What Are Some Of The Best Investment Options?
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There are investment options which are suitable for Long-term financial goals, some are for short-term objectives and some facilitate tax savings. However, it is important to identify which investment product you are going to invest in and how you’re going to move ahead with it. Investments could be financial and non-financial. Financial investments include money invested in Bank deposits, mutual funds, Fixed Deposits, etc., while non-financial investments include money invested in gold, real estate, etc.
Before finalizing any investment option, it is advised that you go through all the available financial vehicles carefully and then make the right choice. Consider the risk involved and the return offered by the investment plan that you are planning to go for. Note that returns and risks are directly proportional to each other; higher the return offered, the higher the risk involved.
Some Of The Best Investment Options
Let us have an insight of these investment options and their suitability-
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Mutual Funds
Investors often end up in a dilemma when it comes to Mutual Funds. Of course, they are risky because they are market linked but higher returns cannot be overlooked. If you want to invest in markets but do not have required experience and expertise, you can opt to invest in Mutual Funds and get higher returns than many other investment options. These are market-related investments that invest money in various financial instruments such as debt, equity, stocks, money market funds, etc., wherein the returns are generated as per the market performance of the fund.
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Public Provident Fund
Public Provident Fund (PPF) is a government backed investment plan which will help its subscribers to enjoy risk-free investments for the long-term. The interest rate on a PPF account is revised and paid by the Government every quarter. The current interest rate is 7.9%. There is a maturity period of 15 years under PPF. But, the money in your PPF account can only be partially withdrawn after a time period of 6 years. However, one can take a loan on the balance of PPF account.
Since this scheme is regulated by the Government, the principal amount as well as interest earned is completely secure. Also, PPF comes under the EEE category (Exempt-Exempt-Exempt) in which the principal amount, interest earned and maturity amount are exempted from tax. Contribution to PPF account (up to Rs 1.5 lakh per annum) is eligible for deduction under section 80C of Income Tax Act.
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Bank Fixed Deposits
Following the traditional investment ways, Fixed Deposits are one of the most popular options available. These deposits are made with banks, with the guarantee of offering fixed returns over a fixed period of time. As per the bank guidelines, and the tenure of FD selected by the investor which varies from 7 days to 10 years. However, individuals can also choose from available tax-saver fixed deposits available for a fixed period of 5 to 10 years.
While investing in Fixed deposits, the investor has options of either making a cumulative deposit or choosing a non-cumulative deposit. In the cumulative option, the interest gets reinvested into the principal amount and is payable at the time of maturity, whereas, in the non-cumulative option, the interest is paid to the investor as per the underwriting.
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National Pension System
National Pension Scheme (NPS) is a Government-backed scheme that allows its investors to invest in various market-linked instruments such as equities and debt; the final pension amount depends on returns from these investments. There is 75% to 50% equity exposure for the National Pension Scheme which stabilizes the risk-return proportion for the investors.
NPS, regulated by the Pension Fund Regulatory and Development Authority of India (PFRDA), is open to all individuals between the ages of 18 and 60; the maximum age can, however, be extended to 70. The individuals can withdraw partial amounts (up to 25%) from the NPS after 3 years of opening the account.
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Recurring Deposits
Recurring Deposits (RD) are term deposits offered by Indian Banks wherein the subscribers are allowed to make regular deposits and earn good returns. This instrument offers flexibility of investment by allowing the investors to choose the tenure on their own. Usually the tenure of a RD ranges from 1 year to 10 years. Individuals can open an RD account with their respective banks and proceed with deposits of fixed amounts every month. The interest earned is paid at the time of maturity along with the invested amount.
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Senior Citizens Saving Scheme (SCSS)
Here is a 5 year saving scheme available for Indian Senior Citizens. Under this scheme, individuals above 60 years of age can make deposits for 5 years from the date of opening the account and earn good interest on the amount. The current rate of interest for this scheme is 8.6%. The tenure of this investment instrument can be extended by 3 years.
SCSS is offering the highest interest rate as compared to other saving schemes available in India. You can get your accounts opened through Public/Private sector banks or Indian Post Offices. Moreover, it is also counted in the list of best tax-saving schemes as the investment done under this scheme is tax-deductible under Section 80C, of the Income Tax Act, 1961 up to Rs. 1.5 lakh per annum.
Conclusion
In order to make smart investments, you must have in-depth knowledge of the different investment options available in the market. For most of the investors, the choice of a suitable scheme depends upon financial objective, time period, risk level, etc. Also, do not get confused between savings and investments. These are two broad terms: the former refers to a passive way of saving your money whereas the latter also focuses on creating & growing wealth.
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