Most retail investors are on the lookout for small investment avenues that can help in building their cash reserves just in case things fall apart in the current economic scenario. However, investors tend to assess their financial planning and make changes to the existing route of investment by focussing on smaller investments that could help in generating nearly fixed returns during the lean market conditions.

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Also, when opting for a suitable investment avenue, investors are advised to assess the product and see to that it matches with their risk profile and investment horizon. Investment products can be categorised into two types - financial assets and non-financial assets. Financial assets can be further classified into fixed-income instruments and market-linked instruments.

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While fixed-income instruments include products such as the bank fixed deposits (FDs) and Public Provident Fund (PPF), market-linked instruments mainly include products such as mutual funds and stocks. Non-financial assets, on the other hand, include investments in real estate or gold where most of the Indian population invest in.

Here are some small investments that can be utilised as a mode to generate returns or accumulate savings keeping the current economic condition in mind.

Public Provident Fund (PPF)

PPF is one of the most sought after investment avenues salaried retail investors turn to. A maturity period of 15 years provides individuals with enough time to accumulate a substantial corpus. The extended tenure on PPF also ensures enough time for the compounding to take effect on the investments, especially towards the end of the maturity period. PPF is a safe bet for investors who are looking for low-risk instruments while generating better returns during the investment period.

National Pension Scheme (NPS)

Most salaried individuals look forward to having a secured retirement life. Making small contributions to a long-term retirement plan should be part of everybody's financial planning. NPS allows subscribers to contribute smaller amounts regularly towards the scheme to generate a significant corpus which can be utilised to ensure a regular pension. NPS is backed by the Pension Fund Regulatory and Development Authority (PFRDA), which makes it a save investment. Also, you get the benefit of investing across various asset classes such as equities, corporate bonds, treasury bills, fixed deposits and many more which can be ideal to your portfolio.

Gold

Gold has been a part of every Indian household. Gold retains its value even in dire market circumstances. This allows investors to hold on to their investments even during a market slump, ensuring that they do not lose out on their invested amount, which is not the same in the case of equities. Investors are advised to allocate a certain portion, say 5%-10% of their portfolio to ensure that they do not lose out on their investments during an economic slowdown. Investing in gold is pretty simple these days. You don't even have to hold it in its physical form now. There are various products such as Gold Exchange-Traded Funds (ETF) and Sovereign Gold Bonds
 (SGB) which allow individuals to invest with a smaller amount.

Mutual Funds

Many investors stay away from mutual fund investments during an economic slowdown. However, this is one of the common misconceptions among investors. A slump in the market conditions can present itself as an excellent opportunity for investors to buy assets at a lower price. The assets could be purchased at a price a fraction of their earlier value as investors who misinterpret market conditions would rush to liquidate their assets. The market never follows a single trend. It fluctuates consistently. Meaning, it is bound to recover after a downfall one or the other day. 

Individuals who invest in mutual funds through the Equity-Linked Savings Scheme (ELSS) via Systematic Investment Plan (SIP) can make the most of adverse market conditions with the benefit of rupee cost averaging. In short, you get to buy more units at the same price. Also, SIP allows you to invest small amounts regularly to accumulate substantial wealth with tax benefits.

(Authored by Archit Gupta, Founder and CEO at ClearTax)