“The best time to plant a tree was 20 years ago. The second best time is now.” — Chinese Proverb
This quote rings especially true when it comes to investing. If you’re in your 20s, you’re sitting on one of the most valuable assets in the world: time. With the power of compounding, even small, consistent investments can grow into substantial wealth over the decades. The key is to get started early, even if it’s with a modest amount. In this blog, we’ll explore three main types of investments based on risk level — low, medium, and high — so you can make informed decisions and start building your financial future today.
Low-Risk Investments
Low-risk investments are ideal if you’re new to investing, have a low risk tolerance, or want to preserve capital while earning steady returns.
1. Fixed Deposits (FDs)
- What it is: A lump sum is deposited with a bank for a fixed period.
- Why choose it: Safe, predictable, and insured up to ₹5 lakh in India.
- Returns: Around 6% to 8% annually.
FDs are a traditional favorite among Indian households. They’re easy to understand and offer peace of mind since returns are guaranteed and unaffected by market fluctuations.
2. Public Provident Fund (PPF)
- What it is: A long-term, government-backed savings scheme.
- Why choose it: Tax benefits, guaranteed returns, and compound interest.
- Returns: About 7% to 7.5% annually (variable but stable).
With a 15-year lock-in, PPFs encourage long-term saving habits. Ideal for retirement planning, they also offer EEE tax benefits (Exempt-Exempt-Exempt).
3. Government Bonds
- What it is: Loans you give to the government in exchange for periodic interest.
- Why choose it: Backed by the Government of India.
- Returns: Around 6.5% to 7.5% annually.
Government bonds are virtually risk-free and can be held for up to 10 years or more, making them ideal for cautious investors looking to diversify.
4. Debt Mutual Funds
- What it is: Funds that invest in fixed-income securities like corporate bonds and government securities.
- Why choose it: Lower risk than equity funds, more liquid than FDs.
- Returns: Typically 5% to 7% annually.
They’re suitable for short- to medium-term goals, offering better liquidity and potentially higher returns than traditional savings.
Medium-Risk Investments
If you’re willing to take on a bit more risk for potentially higher returns, medium-risk investments are a balanced choice.
1. Balanced or Hybrid Mutual Funds
- What it is: A mix of equity and debt in a single fund.
- Why choose it: Offers a balance of growth and stability.
- Returns: 8% to 12% annually.
These funds reduce volatility by spreading risk between stocks and bonds. They’re a great middle ground for cautious investors.
2. Real Estate or REITs
- What it is: Investing in property or real estate investment trusts (REITs).
- Why choose it: Offers rental income + capital appreciation.
- Returns: Around 7% to 12% depending on the market.
While buying physical property is capital-intensive, REITs offer an affordable way to gain exposure to real estate without owning property directly.
3. Corporate Bonds or NCDs (Non-Convertible Debentures)
- What it is: Fixed-income securities issued by companies.
- Why choose it: Higher interest than FDs with moderate risk.
- Returns: 7% to 10% annually.
Ensure you invest in bonds rated AAA or similar to minimize risk. These work well for medium-term financial goals.
4. Index Funds
- What it is: Mutual funds that track a market index like Nifty 50 or Sensex.
- Why choose it: Diversified exposure to top-performing companies.
- Returns: Around 10% to 14% annually over the long term.
Perfect for passive investors who want to benefit from the overall growth of the stock market without picking individual stocks.
High-Risk Investments
High-risk investments can be volatile but have the potential to generate the highest returns over time. Best suited for those with a long-term horizon and a strong stomach for market swings.
1. Individual Stocks
- What it is: Buying shares of publicly listed companies.
- Why choose it: Potential for high returns and dividends.
- Returns: Can range from negative to 1000%+ depending on performance.
Requires research, market awareness, and emotional discipline. Start small, diversify, and avoid putting all your money in one company.
2. Cryptocurrencies
- What it is: Digital currencies like Bitcoin and Ethereum.
- Why choose it: Decentralized, high return potential, globally liquid.
- Returns: Extremely volatile — can be +300% or -90% in a year.
Only invest what you can afford to lose. Crypto is not regulated in many regions and is susceptible to hype, scams, and volatility.
3. Startup or Angel Investing
- What it is: Funding early-stage companies in exchange for equity.
- Why choose it: Possibility of massive returns if the startup succeeds.
- Returns: Rare, but can be 10x to 100x over several years.
Access may be limited without networks or platforms. Risk of total loss is high, so diversify and do your due diligence.
4. Derivatives Trading (Futures & Options)
- What it is: Speculating on the future price of assets.
- Why choose it: Leverage can lead to high short-term profits.
- Returns: High risk, high reward — or high loss.
Not for beginners. Requires technical analysis skills and strict risk management.
Conclusion
Your 20s are a powerful decade to start investing. You may not have a lot of money, but you have something even more valuable: time. That means you can afford to experiment, make mistakes, learn, and grow. A good rule of thumb is to diversify your investments across low-, medium-, and high-risk categories based on your income, goals, and risk tolerance.
Remember, investing is not just about making money—it’s about building habits that lead to financial freedom. And there’s no better time to start than today.