Investment

3 Best Long Term Investment Options in India 2019

long term investment options

Do you know what is financial security? And have you ever thought if you are truly financially secured? Well if your strategy is to save and invest money for the long-term, then my friend you are going to earn financial security and stability.

Get “Rich Quick” policy does not apply in Long term investment. Patience, consistency and commitment is what you require to be a successful long-term investor. As you cannot clone yourself to keep continuing your office/business works, there will be a time you will not dare to solely depend on your regular income and seek another revenue option such as long term investment options which will provide major funds in long run.

It’s called ‘Long term’ for a reason, as you should invest your cash keeping in mind that you will not be able to utilize these funds even during those short critical financial crunches. However, you should always keep a tab on savings from time-to-time so that you an idea of your investments.

Perks in investing for Long term can’t be counted on finger tips. Most popular advantage of Long term investment is compound interest calculation and they are highly tax efficient. Investments which are held for more than three years or sometimes 5 years are known as Long term investment.

Talking about the rewards on maturity of long term investment options, it draws high amount of funds which is required for the major milestone of your life, be it your dream wedding, son’s admission in a reputed college or buying your dream home.

Best Long Term Investment Options in India

There are numerous long term investment options available in India. You must be very prudent to select the investments as it should be on the basis of your long run financial goals and the risk factors involved to the investment plans in India.

Investing in Real Estate

Investing in real estate is more than just buying yourself a dream house. Owners of land and houses usually end up in ruling class while the landless people led life of hard labor and turmoil.

Investing in real estate has been considered the best asset since the conventional days and even after the market correction in 2016 Demonetization in India. Considering that it can fetch you a consistent passive income and great long term investment when the land value rises over the period.

Of course, this does not mean that investing in real estate will fetch you gains. Although real estate investment can yield you high profits but at the same time it can be a lot more complicated than investing in stock or bonds.

Hers are few factors, that should be kept in mind before you start investing in real estate.

Start Small

Getting a recent promotion at work or a sudden hike in your business, can make you get excited and feel the desire to buy yourself a piece of property. How smartly you plan your investment is very crucial, beginning your real estate investment by applying all your budget may push you off the road.

Let’s say you are planning to invest in a duplex or a multistory apartment and renting it out for the means of paying your monthly loan installment. Importantly, you should also consider to park some reserve funds to mitigate the risk for the time when you have no renters at all for the property.

Advisable plan is to start small and invest only 70% of your saving into the real estate and park the remaining funds to mitigate the unforeseen scenarios.

Pay with Cash

Everyone loan borrowers you meet, you hear how bad it is to carry debt. Picking up a mortgage loan isn’t the brightest idea; many financial experts advise against borrowing money to invest in real estates.

Buying real estate with cash will allow you to sell the property at wish. On the other hand, if you avail mortgage loan your property will be leveraged and you will not have control to sell it out.

Cash buyer mostly crack the property at a lower cost and receive a cash discount. As real estate sellers prefer clients who are willing to pay cash because they will not have to worry about the client backing out of the agreement as the financing Bank or NBFC decline the loan request.

Research the Property Carefully

You should ensure that the seller has a clear title deed and NOCs from the concerned authorities. Commencement certificate for work, environment clearance and approved building plans should be thoroughly checked before zeroing on the property.

Public Provident Fund

From several decades Public provident funds continues to be a favorite long term investment option in India. PPF scheme suits to investors who desire no volatility and stable return.

Public provident fund is highest chosen long term investment options especially amongst the salaried people. It is directly backed by the government of India, which provides high interest rate (In year 2019 PPF interest rate is 8%) and tax benefits.

PPF is a 15-year investment scheme, and it can be extended indeterminately in slab of 5 years. It can be easily opened from a Bank branch or a Post office. Few major banks in India such as HDFC and AXIS provides facility to open PPF account online.

Features of Public Provident Funds

You should know that Govt of India launched Public provident funds with sole reason of mobilizing small saving of Indian residents and providing reasonable returns with tax benefits.

