The Covid 19 lockdown was a learning experience for each one of us. And one of the valuable lessons that must have struck many was the need to save and invest for a rainy day. A lot of individuals were faced with a growing financial concern due to the Corona lockdown. It turned out to be a period for individuals to relook and realign their financial goals to sail out of this global crisis.
Depending on one’s goals, tenure and risk appetite, we can list out the best investment options available to the Indian investor. As we are aware, the risk and return tangent would vary from individual to individual. Similarly, the long and short term needs will vary on the basis of age, responsibilities and lifestyle. Keeping all these variables in view, let us evaluate the investment options in no particular order, and you as an investor can fill in your trolley. As we also need to keep in mind that a diversified portfolio is another strategy that one must adopt.
Best Investment Options in India for 2021
Following are some of the best investment options in india
1. Fixed Deposits
For the majority, the most reliable and traditional investment option has been the Fixed Deposits. One can invest in both Banking as well as non-banking financing companies. The rates of interest vary amongst them depending on the tenure for which the deposit has been created.
It is one of the least risky, flexible investments with assured returns. However, there have been a few exceptions where depositors have had to bear the brunt, as in the case of the PMC and Yes Bank fiasco.
The current average interest rate for FDs, depending on the bank and tenure, is around 6 per cent per annum across most tenure.
Under the DICGC Rule (Deposit insurance and credit guarantee corporation), each depositor in a bank is insured up to a maximum of Rs 5 lakh for all bank deposits, such as saving, fixed, current, recurring deposits.
2. Mutual Funds
For those who wish to reap the benefits of the stock market but are hesitant to trade themselves, Mutual Funds are the solution. One can obtain detailed information on the performance of various schemes, including the latest NAVs and fund comparisons before investing. As a beginner, investing in SIPs would be a good option. For the risk-averse and the steady income investors, the option of debt funds would be a better bet.
However, equity schemes are the most popular amongst the mutual fund schemes. Though categorised as high risk, these schemes also have a high return potential in the long run. They are ideal for investors in their prime earning stage, looking to build a portfolio that gives them superior returns over the long term. Typically an equity fund or diversified equity fund, as it is commonly called, invests over a range of sectors to distribute the risk.
The investment in mutual funds can be a lump sum or SIP for an amount as low as Rs. 500.
3. Public Provident Fund
This is kind of a secured tax saving scheme initiated by the GOI. The PPF can be opened at a Bank or Post Office. Being a Government-backed scheme, the principal and interest amounts in your PPF account are guaranteed and safe. Investment in a PPF account can save a lot of tax because investment in PPF can be claimed as a deduction under section 80C of the income tax act. Contributions to the account of up to Rs 1.5 lakh per annum and the approx annual returns are 7.1%.
Among the plethora of Investment options, Gold is a favourite amongst the masses due to its high liquidity and inflation-beating capacity. Moreover, Indians have a penchant for gold jewellery and is a means to tide over financial exigencies. Apart from jewellery, one has the option of picking up gold coins or bars that are hallmarked as per BIS standards.
The ideal way to Invest in gold would be to opt for a gold-backed ETF, Gold Mutual fund or Gold Sovereign Bonds of the Government of India. Under Gold Sovereign Bonds, the gold is owned in a ‘certificate’ format. The value of the bonds is assessed in multiples of the gold gram. The initial minimum investment is 1 gram of gold. Investors will get regular income in the form of interest 2.5% per annum on the amount invested apart from the value appreciation in the price of the bond, and the Lock-in period is 8 years. Further, the capital gains on the sale of Gold Sovereign Bond held till maturity is also exempt from income tax.
Directly dealing in Equity trading is an excellent long term investment plan for most investors. Today the investor has the convenience of trading from his mobile. All it takes is to open a Demat and trading account with any of the brokers. Equity though risky, provides you with higher returns in comparison to other forms of investment. One must be well versed with the share market to invest in equity. Apart from the capital gains that one earns on trading, there is the dividend income that the investor can earn. One can also invest in IPOs that are launched in the market.
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6. Real Estate
Real estate investment generates assured returns to the investor in the form of rent and capital appreciation. This dual benefit makes it one of the sought after investments by many. The only drawback of this is that it is a highly capital intensive investment option. Depending on the location and the demand, the rents or the property prices keep varying. Moreover, this sector always witnesses an appreciation in value. This is a good long term investment, and approx a return per year is around 11% to 12%, but one should take sufficient care and make a thorough study of the property before investing. Proper documentation and legal title deeds for the property is essential.
Unit Linked Insurance Plan (ULIP) is a perfect blend of insurance along with investment. The instrument provides wealth creation along with life cover from the insurance company, where a portion of your investment is directed towards life insurance, and the rest is put into a fund that is based on equity or debt or both in line with your long-term goals. The premium paid for ULIPs is eligible for deduction under section 80C. Additionally, the returns on maturity are exempt under section 10(10D).
The dual benefit of insurance and return makes it a sought after investment option in India. Though the mandatory lock-in period of 5 years is a deterrent.
There are more investment options in India that one can opt for depending on your risk appetite. However, it is always beneficial that your investment strategy involves diversification as that would provide you with liquidity and flexibility. In case you are still in doubt on your choice of investments, it is always beneficial to get a personal financial advisor on board.