7 Investment Options For Self Employed Individuals
Investment and wealth creation are important for self-employed individuals for many reasons. Most importantly, it is a means to generate passive income and plan for short-term as well as long-term goals. This blog explores 7 of the recommended investment options for self-employed individuals.
June 10, 2021
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Income serves as the means to invest and grow one’s wealth. Irrespective of the amount of wealth one has accumulated, it is important to make your money grow. This can be done by investing in the right assets and developing new sources of passive income.
Short-term investments that generate high returns can help fulfil goals like asset creation or kids’ education. Longer investments on the other hand can be made with the purpose of having a post-retirement corpus.
Wealth creation through passive income generating assets can be important for self-employed individuals as they may not have a pension, like government employees, to manage expenses in their old age.
So making the right investment at the right age is important to secure your future. Self-employed professionals must manage their wealth in a way that the risk is well-diversified.
It goes a long way in providing support during financially difficult times or post-retirement. In this blog, we will cover 7 great assets for self-employed professionals.
7 Best Investment Options For Self Employed Individuals
1. Mutual Funds
In a mutual fund, investors pool their money and a fund manager further invests this money in various instruments like equity, debt, liquid assets etc. to generate returns.
Benefits Of Mutual Funds For Self-Employed Professionals
You can invest a lump sum in mutual funds if you have a large chunk of capital ready. But you can even start a Systematic Investment Plan (SIP) in case you want to periodically invest small chunks of money to build wealth for the future.
A trustworthy app like Cube Wealth can make it easier for you to invest a lump sum or start a mutual fund SIP. Cube gives you access to:
The QuickSIP option helps you determine your risk level and get mutual fund recommendations based on your goals. All you need to do is take a simple risk analysis quiz.
Here’s a snapshot of QuickSIP in action on Cube Wealth:
The SuperSIP option is unique to Cube Wealth. In simple terms, SuperSIP helps you prepone or postpone your SIP date and allows you to increase or decrease your SIP amount.
SuperSIP on Cube Wealth also allows you to snooze or skip a SIP payment entirely. Here’s a snapshot of SuperSIP on Cube Wealth:
2. High Liquidity
Mutual fund investments can be withdrawn conveniently. However, some funds charge an exit load or an exit fee before a minimum period. Also, while mutual funds are liquid, it does take some time before the redemption amount gets credited to your bank account.
Liquid funds are the only kind of mutual funds that can be redeemed quickly. In fact, liquid fund withdrawals can be processed in as less as 24 hours.
Mutual funds can potentially generate higher returns than traditional instruments like Fixed Deposit, Public Provident Fund and Gold. Unlike other investments, they offer compounding interest, i.e. interest earned for a year is added to the principal for the next year.
Moreover, there are risk-based investment options available based on your investment goals. For example, equity-linked schemes are subject to market risks but generate substantially higher returns.
4. Comparatively Safe
Mutual funds invest in a diverse range of stocks or debt instruments. Thus, mutual funds are known to be safer than traditional stock investments.
However, it can get a little tricky to invest in mutual funds because there are a large number of mutual funds available to investors. Selecting one has to be based on a range of parameters and not just star ratings and past performance.
Furthermore, mutual funds are of various types, such as equity, debt, hybrid, etc. An investor must be well-versed with the mutual fund jargons to be able to differentiate between different mutual funds.
The easiest way is to download Cube Wealth and go through the top mutual funds in each category. These funds are shortlisted and recommended by our advisory partner WealthFirst - an investment advisory with a solid track record.
Investing in shares of companies listed on recognized stock exchanges has the potential to generate lucrative returns but carries its own risks. However, investing based on research and thorough analysis is necessary to get the best out of your stock investments.
Benefits Of Investing In Indian Stocks For Self-Employed Professionals
1. Better Returns
Indian stock investments have the potential to generate better returns than fixed deposits and government securities. They also have the potential to earn significant returns if sold at the right market opportunity.
2. Better Liquidity
Indian stocks have high liquidity. They can be sold easily in the stock market for quick cash. This is true for most stocks but a number of factors, together, decide how quickly a stock can be sold.
For example, if the stock being sold is of a known and well-performing company, it can be sold in no time. Stocks of a lesser-known or an unstable company might take a bit longer to be sold.
3. Long-term Investments
Indian stock investments have the potential to generate lucrative returns in the long run. But the important aspect lies in investing in companies with credible leadership and proven capabilities that can generate value in the long term.
Investing in US stocks from India is a smart way to create wealth. You can invest in the world's biggest companies like Tesla, Apple, Amazon, Google, Facebook, etc. and the world’s busiest stock exchanges such as NYSE and NASDAQ from India using a reliable app like Cube Wealth.
Benefits Of Investing In US Stocks From India For Self-Employed Professionals
1.Rising Value Of The Dollar
One American dollar is currently valued at approximately ₹72.85 as of 29-01-2021. Even small earnings in the international market could mean big profits for Indian investors. However, it's important to get reliable advice using a trustworthy platform like Cube Wealth to invest in the right US stocks.