Minimum and Maximum Cap

Since the purpose of PPF is to mobilize the small savings, it has minimum subscription of as low as ₹500 and maximum cap of public provident fund cannot be more than ₹150000 per year.

While the minimum amount which is mandatory to deposit each year is ₹500, incase you have missed to pay the minimum amount the penalty charge would be ₹50 per year.

If you contribute more than ₹150000 in a year, the excess amount will be treated as irregular and it will not yield any interest amount. Also, you will not be able to exempt income tax on the excess contribution.

Time Horizon

A Public provident fund account usually matures at the tenor of 15 years, post which the principal investment and the yield interest amount shall be handed over to the account holder.

However, you will also have an option to extend the maturity date which is predefined to multiple set of 5 years.

Rate of Interest

Public provident fund is a risk-free investment option, as PPF is debt-oriented asset. Which means that funds are collected by Government of India and it is not redirected to equity market.

Depending on the yield of government securities, rate of interest on public provident fund is decided by government on quarterly basis. (In year 2019 PPF interest rate is 8%)

Income Tax benefit

Majorly salaried person opts for PPF account as it offers a complete tax benefit package. Public provident funds fall under EEE(Exempt-Exempt-Exempt) category. In other words, the amount invested in PPF scheme are deductible under Income tax section 80C.

Gold Investment

India being the largest consumer of Gold, with overall consumption more than 700 tons which is one third of worlds gold consumption. Easy to buy and easy to liquefy, Gold can be relied upon in your financial tough time.

Gold ornaments is highly popular among the Indian married woman. In India Gold is considered as a symbol of high status and mean to show off prosperity. Ornaments made of gold is not only used as a wearable, nevertheless it also works as an asset to phase out financial emergencies in Indian households.

Gold has many selling points, such as High liquidity and inflation beating capacity. Even though we have seen many many falls in Gold prices however, it always comes back stronger than ever.

In year 2007 when the equity market was under downfall, Gold investments has shown consistency and performed well. This clearly indicated that Gold is negatively correlated with the equity investments.

Many financial advisers’ emphasis on including Gold investment in your portfolio, as it reduces the volatility and Gold has always proven to be in line with the inflation rate.

How to Invest in Gold?

So, let us discuss on the diverse ways of purchasing and investing in Gold.

Investing in Gold ETFs

Gold Exchange traded funds are non physical method of investing in Gold. However, this fund is fully backed by the Gold and Gold ETF prices moves according to the gold price.

Apart of possessing a yellow metal, Investing is Gold ETFs is as same as Investing directly in physical gold bars or ornaments.

Gold ETFs is managed by professional fund managers and you can buy and sell your Gold EFTs directly from your DEMAT account.

Investing in e-Gold

In the year 2010, India’s National spot exchange introduced E- Gold. As we know that throughout the world, commodity market is dominated by precious metals like Gold and Silver.

E-gold is an electronic means to own a gold holding. DEMAT provides you a certificate for the gold you bought and it can be instantly sold or exchanged with physical gold.

The best perk in E-Gold is that you can invest in gold with very lover denominations as compared to the physical gold.

Few financial advices to invest in E-gold as it provides higher returns then Gold ETFs in the longer term since the E-gold does not charge management fee unlike Gold ETFs.

Gold Mutual Funds

Gold mutual funds are no where related to the Gold prices, as it provides you exposure to shares of companies or group of organization who are directly involved in Gold mining and Gold production.

Most of the financial advisers suggest to mix your equity portfolio with Gold mutual funds. You would also like to know that last year Gold funds have given 3.95 % returns and even in 3 months period it has marked returns up to 3.07%.

Gold Mutual funds protects your portfolio with volatility due to the economic and financial crisis. Gold asset class also provides the portfolios the ability to withstand the inflation.

|| Hopefully our content has provided insights and good ideas to your future investment plan. Do let us know your thoughts in comments section.||

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About Khalid Ahmad

Khalid Ahmad is an MBA and finance enthusiast with 10 years as a financial consultant and a passionate blogger, running the personal finance blog Easytechbank.com. He shares knowledge and simplifies things in the field of finance and investment for the common people.
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