk appetite of an investor. Risk tolerance brings variability in investment returns. Determine what’s your risk profile and how much you’re willing to invest to choose the right option for yourself. If you can take the risk to receive a reward big enough that justifies the risk, then yes you can invest in stocks but if it’s a no, steer clear of stocks.
There can never be a direct answer to such questions because everyone has different goals towards investments, risk tolerance, and time horizon and they invest accordingly. However, you can compare both types of investments to make favorable decisions to meet your financial objectives.
Investing in Stocks
For a beginner, there is a lot to learn while investing in the stock market. So, advise investing only a small amount. Returns in the stock market are entirely dependent on the market forces in an economy. You will not get assured returns always. But the risk is certain here even after researching and in-depth market knowledge. Stocks are better suited to individuals with a high-risk profile i.e. how well you can manage a financial loss.
For stock investments, you can say the higher the risk higher the rewards.
Benefits of investing in stocks
- Invest small amounts
You can invest small amounts in stocks directly or through mutual funds. You need not accumulate money to invest in the stock market, but yes invest whatever you can afford to lose as you know losses are inevitable in the stock market.
- Maximum Returns
If you have a long-term perspective for investing, stocks will be proved most beneficial for you. No other type of investment can offer you this type of higher returns.
- Protection against inflation
It is true over the years that stock investment can win the battle against inflation rate with high return returns and growth.
- Liquidity
Whenever you need money, you can sell your shares and meet your financial needs on time. The time required to sell is also very less and you do not lose any value.
- Dividend Income
You can earn regular income in the form of dividends even if the stock has lost its value.
To invest in the stock market, you will need a Demat account.
How to open a Demat account: It is an easy online process. With Bajaj Finance Securities Ltd, you can open Demat account within 15 minutes as per your comfort at your home.
Documents required: You will need your PAN card, ID proof, canceled cheque, and passport size photo. All in digital format to be uploaded while filling the online form. These are the Documents required for opening a Demat account.
Fixed Deposits
For decades, fixed deposits are considered the safest investment avenues. The core benefit of fixed deposits is that you will never lose your principal amount. If you have a low-risk profile, it is better to invest in fixed deposits.
For fixed deposits, the higher the investment amount and investment tenor, the higher the returns.
Benefits of fixed deposits
- Fixed returns
Once you have deposited a lump sum, you will receive a fixed rate of returns at the maturity date.
- No risk investment
Your principal and rewards are risk-free from economical factors that can affect returns adversely.
- Regular payouts
If you have accumulated funds and you are dependent on your investments for income, FDs are for you.
The Bottom Line
Keep in mind your financial condition while investing. You can invest a part of your funds in the stock market and another in fixed deposits. This diversification will keep you strong even in losses.