There exists a plethora of investment options in India which offer quite a good amount of returns. Some of them include ULIP, National Pension Scheme, Fixed Deposits, Public Provident Funds, Mutual funds, etc. To know the best investment options available, it becomes important to analyse the individual’s requirements along with the risk tolerance level depending on the financial objectives. In this article, let us discuss some of the best investment options that allow the growth of your wealth over a period of time.
Categories of Investment Options
- Low-Risk Investments
Low-risk investments are investment options where no risk is involved or minimal risk is involved. These are the best investment options for risk-averse investors. Following are some of the low-risk investments:
- Public Provident Fund (PPF)
- Fixed Deposit
- Sukanya Samridhi Yojana & many more
- Medium Risk Investments
Medium-risk investments are slightly risky compared to low-risk investments. This investment type is for investors who want a balanced portfolio & can take some risk. Following are some of the medium-risk investments:
- Debt fund
- Government bonds
- Corporate bonds, & many more.
- High-Risk Investments
High-risk investment options are all the investment avenues which are market-linked & come with greater risks. Such investment options get high returns as well, but they are volatile & uncertain in nature. Investors who can manage higher risk to earn better returns should only opt for such investment options. Following are some of the high-risk investment options:
- Stocks
- Mutual Funds
- Unit Linked Insurance Plans (ULIPs)
Different Types of Investments
Let’s check the different types of investment plans below:
- Bank Fixed Deposits
- They provide guaranteed returns, hence offering a safe principal amount.
- It does not allow withdrawal before its due date. If the same is done, the penalty charges will be imposed.
- The investment tenure can range between 7 days to 10 years.
- The interest amount remains constant, hence keeping the return amount to be constant.
- Banks allow auto-renewal of the deposit amount along with the interest.
- Unit Linked Insurance Plans (ULIPs)
- ULIPs are insurance cum investment plans which allow you to invest to meet your long-term financial commitments along with providing life insurance coverage.
- The premium amount paid is invested in the funds opted for, & the rest is allocated towards life insurance coverage.
- It also provides an option to switch between the funds with your changing requirements & the life milestones you reach.
- These funds offer flexibility in making payments towards premiums & allocation of funds, where you can customise the plan as per your financial goals & risk tolerance.
- One should compare the costs involved & returns received before investing the funds in any of the financial products using a ULIP Calculator.
- Public Provident Fund (PPF)
- It allows funds to be invested till a maximum tenure of 15 years.
- Get a tax deduction of up to INR 1,50,000 under section 80C.
- The maturity amount is also exempt from tax.
- Also, it allows the corpus funds to be borrowed within the initial 5 years, after which, for the next 5 years, only partial withdrawal is allowed.
- It is considered to be a less risky investment but a market-linked interest rate that changes each year.
- The tenure can be extended by a period of 5 years.
- National Pension Scheme (NPS)
- India introduced this plan to secure the financial future of government & private employees post-retirement.
- The policyholder is required to invest the money in debt & equity funds to get a return on investments.
- The amount equivalent to 60% can be withdrawn at the time of retirement, & the remaining 40% can be used to buy an annuity.
- The proceeds from NPS are not tax-free.
- Gold
- Gold is considered to be the highest-value metal investment option.
- Gold is the most preferred investment option in India due to its high liquidity & inflation-beating capacity.
- It may be bought in the form of coins, bars, jewellery, sovereign gold bond schemes, gold exchange-traded funds, etc.
- Recurring Deposit
- A recurring deposit can be opened at an amount as low as INR 100.
- The instalment date & amount are fixed.
- The maturity date remains the same.
- The interest rate is almost the same as that of a fixed deposit.
- No tax would be deducted on the amount of interest received if it does not exceed INR 10,000.
- A loan can be availed against a recurring deposit maximum of up to 95% of the amount.
- Also, the interest earned on recurring deposits gets added to the taxable income.
- Mutual Funds
- Diversify your funds across different stocks.
- One can invest in mutual funds either through the service provider’s application or website.
- The investment amount starts as low as INR 100.
- There is no lock-in period, which means the funds can be withdrawn at any time before maturity.
- However, in the case of equity-linked saving schemes, the lock-in period is 3 years.
- They attract high risk.
- They are not entitled to a tax deduction. However, if the funds are invested in ELSS, it provides a tax deduction maximum of up to INR 1,50,000.
- Capital gains are taxable, i.e. short-term capital gains will be taxed at @15%, & long-term capital gains will be taxed at @10% in case the gains are over INR 1 lakh.
Conclusion
Different investment options provide different benefits, but all of them lead to wealth creation. One should analyse how different investment options available help you achieve future financial objectives. Also, the investment decision should be in proper alignment with the investment horizon, risk appetite, and financial objectives. Hence, a wise investment, staying informed, and a holistic approach lead to a secure financial future.
