The best investment advice in the world is that “one should start investing as soon as they start earning”. Starting from your first paycheck, a considerable portion of your salary should be invested, in order to generate a substantial corpus of wealth in the long run.
Salaried individuals in India have a plethora of investment options to choose from, including various mutual fund schemes, Public Provident Fund, National Pension System etc. Picking up the perfect investment instrument as per your financial goals and risk appetite can be a daunting task.
To make this task a little easier, we’ve curated a list of some of the best investment options available in India:
1. Mutual Funds
Where a balance between both growth and savings is concerned, the best investment option for salaried individuals is Mutual Funds. A mutual fund is an investment vehicle which collects money from numerous investors and invests the collected corpus in equity, debt and money market instruments.
Mutual Funds are managed by a professional fund managers along with a team of experts which help investors to benefit from the professional management of funds. It also allows an investor access to a diversified portfolio of stocks and/or bonds for an amount as low as Rs. 500.
An investment in a mutual fund scheme generally yields a return of 8% – 12% subject to market conditions and involved risks.
You can invest in a mutual fund scheme in 2 ways – either in a lump sum or by way of a Systematic Investment Plan (SIP). It is always a good and financially sound idea for salaried people to invest in a mutual fund scheme via a SIP as it allows investment of a fixed sum in a mutual fund scheme at fixed intervals – either daily, monthly, quarterly or semi-annually.
2. Public Provident Fund
Started by the Government of India to boost retail investment, Public Provident Fund (PPF) is a savings cum investment instrument popular for long term savings and tax benefits. The rate of interest offered on the principal amount invested in PPF changes every quarter, as per the government guidelines. The interest earned by the investor is paid by the government of India.
Mostly used as a savings tool to build the retirement corpus, the maturity period of PPF Account is 15 years. This tenure can also be extended further as per investor’s wish. One can also avail tax benefits through investment in PPF Account. Investment upto ₹1.5 lakh in a financial year is exempted from tax under Section 80(C) of the Income Tax Act. the interest earned is also tax-free. This is the USP of PPF investment which has attracted numerous investors throughout its lifetime.
3. National Pension System (NPS)
NPS is a retirement oriented savings vehicle, where an indian citizen above the age of 18 years can subscribe to the scheme. NPS invests the contributions of its investors in various financial instruments such as equities and debt securities. The final maturity amount is dependant on the performance of these aforementioned securities.
However, the invested capital remains locked in till the investor reaches the age of 60 years. Investment in NPS is eligible for deduction upto ₹1.5 lakh from taxable income under Section 80(C) of the IT Act, and an additional deduction upto ₹50,000 under Section 80 (CCD) (1B).
Salaried individuals with moderate risk appetite can consider investing in NPS, as the returns are relatively more volatile compared to that from PPF. Investors have this reservation of losing their invested capital because of market fluctuations and wrong stock selection by the fund manager. Although, PFRDA active involvement ensures that the investors’ capital is safe. Also, in the long run, markets tends to even out the volatility, leading to significant rise in capital gains from equity investment.
4. Bank Fixed Deposits (FD)
Bank fixed deposits are one of the most popular investment options available in India. A fixed deposit account essentially offers fixed interest rate on your principal investment. This fixed-income security is offered by almost every scheduled bank in India. Numerous investors in India have availed the benefits of Bank FD.
An investor makes a lump-sum principal investment that earns interest during the deposit period. At maturity, the investor gets the principal and the accrued interest.
Different banks provide fixed deposit accounts with different maturities. Investors can opt for FD accounts with maturity period ranging from 7 days to 10 years.