1It is good to know that you are thinking of investing options at a very early age. However, you have to remember that investing is a long term option, where in you need to invest continuously, systematically over a long period of time to generate wealth.
First thing you need to understand is the risk vs. return graph and how the various investing instruments that can be helpful in achieving your goals.
- PPF, Tax saving as well as government bonds will yield around 8% on an average investment over a 15 year period. For PPF calculation read here: Public Provident Fund Calculations by Gopal Kavalireddi on All about Investments and investing instruments in India
- Liquid funds, fixed deposits, debentures will yield a post tax return of 6.5% on an average holding period of 1 - 5 years. For performance of liquid funds read here: Gopal Kavalireddi's answer to Is it advisable to put retirement funds in mutual funds or in bank fixed deposits. If yes in MF, in what type of instrument?
- Equity mutual funds, direct investing in stock markets will yield more than 15 - 18% compounded annually on an average, if your holding period is more than 15 years. For performance of equity mutual funds you can see here: Equity Mutual Funds/MF, Large Cap Funds, Best Large Cap Funds, Top Large Cap Mutual Funds
Mutual Funds:
It is important to understand the risk profile of all types of mutual funds. Liquid funds have no risk but low return, Debt funds, Balanced funds have low to moderate risk but moderate returns and Index funds, Equity funds have higher risk and Sectoral funds have the highest risk (Risk due to investments in only one sector).