Adding US stocks to the portfolio helps diversify risk based on geography, industry, and magnitude.
3. Market Capitalization
The US markets have the largest market capitalization in the world, which is almost ten times of the Indian market.
While investing in US stocks from India, investors must take into account the international transaction charges as well as currency conversion charges.
These charges usually eat up a significant chunk of the earnings. Also, it is important to keep an eye on taxation as per both in India and the US.
Cube Wealth makes investing in US stocks from India easy with its easy-to-use app. Download the Cube Wealth App to buy stocks yourself or under advisory with RIA, Rick Holbrook.
Peer-to-peer or P2P lending is a well-regulated industry with RBI safeguards in place to protect all parties. The industry is set for strong growth and offers a high-return stable investment opportunity.
Benefits Of P2P Lending For Self-Employed Professionals
It is a transparent model and is protected from market volatility since it is a non-market linked financial instrument.
2. Low Risk
P2P lending platforms have mitigated risk for lenders with:
Legally binding agreements
Collection of security cheques before disbursement
Limiting lender investment to 20% of total borrower requirement
The RBI mandate further limits the maximum lending amount for an investor to a single borrower through any P2P lending channel at ₹50,000.
3. Risk Based Investment Options
Cube Wealth’s P2P partners Faircent and LiquiLoans make P2P investments extremely convenient. Cube users can pick an investment risk category and schemes based on the return percentage and minimum holding period.
One of the biggest advantages of going through Cube is that Faircent and LiquiLoans have provisions for background checks through physical verification at home and office.
Post vetting, money is lent only to trustworthy borrowers with a high CIBIL score of 750 and above. This way, P2P lending through Cube gives lenders transparency and choice of lending to only creditworthy borrowers.
4. Higher Returns
P2P lending models provide higher returns than other traditional short term investment options such as a bank Fixed Deposit. Historical data suggests that returns may range from 9.5-12%*.
There are certain risks involved in P2P lending, the most important one being defaulting. The solution lies in having a diversified portfolio that includes borrowers with varied profiles.
When investing in P2P via Cube Wealth, a diversified portfolio is created on behalf of the investor based on the risk category they select. For example, a ₹50,000 investment will be spread across 30–50 individual loans on behalf of the investor for the most simplified P2P experience available.
In India, real estate is considered a good long-term investment. Traditionally, residential and commercial properties were preferred for investment.
Another way of investing in real estate is through REITs (Real Estate Investment Trusts). They are trusts that own and manage a range of properties, primarily commercial, with the objective of generating returns on the investments made by investors.
Benefits Of Investing In Real Estate And REITs For Self-Employed Professionals
1. Passive Income
Real estate investment offers passive income in the form of rent but the downside is that you need to invest a large sum of money to own real estate.
2. Property Gains
Whenever needed, real estate assets can be sold off for cash. More often than not, it results in profits over the investment amount.
Property can be used as collateral to secure a loan
4. Lump-Sum or SIP Mode
Investing through REITs involves putting money in these trusts as a lump sum or in SIP mode.
The primary risk with real estate investments is that there could be a depreciation in the value of a property due to multiple economic factors. Also, it needs regular maintenance and repairs.
FDs (Fixed Deposits) are one of the safest investment instruments available. They earn annual interest that is credited to the investors account along with the principal amount on the date of maturity.
FDs offer lower but assured returns in the form of annual interest. Currently, the rate of interest offered by most banks on FDs ranges between 4 to 6% per annum. There are debt mutual funds like arbitrage funds that can offer better returns.
FDs are less liquid compared to stocks and mutual funds as the money invested cannot be withdrawn till maturity. Premature withdrawal amount does not include the interest earned.
Commodities can be easily sold in the commodities exchange market.
Commodities are mostly fluctuating in nature but they are not extremely volatile. They are however impacted by a number of factors such as trade relations, geopolitical stability, inflation, and so on.
As compared to other diversification instruments, they are relatively high-risk. Gold and silver investments are a little different from other commodities.
Investors may or may not need expert advice before investing in physical gold or silver. Digital gold investments, for example, are quite simple and hassle-free.
Self-employed individuals should consider investing in digital gold if they are looking for a fixed income along with capital gains. Digital gold by SafeGold on Cube Wealth app comes with assured purity of 99.99%. It is safe, secure and does not involve any making charges.
The above-mentioned investment options may be suitable for self-employed individuals. However, the right mix of assets is unique to each investor portfolio.
The choice of investments needs to be determined based on the individual investor’s goal, duration, targeted return, risk-appetite and desired liquidity, among others. Download the Cube Wealth App to explore more investment options. Speak a wealth coach to start building your portfolio now.
Watch this video to learn why you should invest with advice from a proven expert
Bhavna is a Business Economics graduate with over 10 years of writing experience. She writes on a variety of topics for Cube Wealth and helps simplify investment-related concepts with both short & long-form content.
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