Confused about how to pick an investment? Here are the best tricks

In the ever-evolving financial markets, investors always look for more reliable and safe options to invest their hard-earned money in to get the best returns. However, as the choices increase, so does the confusion about choosing among the best savings instruments. With a lot of options on the market, people end up picking some while still believing that there are better options. When we evaluate our portfolios, we may often find certain stocks and funds that may have done better than those in our portfolios, leaving us regretting not choosing them.

Amid a plethora of financial products on offer and their variants, there are a few factors that you should consider before picking an investment or a product.

Tricks to pick the right investment option

Return on Investment: One of the primary factors that investors need to consider before picking an investment is the return. While some products, like fixed deposits, offer a fixed rate of return, a few others, like equity shares, offer a market-linked rate of return. You should choose the investment option based on your investment goal and risk appetite.

Risk: Investors should check for all the possible risks that are associated with their investment options. The higher the return that the investment offers, the higher the risk it carries. Therefore, it is important to evaluate the risk appetite before making a choice.

Liquidity: This is another major factor that must be considered to make the right choice for investment. It is about liquidity in investment plans. As most investments have a lock-in period and there is a penalty for early withdrawal, some other options, like mutual funds, have liquid plans that provide the option to make an early withdrawal.

Tax factors: Investors must check for taxation in different investment plans. Some products offer benefits like a deduction of Rs 1.5 lakh under Section 80C of the Income Tax Act for investments such as equity-linked savings schemes and PPF, among others. It’s important to note that certain investments may attract tax at the time of redemption or withdrawal.

Apart from all of these factors, investors also need to evaluate a few other things, like the purpose of the investment, their objectives, and the time when they need the money.