There are saving and investment schemes for Indians galore. From financial instruments providing fixed and assured returns backed with a sovereign guarantee to market-linked products with returns linked to underlying securities, the list of investment options in India is long and runs across different asset classes. Each investment option will differ in terms of the structure and the way it works. Further, the features of each investment option will vary, and, therefore, knowing them before locking in your hard-earned funds into them helps.
Before you start selecting the right scheme within each category of investment, make sure you have an asset allocation plan prepared. Thereafter, within each asset class, select the right investment option that goes along with your goal. Some key factors to consider during the selection of investment schemes are liquidity, tenure, lock-in, safety, regular income payout, and the taxation of the income.
Here are 75 savings and investments options available to Indians in the 75th year of independence.
The bank account where you keep your savings refers to the savings account. The interest earned on savings accounts is very less even though some banks provide higher savings back interest on amounts exceeding a specific limit. Savings accounts come in handy in meeting expenses for your daily needs and funding financial exigencies.
Buying direct shares from the stock market is an equity investment for which you need to have a demat account that can be opened with any brokerage house. The risk-reward ratio is high in buying direct shares as the volatility associated with the equity asset class over the short-medium term is extreme. However, over the long term returns from equities tend to drift upwards. While selecting stocks, you may make use of fundamental analysis or technical analysis, or both.
When it comes to investing in equity mutual funds, there are about 11 equity fund categories.
Multi Cap Fund
An open-ended equity scheme investing across large cap, mid-cap, and small cap stocks with a minimum investment of 65% of total assets in equity & equity-related instruments.
Large Cap Fund
An open-ended equity scheme predominantly invests in large-cap stocks with a minimum investment of 80% of total assets in equity & equity-related instruments of large-cap companies.
Large & Mid Cap Fund
An open ended equity scheme investing in both large cap and midcap stocks with a minimum of 35% of total assets in equity & equity related instruments of large cap companies and a minimum of 35% of total assets in equity & equity related instruments of Mid Cap companies
An open ended equity scheme predominantly investing in mid cap stocks with a minimum 65% of total assets in equity & equity related instruments of mid cap companies.
Small cap Fund
An open ended equity scheme predominantly investing in small cap stocks with a minimum 65% of total assets in equity & equity related instruments of small cap companies
Dividend Yield Fund
An open ended equity scheme predominantly investing in dividend yielding stocks with a minimum investment in equity of 65% of total assets
An open ended equity scheme following a value investment strategy with a minimum of 65% of total assets in equity & equity related instruments.
Contra Fund Scheme
An open ended equity scheme following contrarian investment strategy with a minimum of 65% of total assets in equity & equity related instruments.
An open ended equity scheme investing in maximum 30 stocks with a minimum of 65% of total assets in equity & equity related instruments.
An open ended equity scheme investing in a particular sector/ theme with a minimum of 80% of total assets in equity & equity related instruments.
Equity linked savings scheme (ELSS)
An open ended equity linked saving scheme with a statutory lock in of 3 years and tax benefit under section 80C of the Income Tax Act, 1961. The minimum investment in equity & equity related instruments has to be 80% of total assets.
Also Read – Mutual Funds: Five MF myths that can mislead you
When it comes to investing in debt mutual funds, there are about 27 debt fund categories.
An open ended debt scheme investing in overnight securities having maturity of 1 day
An open ended liquid scheme with investment in Debt and money market securities with maturity of upto 91 days only.
Ultra Short Duration Fund
An open ended ultra-short term debt scheme investing in instruments with Macaulay duration between 3 months and 6 months
Low Duration Fund
An open ended low duration debt scheme investing in instruments with Macaulay duration between 6 months and 12 months
Money Market Fund
An open ended debt scheme investing in money market instruments having maturity upto 1 year
Short Duration Fund
An open ended short term debt scheme investing in instruments with Macaulay duration between 1 year and 3 years
Medium Duration Fund
An open ended medium term debt scheme investing in instruments with Macaulay duration of the portfolio is between 3 years –4 years
Medium to Long Duration Fund
An open ended medium term debt scheme investing in instruments with Macaulay duration between 4 years and 7 years
Long Duration Fund
An open ended debt scheme investing in instruments with Macaulay duration greater than 7 years
An open ended dynamic debt scheme investing across duration.
Corporate Bond Fund
An open ended debt scheme predominantly investing in highest rated corporate bonds with 80% of total assets (only in highest rated instruments)
Credit Risk Fund
An open ended debt scheme with a minimum of 65% of total assets in below highest rated instruments.
Banking and PSU Fund
An open ended debt scheme predominantly (80% of total assets) investing in Debt instruments of banks, Public Sector Undertakings, Public Financial Institutions.
