While some of the schemes like the NPS and PPF are risk-free, other avenues like the stock markets and mutual funds are subject to market risk and require knowledge or expert help.
From equity mutual funds to fixed deposits (FDs), gold, real estate, PPF, and NPS, there are multiple options for investment today. Hence it may seem a little confusing to decide which one to pick. While some of the schemes like NPS and PPF are risk-free, other avenues like the stock markets and mutual funds are subject to market risk and require knowledge or expert help. Generally, the choice of investment instruments is dependent on the individual’s risk profile, age, and various other factors. However, for a salaried individual, some of the investment platforms play a better role than the others.
If you are looking to invest, consider these investment avenues:
Public Provident Fund: Because of its safe and secure nature for long-term investments along with guaranteed returns that are fully exempted from tax, PPF is one of the popular investment schemes. PPF comes with a lock-in period of 15 years which enables you to earn higher interest on your investments. You can additionally extend your investment time-frame, with 5 years block after the maturity of fifteen years. The minimum period of investment, however, is 6 years after which you can withdraw your investments. The minimum amount you’ll be able to invest during a fiscal year is Rs.500 and the maximum is Rs1,50,000. You can additionally take a loan on the balance of your PPF account, in case of any monetary emergencies. The current interest rate on PPF is 8 per cent per annum compounded annually.
Mutual Funds – It is commonly known that mutual fund investments generate higher income over a period of time. This money is invested in equities, bonds, and other market instruments. The best approach is to invest in MFs through systematic investment plans (SIP) or in a lump sum. Mutual fund schemes, aside from close-ended and ELSS schemes, don’t have a minimum investment period. The risk profile, however, depends on the funds you invest in. While the debt funds invite less risk and are appropriate for risk-averse investors, the risk is comparatively higher in equity funds and are suggested for investors who can take the risk.
National Pension Scheme – For those with a very low-risk profile, this government-sponsored scheme is one of the best modes of investment. As it is backed by the government, the risks of your investment are cut off. Investing in the NPS gives you additional tax benefits under Section 80CCD.
Gold investment – It is one of the most popular and sought-out investment options in India. For investing in gold, you can either buy through a gold deposit scheme, gold ETF (exchange-traded fund), gold MFs or gold bars. Gold mutual funds and ETFs are a highly liquid investment as they allow investors to hold the gold in a paperless form and sell them in stock exchanges.
Bank fixed deposits – If you are looking to invest for a short or medium duration, you can opt for a bank fixed deposit. Ideally, for one year, these give the highest rate of interest. FDs have attracted the maximum investment, because of their fixed returns. Though you can make a premature FD withdrawal with an interest deduction, you cannot break a tax-saving FD that is locked in for a period of five years.
Real Estate – It is an ideal investment avenue especially for long-term investment for those with the money for it. Since the last few years, the industry has become well regulated because of the Real Estate Regulation and Development Act (RERA) which came into practice in 2016.
Stock Market Investment – Though this offers the best returns, this also comes with high risks. Experts suggest those with the proper knowledge of the market should opt for this instrument or should take the help of experts. The Budget 2018 made the long-term capital gains taxable. However, it still appears to be tax-friendly to investors. In the stock markets, you can choose from various small, mid and large cap stocks. You can also invest in all of them to create a balanced portfolio.