Long-term investment is a proven strategy to build wealth and achieve financial security. Thanks to the power of compounding, long-term investments are highly attractive for building wealth. These investments also reduce the risk of short-term volatility, bringing the potential for growth.
In this blog, we are going to check out the best investment options to help you achieve high returns over the long term.
Top Long-Term Investment Options for High Returns
Now, let’s check out the best investment options to earn competitive returns in the long term. All you need to get started is a demat account app.
1. Equity Stocks
Equity stock investments give you ownership rights in a company. It’s advisable to choose equity stocks that provide historically attractive returns than other types of investments.
Here are some of the key categories of equity stocks.
- Large-Cap Stocks: These are the shares of large and established companies, usually in top 100 market capitalization. They are considered stable and less risky and offer consistent growth over time. For example, you can check out the stocks of companies like Reliance Industries, HDFC Bank, and TCS.
- Mid-Cap Stocks: Mid-cap stocks belong to companies whose market capitalization is between 101st to 250th position. These stocks present a balance between the growth potential of small caps and the stability of large caps.
- Small-Cap Stocks: If the market capitalization of a company is beyond 250th position, it comes under the small-cap category. These companies have a high growth potential but come with a higher risk due to their volatility and lower presence in the market.
- Blue-Chip Stocks: Blue-chip companies are well-established and financially sound companies. They have a history of reliable performance. Investors can opt for the best bluechip stocks as they pay dividends and tend to be less volatile.
2. Mutual Funds
Mutual funds pool money from multiple investors and are managed by fund managers. They invest in a diversified portfolio of stocks, bonds, or other securities. Due to these strategic diversifications, mutual funds are less susceptible to concentration risk and offer a variety of investment strategies.
There are different types of mutual funds, categorized on the basis of where they invest. The broad categories include:
- Large-cap mutual funds
- Mid-cap mutual funds
- Small-cap mutual funds
- Hybrid funds
- ELSS funds
3. Index Funds
Index funds are also mutual funds, but they are designed to replicate the performance of a specific market index like the Sensex or the Nifty 50. The advantages of investing in index funds are:
- Low fees: Since index funds are managed passively, they come with lower expense ratios compared to actively managed funds.
- Diversification: Index funds mirror the performance of an index and distribute their assets in a broad range of securities. This absorbs the shock of poor performance from any single stock.
- Consistent performance: The performance of index funds depends on the overall market performance. This makes it a reliable choice for long-term investors looking for steady growth.
4. ETFs (Exchange-Traded Funds)
Although ETFs are similar to index funds, they trade on stock exchanges like individual stocks. Investing in ETFs brings you the flexibility of stock trading as well as the benefits of diversification.
Since you can buy or sell ETFs throughout the trading day at market prices, you enjoy greater liquidity compared to mutual funds. Due to the passive nature of their investment,
ETFs have lower fees. They cover a wide range of sectors, commodities, and indexes, presenting you with several options to customize your portfolio.
Conclusion
Whether you wish to build your retirement portfolio or accumulate wealth for any other goal, long-term investment is a great strategy. Capitalizing on the power of compounding, you can achieve your financial goals.
