Don't have enough money to invest? Don't worry. There are different investment options in the market today which require less than Rs 500 a month to start investing.
Spending Rs 500 a month is a much easier decision for most people. So, congratulations to you for deciding to save the money and invest it. It takes a lot to commit to a regular and disciplined investing scheme, particularly at a time when the propensity and ability to spend is so high. Many people, however, do not realize that Rs 500 a month is actually Rs 6000 a year and Rs 1.2 lakh over 20 years. If you can regularly invest even such a small sum, the rewards can be far greater. Since investors have different risk profiles, investment horizons, and investment choices, let us take you through 5 interesting avenues where you can start investing with just Rs 500 a month. Read on to know more.
1. Mutual Funds
Mutual funds (MFs) allow you to do systematic investment plans, popularly known as SIPs. Through this innovative way, you can invest as low as Rs 100 a month in some investment avenues and Rs 500 a month in other schemes. You can invest in an equity fund, a debt fund, a hybrid fund and a gold scheme. The investment returns are linked to the performance of the underlying assets. By investing Rs 500 a month for 20 years in an investment giving, say, 10% annual return, you can get Rs 3.8 lakh at the end of the term.
2. Atal Pension Yojana
This is a universal social security scheme. Under the Atal Pension Yojana (APY), the subscribers would receive the fixed minimum pension of Rs 1000 per month, Rs 2000 per month, Rs 3000 per month, Rs 4000 per month, Rs 5000 per month, at the age of 60 years, depending on their contributions, which itself would be based on the age of joining the APY. The scheme allows you to invest little amounts monthly. For instance, a person between the age of 25-30 can pay about Rs 300-500 a month to get a Rs 5000 guaranteed pension after turning 60 years of age. In case of death of the subscriber, the pension amount will be given to the spouse, and on the death of both (subscriber and spouse), the accumulated pension corpus would be returned to the subscriber’s nominee.
3. Public Provident Fund
The returns in PPF are guaranteed, and they are changed periodically by the government. PPF is a popular long-term investment option backed by Government of India, which offers safety with attractive interest rate and returns that are fully exempted from tax. Investors can invest minimum Rs 500 in one financial year and can get the facilities such as loan, withdrawal, and extension of account. By investing Rs 500 a month (Rs 500 X 12 = Rs 6000 a year), at the end of 15 years you can get Rs 1.7 lakh as the maturity amount.
4. FD, RD
Fixed deposits and recurring deposits are traditional investment favorites. Many top banks offer regular FDs with a minimum amount for deposit at Rs 100 and some offer at Rs 500. Bank FD interest rates hover between 6.5% and 7.25% for most old commercial banks. Recurring deposits allow you to invest every month for the tenure you have chosen. Apart from PSU banks, many private sector banks allow you to deposit a minimum of Rs 500 per month and thereafter, deposit in multiples of Rs 100. RDs may be used for a loan against the deposit. The rates of interest on RDs are identical to the fixed deposit rates.
5. Post Office Schemes
There are many Post Office schemes that allow you to invest in small amounts. A Post Office Savings Account (4.0% per annum interest) can be opened with minimum Rs 20 and minimum balance to be maintained in a non-cheque facility account is Rs 50. Next, a 5-Year Post Office Recurring Deposit Account (giving 6.9% per annum quarterly compounded interest) can be opened with Rs 10 per month. A Post Office Time Deposit Account (TD) can be opened with minimum Rs 200 and in multiples thereof. A National Savings Certificates (NSC) can be opened with a minimum of Rs 100 and in multiples of Rs 100. In case of NSC, Rs 100 grows to Rs 144.23 after 5 years. Most of the small-savings scheme returns are fixed by the government periodically.
As you can see, there are different investment options for Indian investors even if they want to invest as low as Rs 500 a month. So, do not wait and invest to grow your hard-earned savings in top-quality options today so that you can secure your family’s future going ahead. Every Rs 500 invested today can be worth thousands tomorrow if you give it enough time.
(By Anil Rego, Founder and CEO, Right Horizons)