An open ended debt scheme investing in government securities across maturity. The minimum investment in Gsecs has to be 80% of total assets (across maturity)
Gilt Fund with 10 year constant duration
An open ended debt scheme investing in government securities (minimum investment in Gsecs-80% of total assets ) having a constant maturity of 10 years.
An open ended debt scheme predominantly investing a minimum of 65% of total assets in floating rate instruments
When it comes to investing in hybrid mutual funds, these are the categories.
Conservative Hybrid Fund
An open ended hybrid scheme investing predominantly in debt instruments. The investment in equity & equity related instruments is between 10% and 25% of total assets while investment in Debt instruments is between 75% and 90% of total assets.
Balanced Hybrid Fund
An open ended balanced scheme investing in equity and debt instruments. The investment in equity & equity related instruments is between 40% and 60% of total assets while in debt instruments it is between 40% and 60% of total assets.
Aggressive Hybrid Fund
An open ended hybrid scheme investing predominantly in equity and equity related instruments with equity & equity related instruments between 65% and 80% of total assets while in debt instruments it is between 20% 35% of total assets.
Dynamic Asset Allocation or Balanced Advantage
An open ended dynamic asset allocation fund where investment in equity/ debt is managed dynamically.
Multi Asset Allocation
An open ended scheme investing in at least three asset classes with a minimum allocation of at least 10% each in all three asset classes.
Arbitrage Fund Scheme
An open ended scheme investing in arbitrage opportunities with a minimum investment of 65% of total assets in equity & equity related instruments.
An open ended scheme investing in equity, arbitrage and debt with a minimum investment of 65% of total assets in equity & equity related instruments while a minimum of 10% of total assets will be in debt.
An open ended retirement solution-oriented scheme having a lock-in of 5 years or till retirement age (whichever is earlier)
An open ended fund for investment for children having a lock-in for at least 5 years or till the child attains age of majority (whichever is earlier)
An open ended scheme replicating/ tracking a particular index with an allocation of a minimum of 95% of total assets
An open ended scheme replicating/ tracking a particular index with an allocation of a minimum of 95% of total assets. You need to have a demat account to buy or sell ETF units during the trading hours of a stock exchange.
Fund of Fund (FoFs) – Domestic
An open ended fund of fund scheme investing a minimum of 95% of total assets in a Domestic fund.
Fund of Fund (FoFs) – Overseas
An open ended fund of fund scheme investing a minimum of 95% of total assets in an Overseas fund.
Employees’ Provident Fund (EPF)
Employees’ Provident Fund (EPF) is the flagship scheme under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 and is managed by Employees’ Provident Fund Organisation (EPFO). Under EPF scheme, an employee has to pay a certain contribution towards the scheme and an equal contribution is paid by the employer.
Contribution paid by the employer is 12 per cent ( can be voluntarily increased by employee) of basic wages plus dearness allowance plus retaining allowance and an equal contribution is payable by the employer also. The employee gets a lump sum amount including self and employer’s contribution with interest on both, on retirement. There are several ways to check PF balance.
Voluntary employee fund (VPF)
An employee is allowed to increase own contribution towards the provident fund from a minimum of 12 per cent to as much as 100 per cent. These contributions form the part of VPF and earn interest similar to EPF.
Public Provident Fund (PPF)
PPF is a 15-year scheme, which can be extended indefinitely in block of 5 years. The principal and the interest earned have a sovereign guarantee and the returns are tax-free. The principal invested qualifies for deduction under Section 80C of the Income Tax Act, 1961 and the interest earned is tax exempt under Section 10. While the minimum annual amount required to keep the account active is Rs 500, the maximum amount that can be deposited in a financial year is Rs 1.5 lakh. One can open a PPF account in one’s own name or on behalf of a minor of whom he is the guardian. This is the combined limit of self and minor account.
Senior Citizens’ Saving Scheme (SCSS)
Senior Citizens’ Saving Scheme (SCSS) is available only to senior citizens or early retirees and comes with a five-year tenure, which can be further extended by three years once the scheme matures. The maximum investment limit of SCSS is Rs 15 lakh and one may open more than one account. The scheme can be availed from a post office or a bank.
National Savings Certificates (NSC)
National Savings Certificates (NSC) is a 5-year scheme with a lump sum amount to deposit. NSC does not offer monthly or yearly interest payout and only has the cumulative option. Further, the interest accruing annually, but deemed to be reinvested, also qualifies for benefit under Section 80C except in the last year.
Kisan Vikas Patra (KVP)
Money invested in Kisan Vikas Patra (KVP) doubles on maturity. The interest earned is fully taxable as per one’s tax slab and there are no interest payouts during the period of investment. Further, there is no tax benefit in KVP for the investors.
