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Investment Options Better than Mutual Funds

For most of us, when it comes to investing, Mutual Funds are the first thing that pops up in our minds. But irrespective of the asset class, the best investment plan with high returns is the one thing that we as Indians love to chase!

However, the fact remains – High Risk always accompanies Higher Returns, and eventually, it depends on an investor’s risk appetite – How much risk you’re willing to take for a given percentage point return?

But since we’re discussing Mutual Funds and alternative asset classes that have the potential to generate even higher returns than mutual funds, the point we should be making is ‘Diversification’ and how well can you place your funds so you can minimize the ‘degree of risk’ undertaken while bettering your returns. Right?

The Right Way of Investing

When it comes to investing in India, while there are a lot of investment options, the three best investment options that come to my mind are Real Estate, Stocks and P2P Lending that can potentially fetch you returns better than some mutual-fund categories.

Remember all three asset classes are very different in nature and the factors driving the returns for each asset class can vary significantly. So now that we’ve established the significance of asset class, risk, and returns, let’s dig deeper into how you can better your investments with higher returns!

Investments and Asset Classes

While narrowing down to an investment avenue, you ought to consider among various factors the following:

  • Your risk profile
  • Your existing investment portfolio
  • Your investment tenure
  • Returns

Along with the above factors, you also need to get a clear picture of the economy as to which side the wind is blowing. This can help you bring one step closer to your goal. Let’s further discuss the individual asset classes and factors driving the returns for each:

  • Real Estate:

One of the fastest-growing sectors in India, real estate continues to be the first love among NRIs when it comes to investments. As per IBEF1, the Indian real estate market is to be valued at Rs. 65,000 crores by 2040 as compared to Rs. 12,000 crore at present. Registering historical returns of 20% annually (1991-2014)2, it is poised to grow at 19.50% CAGR3 in the upcoming years. (Well, there goes your better than mutual fund investment option ain’t it!)

Well, investments in real estate can drive returns in two ways – Rentals and Price Appreciation. While rentals are just like an icing on the cake (ability to generate around 7% – 8% annually), to build wealth, you should essentially focus on the capital appreciation, and that happens only if you have invested in a good property. The location of the property is the single most important factor that drives property price appreciation. Although external factors such as government policies and the overall economic scenario could significantly impact the sector. Demonetisation and implementation of RERA on real estate are the most recent examples of such external factors that have dented the pace and led to the slowdown in the industry.

So, if you’re looking at investments in real estate, you should have a very long investment horizon as unlike many other asset classes, you might not see steady appreciation. Additionally, the regulatory approvals, annual maintenance, and other investment costs could shoot your overall cost of acquisition. So invest only if you’re and have a good knowledge of the sector.

  • Stocks:

While mutual funds and stocks both belong to the ‘Equity’ asset class, direct equity investments with the right stocks can generate much better returns than mutual funds. Similar to real estate, with stocks, you again make money in two ways – Dividends and Price Appreciation. With your focus being on the latter, direct investments can be a risky affair since there are instances where shares of even sound companies have seen a fall of 35% or even more in a single trading day.

High volatility is a norm for equities, and investors should exercise caution when engaging in stock markets directly. While equity markets tend to perform well during the phase of economic growth, individual stocks could react sharply to any form of negative news. A number of factors ranging from external, geo-political, global, financial, or stock-specific news could be responsible for the down-turn inequities. Wrong investment can wipe off a significant chunk of your capital. But on the contrary, the right mix of stocks holds the potential to make you wealthy in enormous amounts.

So highlighting the importance of asset allocation, diversification, and long-term horizon form an essential strategy for direct investing inequities. While the individual stock portfolio can vary, the benchmark index SENSEX has delivered a stellar 16.09% CAGR4 (from 1979 – 2019). That works out to a value of Rs. 3.90 crore5 for every 1 lakh invested in 1979. But again patience is the key for direct stock investing and along with that you need a deep understanding of the overall economic picture, pick out the best companies, understand the balance sheet and stick with your portfolio till the best performance shines out of it!

  • P2P Lending:

Although a recent phenomenon, P2P or Peer-to-Peer lending is making news in the alternative asset class with alternative asset class with investments that have the potential to generate high net average. FMPP investors have earned upto 12% p.a. since launch.  P2P Lending platforms such as LenDenClub have been generating waves among the investor community with its ability to generate a top-of-the-line return in short durations.

Fundamentally, such platforms allow borrowers to raise unsecured loans at high rates of interest. Investors on the platform provide funding to the borrowers seeking to raise funds and in turn receive interest for such investment proposition. P2P Lending is regulated by RBI in India, and at present, as per the regulations, an individual can invest maximum up to Rs. 50 lakhs through the P2P route. However, the unsecured loans can pose a default risk and that’s where diversification comes into the picture. Investors can invest in a pool of various borrowers with different risk profiles that helps them bring down their overall default risk, eventually earning them better returns on their investment. You can read all about P2P Lending in detail here.

With these investments offering top-of-the-line returns, it is essential to understand the risk associated with such investment options. While for short-term goals, P2P lending is the best option available there is, an investor should consider a mix of various asset classes to generate wealth appreciation over long-term prospects.

*On platform level.

LenDenClub is India’s largest alternate investment platform which started operations in India in 2015. We have been helping investors diversify their investments beyond traditional investment instruments ever since.



The Reserve Bank of India does not accept any responsibility for the correctness of any of the statements or representations made or opinions expressed by Innofin Solutions Private Limited, and does not provide any assurance for repayment of the loans lent through its platform.

LenDenClub is an Intermediary under the provisions of the Information Technology Act, 2000 and virtually connects lenders and borrowers through its electronic platform via the website and/or mobile app.

The lending transaction is purely between lenders and borrowers at their own discretion, and LenDenClub does not assure loan fulfilment and/or investment returns. Also, the information provided on the platform is verified or checked on the best efforts basis without guaranteeing any accuracy of the data/information verification. Any investment decision taken by a lender on the basis of this information is at the discretion of the lender, and LenDenClub does not guarantee that the loan amount will be recovered from the borrower, fully or partially. The risk is entirely on the lender. LenDenClub will not be responsible for the full or partial loss of the principal and/or interest of lenders’ investment amounts.


*P2P investment is subject to risks. And investment decisions taken by a lender on the basis of this information are at the discretion of the lender, and LenDenClub does not guarantee that the loan amount will be recovered from the borrower.

** Average value mentioned is the weighted average of returns received by investors

© 2023 LenDenClub by Innofin Solutions Private Limited | CIN: U74999MH2015PTC266499


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