A Look At The Best High Return Investments In India

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You cannot generate wealth by investing in fixed deposits. This is because, inflation eats into your returns and you end-up nowhere. Let us understand this with an example. Say you invest in a bank deposit at 7 per cent, when inflation is 5.5 per cent. Your real rate of return after a full year is 1.5 per cent (7.00%-5.00%). That is peanuts by any standard.

We have not even discussed tax

Fixed deposits are taxable and are the least tax efficient financial instruments the country. So, in the above example, if you earn 1.5 per cent, as real rate of return, if you are in any tax bracket, you may not even get that. So, you have to look at instruments that generate returns, create wealth over a longer term and do not eat into your wealth due to capital gains and tax deducted at source. Look at some instruments that can generate wealth for you and within those instruments, we have specified certain shares/mutual fund units etc., instruments that you can buy. Take a look.

Shares of bluechip midcap and small cap stocks

Midcap and bluechip stocks have the potential to generate tremendous returns. In the last two years stocks like Britannia, Ashok Leyland, Bajaj Auto Finser and Torrent Pharma, have virtually doubled your money. Large cap stocks on the other hand, tend to give more stable returns. So, if you are looking to buy into investments that give very high returns, we would suggest small cap and midcap stocks. What we also want to make abundantly clear, is that these are high risk stocks and if the markets crash, they have the potential to destroy wealth, unless you manage to cling onto these stocks for a very long time.

SRF and KPR Mills are some of the stocks that can still be some of the best high return investments in India.

Small cap and micro cap funds

A smallcap fund like DSP Blackrock Microcap Fund has generated a return of almost 51 per cent on an average each year, in the last three years. It would take bank deposits several years by which time you get such returns. It is also important to remember that mutual funds are more tax efficient than bank FDs. On the other hand, shares do not attract capital gains tax, if sold after one year and the dividends are also tax free in the hands of the investors. Mutual funds are also tax efficient, though they are not as tax efficient as shares.
Here are some stocks mid cap funds that can generate wealth and have the potential to offer high returns to investors.

SBI Magnum Midcap Fund

This fund has generated returns of 40 per cent on an average in the last 3 years. This is what we call ability to generate returns. The net asset value of the fund is Rs 71.64 and if you want to invest in the same, you need to do it at the same NAV. Among SBI Magnum's top holdings are Cholamandalam Investments, Ramco and Carborundum Universal Ltd.

The fund has not only generated returns in the short term, but, also in the long term. Over a 5-year period, the fund has given a returns of 27 per cent, which is again tax free and fantastic returns, post tax. The portfolio of the stock too is sound, which makes it a good investment at the current levels. We wish to emphasize that small and mid cap funds are extremely risky, though this remains amongst the best high return investment in India.

Reliance Small Cap Fund

This small cap fund too is amongst the best high return investments, if one cap adopt a long-term approach to generating wealth.

The fund which was launched in 2010, has generated a return of almost 20 per cent each year, since its launch in Sept 2010. This is fantastic by any stretch of imagination. What is also interesting is that you do not need a lot of money to invest. The Systematic Investment Plan allows you to invest small monthly sums of Rs 1,000 each month. Crisil has rated the Reliance Small Cap Fund very well. The fund has the highest exposure to stocks like Navin Flourine, Atul etc. We wish to reiterate once again, that these funds are volatile and only if you have an appetite for risk, buy this fund.

Gold

This small cap fund too is amongst the best high return investments, if one cap adopt a long-term approach to generating wealth.

The fund which was launched in 2010, has generated a return of almost 20 per cent each year, since its launch in Sept 2010. This is fantastic by any stretch of imagination. What is also interesting is that you do not need a lot of money to invest. The Systematic Investment Plan allows you to invest small monthly sums of Rs 1,000 each month. Crisil has rated the Reliance Small Cap Fund very well. The fund has the highest exposure to stocks like Navin Flourine, Atul etc. We wish to reiterate once again, that these funds are volatile and only if you have an appetite for risk, buy this fund.

Look at Gold ETFs

If you are an investor we recommend that you do not buy physical gold and only look at gold ETFs. This is because physical gold, the buy-sell margin is much higher, as compared to Gold ETFs. They are less liquid and can be stolen. Apart this you have to incur expenditure with regards to storage, which is another issue.You can buy listed Gold ETFs like SBI ETFs, UTI Gold ETF etc.

Also read: A look at the top midcaps to buy

Read: 7 Top Gold ETFs in India

Disclaimer

The article is not a solicitation to buy, sell in securities, precious metals or other financial instruments. Greynium Information Technologies Pvt Ltd, its subsidiaries, associates and the author do not accept culpability for losses and/or damages arising based on information in this article.

 

 

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