International holiday is a dream for many and an adventure for a fortunate few. International travel is always desired by many of you because of the thrill it provides. You get to explore new lands, meet new people, experience new cultures, explore the place’s history and, of course, shop. The number of outbound tourists from India is on the rise. International travel is cost intensive, no doubt. However, it can be affordable if you plan it right. You need to create a travel fund to fund your dream holiday. And it needs to start somewhere. Just Rs 5000 invested monthly for 1-2 years and you can plan your dream holiday.
A corpus of around Rs 1 lakh is enough to cover you in many foreign locales such as Vietnam, Thailand, Dubai, Sri Lanka and Maldives. So, now you know the top 5 destinations for your limited budget. But how do you plan your finances for this holiday?
As mentioned earlier, just investing Rs 5000 per month for a couple of years would let you enjoy a trip to any of the aforementioned places. But do you know how?
First, you should select an investment avenue to save your monthly investment of Rs 5000. The instrument should keep your money safe and offer moderate to good returns.
Here are two such options which you can pick:
Recurring deposits
Recurring deposits are popular because they promise fixed returns and your money is safe in your bank. You can invest any amount in the scheme every month for a desired period of time. So, you can choose to invest Rs 5000 every month in a recurring deposit scheme with tenures of 12 or 24 months. The returns are decent and you can accumulate a good corpus after a couple of years to take an international trip.
Systematic Investment Plans of Mutual Funds
Systematic Investment Plans or SIPs are another monthly investment avenue which is good. You can invest Rs 5000 in an SIP of your choice and get good returns. What’s more, if you invest in equity funds, your units redeemed after 12 months are tax-free. So a monthly SIP for 12 months becomes 100% tax-free in 24 months. An equity fund has market risks. If you’d like to earn a moderate rate of return while keeping your money safe, you may be better of purchasing a liquid fund every month.
Here is a comparative analysis of both these avenues:
Points of discussion | Recurring deposits (RDs) | Equity SIPs |
How to invest | Through a bank or financial institution. Can be done online or offline. | Through a mutual fund house. Can be bought directly or from a broker. Both online and offline modes of purchase are available. |
How to redeem | RDs have a pre-fixed term which is chosen by you. Once the term is over, the deposit is automatically redeemed. | Redemption can be done online or offline by submitting a request to the mutual fund house. |
Tenure | Any tenure as per your choice | Any tenure as per your choice |
Taxation | Investments and interest earned are both taxable | Investments are taxable. If redeemed after 12 months of investment, the returns are tax-free. |
After you have selected your investment medium and accumulated a corpus, use the money to plan your holiday. You can book your tickets, make hotel reservations or use the money to buy forex. You can also buy travel cards which enable you to carry money in plastic form, thus providing security against theft.
If you are also dreaming of an international holiday, wait no more. There are budget-friendly destinations which you can explore if you invest a few thousand rupees every month. Be careful when choosing the investment instrument though.
(The writer is CEO, BankBazaar.com)
