Which Investment Option Should You Pick?
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The primary intention behind investing one's money is to see it grow. Wealth augmented over months and years can accumulate into a handsome sum of money for the future. However, it is not enough to merely set a sum aside from the monthly income in lieu of savings. It is equally important to invest one's money in the right financial instrument.
Best Investment Plans For You
We present 7 good investment options:
1. Savings bank account
This is often the first financial product people are exposed to. The first bank account one opens is normally the savings bank account. It offers a rate of interest of up to 5% and most banks insist on a minimum balance per month in the account.
2. Fixed Deposits (FDs)
These are investment plans by which a person may deposit a sum of money in the bank for a minimum of 30 days and maximum of five years. The bank pays interest on the money (about 7.5% to 8%, while up to 10% for senior citizens) at the time of maturity of the FD. It is recommended to keep the FD live for at least 1 year to earn an appreciable amount of interest on it.
3. Money market funds
These are open ended liquid mutual funds that are short term in nature. They are invested for a very short period of time. Their primary purpose is to earn income on the capital to grow the investor's wealth. Several banks now allow customers to issue cheques from their money market fund accounts. The Birla Sun Life Cash Plus is an excellent money market fund to try.
4. Public Provident Fund (PPF)
This is one of the most popular investment options in India. It offers a high 11% post tax return, and is extremely low risk in nature. Also, it is one of the most affordable investments: you can deposit a minimum of Rs 500 per year to keep the fund active, and maximum of Rs 1,00,000 per year. However, you can withdraw money from it not before the seventh year of the fund begins.
5. Post Office Savings Schemes (POSS)
These are normally more preferred over FDs, and they have a component of a monthly income plan. This is a useful feature for retired or unemployed individuals. It is also preferred because no TDS (Tax Deducted at Source) is cut on it. Under POSS, customers can opt for various schemes such as NSC (National Savings Certificate), Recurring Deposit (RD) and Kisan Vikas Patra, among others.
6. Life Insurance
These offer a maturity and death benefit, and 8 to 9.5% returns post-tax. Besides, they help protect one against future financial burdens. They can be purchased to coincide with important life goals and future expenses such as children's education, retirement and hospitalisation corpus.
7. Mutual Funds
This is one of the most affordable and best investment options in India today. They offer investors the chance to make an income on a diversified fund portfolio with a limited investment. Also, those who do not wish to invest large sums of money for the fund can take the SIP (Systematic Investment Plan) route. Though there is low to moderate risk with mutual funds, an experienced fund manager handling the portfolio manages it expertly to minimise risk.
Conclusion
Investing can intimidate a lot of people because there are many options, and it can be hard to figure out which investments are right for your portfolio. This guide walks you through some of the most common types of investments,
and explains why you may want to consider including each in your portfolio.
Also read- What Is a National Savings Certificate, and How Do I Get One?
