Friday, March 18, 2011

I have 2 Lakhs. How to get it doubled in a year?

Its a catchy title to click on the contents of the post. If you have 2 Laks, Great! Already you have double of 1 Lak :)

Okay, coming to the point, you are expecting 100% returns in a year. I have few important questions to ask you!?

(1) How much risk averse are you? Do you know risk and returns join hand in hand?
(2) If you are willing to take risk, Are you sure "You will not feel anything if you completely lose this 2 Laks"

In the order of High returns, if you are great at trading and making returns.
(1) Derivatives (Options and Futures) - Highest risk - You can lose all your money in one day as well. Gain the same in one day as well.
(2) Intraday - High risk - you will lose comparably less money. But trading will lead to lose all your 5 days profit in the 6th day. Do you really want that. If you know what you do and confident doing that, and have the stomach for doing that, please carry on with it.
(3) Equity - High risk - you will lose comparably less money. Again depends on whether you are an investor or trader. Many people have a doubt whether they are really a investor or trader themselves. If you have a doubt, then its highly likely that you are a short term investor cum trader. This is a new role that I have given people who are not actively trading, but when they do trade they do it only in short, they don't have proper goals.
(4) Equity Mutual Funds - Medium to High risk - This is comparably the best option to park the money if you are risk averse and if you want only around 15% returns in the long term.
(5) Debt Mutual Funds - Low to Medium risk - This depends on your risk profile - Around 8% return
(6) Fixed Deposit - No Risk - Now-a-days you get 10% returns in here (Before tax)
(7) PPF, NSC, POMIS - NO Risk - 6-8% - Debt Government bonds and PFs

If you are knowledgeable, you can go with direct equity and opt for the high risk equity and park some remaining money in Equity mutual funds. If you have some more stomach and great knowledge, move one or two steps ahead and do intraday trading and derivatives to achieve your goal faster. But remember, in the meantime, it is highly likely that you may lose your money as well.

Also, Equity markets give returns over 200% in a year and negative returns in another whole year. So, it is where you are and whom you believe.

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