With so many options available, most get confused and can't decide which one to pick. The choice of investments should depend on an investor's age, risk profile, and various other factors.
Are you a salaried individual looking for some investment options? There are multiple investment options today, starting from fixed deposits (FDs) to equity mutual funds, PPF, NPS, gold, and real estate. With so many options available, most get confused and can’t decide which one to pick.
Experts suggest investors should understand the type of investment before investing. The choice of investments should depend on an investor’s age, risk profile, and various other factors. For instance, some of the schemes like PPF and NPS are risk-free. However, avenues like mutual funds and the stock markets are subject to market risk, which requires knowledge or expert help.
Here are some of the investment avenues to consider while investing:
Bank Fixed Deposits (FDs) – For a short or medium duration investment, investors can opt for a bank FD. These give the highest rate of interest ideally, for one year tenure. Because of their fixed returns, FDs have attracted the maximum investment. Note that you cannot break a tax-saving FD that is locked in for a period of 5 years, even though you can make a premature FD withdrawal with an interest deduction.
Mutual Funds – Mutual fund investments are known to generate higher income over a period of time. Money invested in mutual funds are further allocated in market instruments like equities, and bonds. To start investing in a mutual fund, the best approach is through systematic investment plans (SIP) or in a lump sum. Mutual fund schemes don’t have a minimum investment period, aside from close-ended and ELSS schemes. The risk profile of your investment depends on the funds you choose to invest in. For risk-averse investors, debt funds which are less risky are appropriate, comparatively equity funds are higher in risk and are suggested for investors who can take the risk.
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Gold investment – To invest in gold, there are various options for the investor to buy it from. For instance, you can either buy gold through gold ETF (exchange-traded fund), a gold deposit scheme, gold MFs or gold bars. Investment in gold is one of the most popular and sought-out investment options in India. Among the gold buying options, gold MFs and ETFs are a highly liquid investment. They allow investors to hold the gold in a paperless form and sell them in stock exchanges.
Real Estate – Especially for long-term investment, real-estate is an ideal investment avenue, for those with the money for it. The industry has become well regulated since the last few years, because of the Real Estate Regulation and Development Act (RERA) which came into practice in 2016.
Stock Market Investment – It is commonly known that investment in the stock market comes with high risks, even though this offers the best returns. While investing in the stock market, investors can choose from various small, mid and large-cap stocks. To create a balanced portfolio you can also invest in all of them. However, experts suggest only those with the proper knowledge of the market should opt for investing in the stock market, otherwise one should seek the help of experts. Even though the long-term capital gains were made taxable in the Budget 2018, it still appears to be tax-friendly to investors.
National Pension Scheme – This government-sponsored scheme is one of the best modes of investment, especially for those with a very low-risk profile. The risks of the investor’s investment are cut off, as it is backed by the government. Investing in the NPS also comes with the additional tax benefits under Section 80CCD.
Public Provident Fund – PPF is a safe and secure nature of investment instrument especially for long-term investments. It offers guaranteed returns that are fully exempted from tax. It comes with a lock-in period of 15 years which enables the investor to earn higher interest on their investments. One can also additionally extend one’s investment time-frame, by a block of 5 years after the maturity of 15 years. Investors can only withdraw their investments after 6 years, which is the minimum period of investment. The minimum and maximum amount of investment are set at Rs 500 and Rs 1.5 lakh respectively, in a fiscal year. In case of any monetary emergencies, one can also opt for taking a loan on the balance of one’s PPF account.