Saving and investing are the two pillars of financial stability. While we all work hard to earn money, saving and investment is an art to master. While saving is done to meet unplanned and planned expenses, Investment is all about making your money earn for you, and give you the rewards through future returns.
Investment planning needs a careful analysis of the return and time frame to be done before the actual investment process. To make it an easier decision for you, here is a compilation of the Best Investment Avenues across categories that you can invest in 2018.
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1. Savings Bank Account & Flexi Deposits
Holding Period: Short Term
Risk Involved: Low
Surprised to find the savings bank account in this list? Well, funding your savings bank account is the first investment you can do. Bank accounts earn an interest of 4% and more depending on bank to bank. You can convert your savings account with a balance of above 25,000 to flexi deposit account, which is highly liquid and earns you the interest of an FD. Maintain a savings account for your short-term expenses and contingencies.
2. Bank Fixed Deposits
Holding Period: Short/Long Term
Risk Involved: Low
Bank FD’s have attracted the maximum investment, primarily because it is a safe source of investment where the rate of returns is fixed. You can opt for a Bank FD ideally for 1 year, which gives the highest rate of interest. FDs allow premature withdrawal with an interest deduction making them a liquid investment. However, you cannot break a tax saving FD that is locked in for a period of 5 years. Before investing, compare the FD charts of different banks and invest in those which offer the highest interest rate. Also, don’t forget to fill 15 G/H to avoid interest deductions at maturity.
3. Mutual Funds
Holding Period: Short/Long Term
Risk Involved: Depends on the fund bought
We all must have seen the ad “Mutual Fund Sahi hai” beaming from our TV screens. Mutual funds (MF) have grown as a lucrative investment, both for the short term (money market funds) or the long-term (tax saving or locked in mutual funds). You can invest in MF’s through SIP’s (Systematic Investment Plans) or in a lump sum as a single investment. The risk profile depends on the funds you invest in, while debt funds invite less risk, the risk is comparatively higher in equity funds. The investment amount and time period depending on your age and financial goals.
4. Post Office Savings Scheme
Holding Period: Long Term
Risk Involved: Low
Post Office savings schemes offer a safer investment option, offering monthly income plans which are apt for the retired meeting their medical and other requirements. Here are all you need to know about Post Office Savings Schemes.
| Investment Limits | Returns | Eligibility |
| Single account Rs.4.5lacs | 7.80% payable monthly per annum effective from 1.4.2016 (in multiples of 1500/-) | Minimum age: 10 (Account can be opened in the name of minor or by minor) |
| Joint account Rs.9lacs | Single account can be converted to the joint account and vice-versa |
5. Public Provident Fund
Holding Period: Long Term
Risk Involved: Low
Public Provident fund (PPF) is one of the safest and secure long-term investment avenues with the best part being it is a totally tax-free investment. PPF has a lock-in of 15 years which enables you to earn compound interest on your investments. If you want to extend your investment time frame, you can extend it for the next five years. The minimum period of investments is 6 years after which you can withdraw your investments. In case of financial emergencies, you can take a loan on the balance of your PPF account.
The current interest rate effective from 1 January 2018 on PPF is 7.6% Per Annum (compounded annually).
6. Company Fixed Deposits
Holding Period: Long Term
Risk Involved: High
Company FDs are a lucrative investment avenue in comparison to bank FD’s. These investments are placed with financial institutions and Non-Banking Finance Companies (NBFCs) for a fixed term and carry a prescribed rate of interest. Company FD’s are unsecured investments governed by the Companies Act under Section 58A. If the company defaults, the investor cannot sell the fixed deposits to recover the capital which makes company FD’s highly risky. While investing select the investment period very carefully as you are not allowed withdrawing money before the maturity date. This investment is not under any insurance benefits and is not under the control of the Reserve Bank of India, which adds to the risk exposure.
7. Gold Investment
Holding Period: Long Term
Risk Involved: Medium
Investment in Gold is one of the most sought out investment options exercised since older times. The value of gold bears an inverse relation with the value of equity. Gold becomes a lucrative investment option when the stock markets are red. You can plan your investment in gold through a Gold deposit scheme, Gold ETF (exchange-traded fund), Gold mutual funds, Gold bar etc. Gold mutual funds and ETFs allow you to hold the gold in a paperless form and sell them in stock exchanges making them a highly liquid investment.
8. Insurance Plans
Holding Period: Long Term
Risk Involved: Depends on the plan bought
Insurance plans are the preferred investment avenue in every household to save taxes. Insurance plans come in a fixed maturity time frame and urge the investor to invest a fixed premium every year. You should not see Insurance plans solely as an investment option; instead, buy it as your life cover. The most popular insurance plans are ULIPS (Unit Linked Insurance Plans) that invest in equity and give you tax benefit under Section 80C.ULIPs are the best combination of insurance and investment plans, where premium contribution goes to insurance (as mortality charges deduction) and investment(through equities) simultaneously.
9. Bonds
Holding Period: Long Term
Risk Involved: Low
Bond investment can be divided into tax saving and capital appreciation bonds. Capital appreciation bonds like GOI savings (taxable) bonds will yield you 7.75% interest inviting tax on maturity under the Income-tax Act, 1961. Infrastructural bonds issued by NTPC, NHAI, REC etc. are tax saving yielding an interest of 6% p.a. The tax saving bonds come with a lock-in period of 3years, and allow a maximum investment limit of up to Rs.50 Lakhs in a Financial Year per individual.
10. Real Estate
Holding Period: Long Term
Risk Involved: High
Real Estate is a lucrative investment avenue to invest for those who have an appetite for risk and are patient with time. Real estate involves investment in housing, commercial, hospitality infrastructure. Many buy a flat, shop or plot for investment purposes. The risk depends upon the development of the place, property prices, and accessibility. Keep your paperwork updated, and be careful with whom you deal in real estate, for this investment in this avenue is risky.
At whatever age or earning bracket you are in, Don’t wait for the right time for beginning an investment. It is important to make a start, however small the amount is. The power of compounding will grow your investments thereby allowing you the experience to learn and build a corpus in the long run.
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