In his seminal book Security Analysis, Benjamin Graham, the father of modern-day investment, states that investors should distinguish between an investment and speculation. An investment protects the principal and provides an adequate return after carrying out a thorough analysis. Any deployment of money that does not meet these criteria is speculation.Read more
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When it comes to India's most significant investing possibilities, you will have a lot of questions. You should choose investment options that depend on your liquidity needs, financial goals, investment horizon, and, most importantly, the safety of the principal.
We seek to answer some of your questions and list below some of the best investment options in India that offer stable to high returns.
One of the traditional investment sources for the common man has been bank fixed deposits. They are widely accepted as a fixed income source. Fixed deposits offer contracted returns over the tenure of the investment in the form of interest. Further, fixed deposits come with cumulative and non-cumulative options of investment. The interest will be reinvested and paid at maturity in an incremental opportunity. As per bank policy or selected option by the investor interest is payable monthly, quarterly, or annually for the cumulative option.
The PPF - Public Provident Fund is considered one of the most secured long-term investment options among all the investment options available in India. As per extant laws, you can earn compound interest on the accumulated money, and the interest earned is tax-free. A PPF account can be opened in a bank or post office with a minimum investment of Rs.1,000. The acquisition is locked for a fixed tenure of 15 years. However, you may withdraw a portion of the invested money by the 6th year. At the end of the 15 years, you may extend the time frame by another five years. Over the last seven years, PPF interest rates have moved southwards from 8.80% to 7.60%, in line with the interest rate movement in the market.
One of India's risk-free tax-saving investment options for senior citizens is SCSS - Senior Citizens' Saving Scheme, as it offers them a regular income. Investment facility in SCSS is available across India through banks and post offices. The highest amount that can be invested in this scheme is Rs 15 lakh. While the initial tenure is five years, it may be extended by another three years.
Post Office MIS is a scheme regulated by the India Post Office. It is government-backed and enables the users to save every month. Any Indian citizen can easily open a Post Office MIS account starting with Rs.1500 with a maturity period of 5 years, in a single name or jointly. This scheme does not provide any tax benefit on the amount invested or on the interest income.
Debt mutual funds are managed by asset-managed companies that aggregate investment contributions from various investors and invest in fixed-income securities such as government securities, commercial paper, corporate bonds, treasury bills, and other money market tools. Investing in debt funds aims to generate capital appreciation through interest income from the underlying securities and gains from interest rate movements.
Physical Gold: Gold has also been one of the traditional investment modes of the people in our country. It is considered a haven and a valuable hedge against inflation. Physical gold has an administrative burden of storage and security, which can be resolved through Gold ETF and Sovereign Gold Bonds.
Gold ETF: A gold ETF is an exchange-traded fund (ETF), a passive investment tool based on gold prices, which invests in electronic gold bullion. Units representing physical gold are Gold ETFs, usually in dematerialized form. 1 gram of gold of very high purity is equivalent to 1 Gold ETF unit.
An alternate way to invest in physical gold is SGBs - Sovereign Gold Bonds, with a unique option of enjoying capital appreciation and earning interest twice a year. The Indian government issues these bonds. They also terminate numerous risks associated with physical gold.
Direct Equity: Direct equity investing, i.e., investing in equity shares of a company, is considered one of the best wealth creation options for a long-term period. The investing legend, Warren Buffet, has been on record stating that his favorite investing period inequity is 'forever.' Even though most the investors shy from direct equity, as it is considered a high-risk investment option, the returns offered by equity as an asset class are better than most investment options available in the market.
Asset management companies manage equity mutual funds, wherein fund managers invest in shares of companies for capital appreciation. While the risk involved is more, equity mutual funds have earned far higher returns over the long term than fixed income and gold investment options.
National Pension Scheme or NPS is a market-linked voluntary contribution retirement scheme. Any Indian national between the age of 18 and 65 years can join the NPS. Contrary to common belief, you are not allowed to withdraw the entire corpus of the NPS after retirement. At least 40% of the corpus must be set aside to receive a regular pension from a PFRDA-registered insurance firm. This annuity will provide you with consistent cash flow during your retired life. However, you may redeem up to the remaining 60% of your retirement corpus tax-free.
Real estate – be it commercial or residential – is considered one of the most popular investment options in India. It is also one of the traditional wealth creation ways in India. Due to structural changes in the industry, such as the introduction of RERA, demonetization, GST, etc., real estate has not delivered high returns for close to a decade.
Before carrying out any investment – be it long-term or short-term – it is essential to understand the different investment options available in the market. Investing is a time-tested method for income generation as well as wealth creation.
Past 10 Year annualised returns as on 01-12-2023
^Tax benefit are for Investments made up to Rs.2.5 L/ yr and are subject to change as per tax laws.
*All savings are provided by the insurer as per the IRDAI approved insurance plan.
Tax benefit is subject to changes in tax laws. Standard T&C Apply
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