Post Office Time Deposits
Post Office Time Deposits are available for tenures of 1, 2, 3 and 5 years but it is only the 5-year deposit that enjoys Section 80 C tax benefit.
Pradhan Mantri Vaya Vandana Yojana (PMVVY)
Pradhan Mantri Vaya Vandana Yojana (PMVVY) is essentially a government of India scheme aimed at providing a regular income to senior citizens. It is a one-time lumpsum investment scheme with an option to receive a regular income either monthly, quarterly, half-yearly or annually, in the form of a pension. One can invest up to a maximum amount of Rs 15 lakh and get a regular pension income for 10 years. After ten years, the principal amount is paid back to the investor.
Floating Rate Savings Bonds 2020
Floating Rate Savings Bonds 2020 scheme has a tenure of 7 years and the interest rate in them will keep varying during the tenure of the scheme. Interest ( fully taxable) will be paid half-yearly to the investors in July and January of each year. Only specified categories of senior citizens may go for premature redemption of the bonds.
Bank fixed deposits
Bank fixed deposits remain a popular savings option for most conservative investors. Those who do not wish to take risks and want a fixed interest rate (taxable) on their investments keep their funds in bank deposits. Banks offer deposits across different tenure and hence depending on the time horizon, depositors can choose to open an FD account from 15 days to as long as 10 years.
5-year notified tax-saving fixed deposits
For someone who has not exhausted the Section 80C limit of Rs 1.5 lakh in a year and is looking for a debt tax saver, investment in 5-year notified tax-saving fixed deposits in banks are a popular choice. Such deposits come with monthly, quarterly or cumulative interest payout options on the investment made in them.
Company fixed deposits are offered by Housing and Non-Banking financial companies (NBFCs) and even manufacturing companies. They offer a higher rate of interest than bank deposits but the risk compared to bank deposits is higher in them. The offer tenure range from 6 months to 60 months and there are various interest payment options to choose from.
Sovereign gold bond (SGB)
Sovereign gold bonds (SGBs) are issued by the government and are one of the ways to own gold in paper form. The bonds come with a tenor of eight years with exit options available in the 5th, 6th and 7th years, to be exercised on the interest payment dates. The government has fixed interest of 2.50 per cent per annum on the investment, with no compounding of interest. The interest will be paid in half-yearly rests and the last one shall be payable on maturity along with the principal. One can invest for a minimum of 1 gram of gold. The maximum limit of subscribed is 4 kgs annually for individuals.
Buying jewelry is one of the popular options to own gold by most Indians. But possessing gold in the form of jewellery has its own concerns about safety, high cost and outdated designs. Further, there are the ‘making charges, which could prove to be a costly affair. Make sure the jewellery has all the four marks of Hallmark to meet its genuinity. At the time of return or exchange of gold through a jeweller, there is a probability of losing a high amount.
Purchasing gold coins available in different denominators such as 1 gram, 10 gram to 50 gram and above is also an option. In addition to private companies, there is government owned MMTC offering hallmarked coins through its various outlets all across the country. While buying gold coins make sure to know the return or exchange policy from the manufacturer.
A Gold Fund could be in the form of a Gold Exchange Traded Fund (Gold ETF) or have a fund of fund structure investing in equity stocks of companies engaged primarily in mining, refining, or marketing of gold or gold products.
Gold exchange-traded funds (ETF)
Gold exchange traded funds are available on stock exchanges and the units can be bought or sold on all trading days of the stock exchange. The prices are very close to the real price of gold prevailing on that day in the country. What you need is a trading account with a share broker and a demat account.
Real estate Investment
Investments in real estate deliver returns in two ways—capital appreciation and rentals. One can consider both residential as well as commercial real estate properties to invest in. Purchase of property can be in the primary market which is right at the launching phase of the project by the builder or from a third-party as a re-sale in the secondary market.
Real Estate Investment Trusts (REIT)
Real Estate Investment Trusts (REIT) are similar to a mutual fund wherein investors pool funds that are invested by the sponsor of the scheme into the real estate asset class which acts as the underlying securities. As a REIT investor, the earnings may be in the form of regular income and capital appreciation, if any.
National Pension System (NPS)
National Pension System (NPS) is essentially a long-term investment scheme to help one direct his or her savings toward retirement. After opening an account, you keep contributing till age 60 or till the scheme’s maturity. At age 60, called the vesting age, you can withdraw a maximum of 60% (tax-free) of the accumulated corpus, while the balance is to be handed over to a life insurance company to buy an annuity. NPS offers a choice to allocate your money among equity (index stocks), debt (corporate, state government and central government bonds) or a mix of both.
