Returns form the most important part of our investment decisions. But how do you arrive at good investment returns? Let's understand this question with an example.
You want to dine in a restaurant. Now, you might have had expectations about the ambience, service, and of course, food. Also, you must have spent time getting ready and travelling, rather than ordering food online. With this investment of your time and money, what would be a good investment return?
You will expect the food to taste delicious, the ambience to be comforting, and the service to be pleasing. In short, you would want the experience to meet, if not outdo, your expectations.
It's the same with your investments. You can skim the internet to seek answers on ‘where to invest money to get good returns?’ or ‘what is a good annual return on investment?’. But it is essential to note that your search for a good return investment starts with you. It begins with understanding your expectations of returns based on your risk appetite and goals.
Let's learn about aspects to consider while looking for good investment returns.
Setting unrealistic expectations is a recipe for disaster. For instance, you go to a restaurant serving Italian cuisine and expect to have the best north Indian food. You will be disappointed.
The same can occur with your investments if they are unrealistically planned. One of the main reasons for this is a financial goal that isn’t SMART.
Let’s understand SMART goals with the help of this analogy:
Buying a smartphone versus buying a specific smartphone from a specific brand, with specific features like RAM, memory and camera features. If you know what you want, you will know where to put your focus.
Buying a smartphone of a particular brand versus buying a smartphone of a particular brand worth ₹30,000. If your goal is measurable, you can easily find ways to achieve it.
Buying a smartphone of a particular brand worth ₹30,000 versus buying a phone that’s with your spending capacity. If your goals are achievable, you will know what is the best way to reach there.
Buying a smartphone of a particular brand worth ₹30,000 with your income versus buying when the smartphone is available. If the features you are looking for in a smartphone are unavailable for that particular brand you have chosen, or if its price is above your budget, your goal would be irrelevant. If your goals are relevant, only then can they be accomplished successfully.
Now, consider that you want a phone with your preferred price, features and brand one year from now. If your goals are time-bound, you can assess how long it will take to reach there and what you can do to reach there faster. Your financial goals have to be SMART for you to make any investment for it. It would help you set the right expectations for your goals.
Consider you made a SMART goal of buying a car worth ₹15 lakh four years from now. Here, you made a SMART financial goal. Ideally, you could have invested in a moderate-risk investment for this medium-term goal.
Now, consider that your age is 59 years old. Since you are very close to retirement, your risk appetite is low. So, how would you purchase this car? Answers to these questions can help you determine good investment returns.
Do you have a financial goal like buying a car or a smartphone? Well, the answer lies in regular savings, which will help you reach your goals.
The Fi Money app can simplify your goal-based savings with Jars. Based on your goals, you can create Jars like a “SOS Jar” for your emergencies or a “Maldives Vacation Jar” for your leisure goals. Creating a Jar helps you revisit the importance of a financial goal and stay committed to saving for them.
Continuing with the previous example of buying a car worth ₹15 lakhs in four years. You know that you will have a low-risk appetite since you are 59 years old now. Since you have a lower risk appetite, your investment choices can be low-risk investments. There is no hard and fast rule for choosing something with good investment returns. However, if your investments are not in sync with your risk appetite, you might be in for a rather unpleasant surprise.
Are you looking for mutual fund investments with different risk profiles?
You can invest in any mutual fund of your choice with the Fi app. You can complete the KYC registration and instruct the app to make SIPs of your preferred amount at your preferred date in the mutual fund scheme of your choice.
If you have answered all the above questions, then your expectations for your goals, risk and investments are set. So, where to invest money to get good returns in India? The answer is a potentially good investment return depends on the risk you’re willing to take.
In investments, risk and return go hand-in-hand. For higher potential returns, you need to take higher risks. Similarly, if your expectation from your returns is stability, then you can look for fixed-income products. Therefore, it is essential for your expectations around risk, returns and goals to move together.
You might find a lot of investment suggestions on the internet. However, there is no hard and fast rule for a good return on investment. An investment based on your financial goals and your expectation of risk and return will be the one that works best for you.
Investing is not a “one size fits all” activity. Like your age, job profile, income, family size, and lifestyle keep changing, so do your risk appetite and financial goals. And the answers to questions like “where to invest money to get good returns” also keep changing. This makes the process of financial planning continuous.
Your investments need to be re-aligned to account for these changes. Therefore, your investments need to be revisited and rebalanced from time to time to get good investment returns.
The Fi Money app conceptualises the idea of simple goal-based savings through Jars. Create a Jar and track your journey to your goal with the Fi money app.
Good investment returns depend on how you set your financial goals and match them with your risk appetite and investments. Since everyone has different expectations of their investments, no investment can be considered a “good return” investment by everyone. Therefore, a comprehensive step-by-step approach can be followed to make informed investment decisions.
A good return on investment is one that matches your risk appetite and your financial goals. You need to know your expectations around risk and returns to determine whether they are good.
For example, it can be better to have a high-risk appetite if you are looking for high returns. Further, if you expect stable returns, you can consider low-risk investments in fixed-income instruments.
Risk and return in investments go hand-in-hand. High-risk investments have the potential to give high returns. Therefore, it can be better for your risk appetite to align with your return expectations.
Have you set a goal? The Fi Money app can help you plan and invest bit-by-bit in them with the help of mutual fund SIPs. Complete your KYC registration and set your preferred SIP date and amount for your chosen mutual fund scheme.
You might want to know what is a good annual return on investment and where to invest money for good returns in India. But your investment performance majorly depends on factors like your risk appetite, financial goal corpus and investment horizon.
For example, a debt-based investment with a low-risk profile can be better if you are looking for stable short-term returns. If you expect high potential returns, you need a higher risk appetite. An investment with high potential returns needs to have a long-term investment horizon. Generally, equity or equity-based investments can give high potential long-term returns.
