Investing is an essential part of the wealth creation of society. It helps an individual to beat their financial goals. There are many investment avenues like stocks, equity, mutual funds and fixed deposits. However, before opening new investing avenues, a person should consider liquidity needs, investment horizons, and risk appetites.
Most investments carry a certain level of risk and volatility which affects the returns. Returns on the investment are more when the stories of the stakes are high. Hence, investment decisions are taken based on the investor’s risk appetite; it also helps classify the investment based on the various levels of risks.
There are multiple options for investment today, and it may seem a daunting task to choose the right one. While a person must select investment plans depending on your risk profile, time horizon and other factors, some investment platforms offer excellent options to start their investment journey towards wealth accumulation.
A high-return, low-risk combination in an investment product, unfortunately, does not exist. There are two types of investment products, and they are financial and non-financial assets. Stocks and mutual funds and fixed income products like Public Provident Fund; bank fixed deposits are financial assets. Non-financial assets consist of gold assets and real estate investments.
Below we have elaborated on five investment avenues you should consider while investing for your future financial security.
List of Best Investment Options for Savings
1.Mutual Funds
Mutual funds are one of the most sought after investment options in India. Amongst mutual funds, equity mutual funds invest most of the assets in stocks. It has the potential to give inflation-beating returns over some time. However, with high rewards come high risks. Therefore, one must invest in equity funds to achieve investment objectives only if it matches the risk tolerance.
Features:
• One must choose mutual funds only after checking the investment style of the fund manager.
• One can start investing in mutual funds as low as Rs 500 a month through the systematic investment plan or the SIP.
• It helps to invest small amounts of money regularly in the mutual fund scheme of their choice.
• An individual would benefit from rupee cost averaging as you invest across all stock market levels.
• It helps to average out the purchase cost of units over time.
• When there are different types of mutual funds, one should pick the right mutual fund to achieve their financial goals based on the risk profile.
2. National Pension Scheme
The National Pension System or NPS is a government-backed retirement cum pension scheme. When you retire, this scheme provides a monthly pension as you have to compulsorily invest 40% of the corpus accumulated at 60 years in an annuity plan. With the sovereign guarantee backing the project, you get the much-needed safety for your investment.
Features:
• Investing in the NPS entitles additional tax benefits up to Rs 50,000 per annum under Section 80CCD(1B) of the IT Act.
• The deduction is over and above the regular tax deductions available under Section 80C, Section 80CCC and Section 80CCD, where one can save up to Rs 1.5 lakh a year in taxes.
• NPS invests the money in the broader asset classes such as Equity, Corporate Bonds, Government Securities and Alternate Investment Funds.
• A conservative investor can opt to have most corporate bonds and government securities investments.
• Aggressive investors may choose to allocate a higher proportion towards equities.
• NPS offers the opportunity to design the portfolio by allocating funds across the four asset classes under the active choice.
• The investor can choose where money is automatically invested across the asset classes in defined proportions depending on their age.
Contact details: 61606161
Weblink: https://www.hdfcbank.com/personal/invest/nps-national-pension-system
3. Public Provident Fund
The Public Provident Fund (PPF) is a suitable investment option when you are a risk-averse investor. PPF is one of the most popular tax-saving investment options for the commoner. You can open this account in a bank or even at a post office. PPF comes with a lock-in period of 15 years, with an option of extending your account in a block of five years.
Features:
• PPF is an excellent investment option for a salaried person as it offers higher interest than bank FDs.
• Whenever a person requires a loan, they can avail one against their PPF balance and even make a premature withdrawal after the 7th year of opening the account.
• One of the most attractive features of a PPF account is it qualifies for the EEE tax benefit.
• The amount invested enjoys a tax deduction of up to Rs 1.5 lakh per year under Section 80C.
• The interest earned and the withdrawal at maturity is tax-free.
• As an example, one can invest a minimum of Rs 500 per month and take the limit to a maximum of Rs 1,50,000 per annum.
Contact details: 18004253800 & 1800112211.
Weblink: https://www.sbi.co.in/web/personal-banking/investments-deposits/govt-schemes/ppf
4. Real estate investment
Real estate is a good investment option for those who have sizable disposable income. In addition, the Real Estate Regulation and Development Act (RERA), which came into force in 2016, has further boosted the real estate market in India.
Features:
• It is an excellent option for long-term investment.
• The industry is well regulated, with safety measures in place for buyers and sellers.
• With fast-paced development and urbanisation, the demand for real estate has witnessed a rise like never before.
• The availability of accessible home loans at lower interest rates has removed the barriers of affordability.
• It also allows buyers to save a significant income tax annually until the home loan payment.
5.Stock Market Investment
An investor may invest in stocks to achieve investment objectives only if it matches their risk appetite. It helps if they select the right supplies to maximise their returns over time. For instance, when someone chooses stocks of companies that enjoy an economic moat, they want a competitive advantage over their competitors and peers, translating it into a higher market share.
Features:
• A person investing in stocks should diversify their stock portfolio by investing in stocks across sectors and different industries.
• It helps them when they invest in stocks through the systematic investment plan or SIP.
• It is a method where they invest fixed amounts regularly in the stocks of their own choice.
• It helps the investor to be average out their purchase costs of stocks over time as they invest across all market levels.
• An investor should always select undervalued stocks with sound fundamentals as it helps them have a market price below their intrinsic value.
• The investor might earn a higher return on their investments in undervalued stocks as the market eventually recognises their potential and the price rises over time.
FAQ Regarding Investment Plans in India
A. They are launched by banks, the government of India or public sector financial institutions. They differ in the investment horizons, interest rates and tax treatments. Such schemes help individuals accumulate funds and create financial security for their future for their long-term and short-term life objectives.
A. You should create your own savings plan from an early age. 20% of a person’s income of the entire life should be saved before retirement for a financially secure future after retirement.
A. It is safe to buy a savings scheme from a bank or buy a savings scheme from any financial institution of your choice. One should always look for the best plans where you get the maximum benefit with minimum risks involved. And you should always read the documents carefully before investing.
A. All savings schemes do not offer the benefit of tax exemption. However, saving plans provide tax benefits to investors like public provident funds, national saving certificates, and equity-linked saving schemes.
A. As per the requirement of the individual, one should choose to invest in saving schemes available in the market. You should also look after the risk factors, rate of interest and return on investments before investing.
A. A regular savings plan helps the individual to be financially prepared for any eventualities. It enables a person to meet their long-term and short term financial expenses in life. In addition, keeping a disciplined approach towards saving creates a financial cushion for the future after a person’s retirement.
A. Investments with tenure from seven days to twenty-four months are short-term investments. Some examples of short-term savings are an investment in mutual funds, fixed deposits, stocks and more.
A. National pension scheme and public provident funds are the safest methods of investment with the highest returns. Your money would be secure, and you would get an assured return on your investments. The risk factors involved are also relatively more minor.
Conclusion
Savings allow you to squirrel away money while earning modest, low-risk returns. Due to the large variety of saving schemes, a little research can go a long way in determining the most challenging work for you. And, since interest rates are constantly changing, it is essential to do your homework before committing your money to a particular savings account so you can make the most of your savings. Fixed income investments help necessary to make the best use of both worlds.