Atal Pension Yojana (APY)
Atal Pension Yojana (APY) is a defined benefit pension plan providing a fixed pension to subscribers. APY is administered by Pension Fund Regulatory and Development Authority (PFRDA). Under the APY scheme, a subscriber would receive a minimum guaranteed pension of Rs.1000 to Rs.5000 per month after attaining the age of 60 years, depending upon his contributions.
Unit-linked insurance plans (Ulips)
Ulips are often referred to as almost similar to mutual funds (MF) wrapped with insurance cover. The premium that one pays pay provides a life cover while a portion of it goes into the fund options. Ulip is essentially a hybrid investment wherein several factors such as premium, duration of the plan, mortality, fund administration charges, allocation charges etc interrelate and impact each other. Ulips have a lock-in of 5-years but one should try to run it till the original maturity.
Life Insurance – Endowment
Endowment life insurance plans are policies that combine savings with life cover and provide a steady return to the policyholder. Based on the age, tenure, sum assured, the premium is calculated and one needs to pay till the maturity of the plan. On death, before the plan ends, the sum assured along with accrued bonus is paid to the nominee. On maturity, the survival benefit including the sum assured and bonus is paid to the policyholder.
Life Insurance – Money Back
In money back insurance plans, you will get a percentage of insurance cover periodically and the rest of the amount with bonus on maturity. On death before the plan ends, the outstanding sum assured along with accured bonus, if any is paid to the nominee. On maturity, the survival benefit including the outstanding sum assured and bonus is paid to the policyholder.
RBI Retail Direct scheme
For those who wish to invest in government securities, RBI’s Retail Direct scheme is a one-stop solution to facilitate investment in Government Securities by Individual Investors. Under this scheme, Individual Retail investors can open Gilt Securities Account – Retail Direct Gilt (RDG) Account with the RBI.
Non-convertible debentures (NCDs)
Non-convertible debentures (NCDs). NCDs are issued by corporates to raise funds from the public and offer a fixed return generally higher than what is available to investors from bank fixed deposits. NCD is almost similar to a bond and thus is a debt investment where the investor’s money is not put into the stock market.
Tax-free bond is almost similar to a fixed deposit when it comes to investment. A lump sum can be invested in a tax-free bond that carries a fixed rate of interest for a fixed term. On maturity, the principal is returned back to the investor. The interest earned is tax-free in the hands of the investor in the year of receipt.
Sukanya Samriddhi Yojana (SSY)
Sukanya Samriddhi Yojana (SSY) is an investment that earmarks funds exclusively for the needs of girl child. SSY, a 21-year scheme, can be opened in the name of girl child below 10 years only. The investment qualifies for tax benefit under Section 80C and the interest earned is tax exempt.
Post Office Monthly Income Scheme (POMIS) Account
POMIS is a 5-year investment with a maximum cap of Rs 9 lakh under joint ownership and Rs 4.5 lakh under single ownership. The interest rate payable monthly remains fixed for the entire tenure. The interest earned in POMIS may be credited to a post office savings account and a mandate may be provided to transfer the funds to recurring deposits in the same post office.
Floating Rate Savings Bond
Floating Rate Savings Bond, 2020 (Taxable) comes with a tenure of seven years. Interest is paid twice a year, on July 1 and January 1 each year. For Floating Rate Savings Bond, the rate of interest is equal to the interest rate on NSC plus 0.35%. The interest rate will keep varying during the tenure of the scheme depending on the interest rate of NSC. There is no upper limit on investment in Floating Rate Savings Bonds.
Capital gains bonds
To save long-term capital gain tax, 54EC bonds, or capital gains bonds, are one of the best ways. If you have earned long term capital gains, you can save tax on these gains by investing in 54EC bonds within 6 months of the date of sale of the asset. By investing in capital gains bonds you not only save tax but also earn interest on the amount invested. The maximum limit for investing in 54EC bonds is Rs. 50,00,000.
Chit Funds activity involves contributions by members in instalments by way of subscription to the Chit and by rotation each member of the Chit receives the chit amount. The subscriptions are specifically excluded from the definition of deposits and cannot be termed as deposits. While Chit funds may collect subscriptions as above, they are prohibited by RBI from accepting deposits with effect from August 2009. Chit Fund Companies are regulated by the respective State Governments.
Peer-to-peer (P2P) lending
Peer-to-peer (P2P) lending platforms make available an avenue for people to borrow money from each other. You can even lend money to others using this platform and earn interest.
The commodities market can be either a physical or a virtual space, where investors can trade commodities at present or future dates. Metals, Energy goods, Agricultural goods, and Environmental goods are four major categories where you can trade or invest. In India, one can invest or trade commodities through any commodity exchange regulated by the Securities and Exchange Board of India.