It is always a wise action to save and invest money in some form or another. There are various investment options in the financial market for different types of financial requirements. Among all the choices in the investment market, the long term options are the best. A long term investment option is essentially a financial plan that increases your money for over a period of 6 years or more.
Best Investment Options in India
Any investment plans which can be made for a time duration of 1 to 5 years are considered to be short term investment options. There are many advantages in opting for short term investment options, compared to the long term ones. If you opt for short term investment, you will be facing lower risks and the money is not locked up by the bank or the financial institution. The Return on Investment on such plans is also considerably high. Let us look at some of the best short term investment options in India.
This is one of the safest short term investment option available in the country. In this scheme you can get a fixed interest ranging from 4% to 11% per annum. Although you cannot withdraw the money before the period of maturity, it is possible to opt for fixed deposits ranging from 10 days to 10 years hence the period of the deposit is up to you to choose. Interest is paid 3 months after the deposit commences and the interest is exempt from tax under the section 80C of the Income Tax Act 1961. If you invest money prematurely, you may have to pay a penalty as defined by the bank.
This is also a reliable and safe method of short term investment, which is mainly used for liquidity. It can be opened with any bank or financial institution and the money can be kept in the account till you so wish. Banks pay around 4% to 7% interest rate, which depends on the amount of money and the duration for which it is kept in the account.
In India, investment in gold is considered to be the most prudent option when it comes to short term investment. The investment can come in handy in times of uncertainty and you also get protection and stability when there is crises in the banking sector, inflation or social unrest. Another benefit of investing in gold is that the trends in the financial market do not affect the value of gold. There has been a constant increase in the demand for gold which has resulted in a 23.5% return on investment in the past few years.
Liquid funds have high liquidity value and can be invested in certificates of deposits for short term securities offered by the government. They are secure and allow the investor to enter or opt out of the scheme at any time that they wish. This is a short term investment plan which has low risk and low return investment, but it offers current fixed income. If you wish to avoid the fluctuation of interest risks you can opt for maturity of the fund to be 90 days. You can choose from certificates of deposit issued by commercial banks, corporate debentures or government treasury bills if you wish to invest in liquid funds.
A bond is a loan offered to a corporate or government entity. There is no risk associated with bonds which also offer high liquidity. The principle amount has a fixed rate or interest per annum and is returned by the borrowing entity after completion of the maturity period. People who wish to diversify their investment profile can easily opt for bonds as a means of short term investment.
National Savings Certificate
These are essentially Savings bonds provided by the Indian Government which also provide tax benefit under section 80C of Income tax act, 1961. The National savings certificates are part of the Indian Postal service. You can purchase these certificates from any post office in India. They are issued for five and ten year maturity and you can pledge them to banks as collateral for loans.
Public Provident Fund PPF
The Public Provident Fund is a well-known tong term investment option which offers savings and tax returns both. It was introduced by the ministry of finance in the year 1968. With the help of this savings option it became possible to mobilise small savings by offering an investment which provided reasonable returns. You need to make a minimum yearly deposit of Rs. 500 in order to open and maintain a PPF account. The maximum limit for this plan is Rs. 1.5 lakh. However, there is a lock in period to the PPF account and you can withdraw the money in whole only after the maturity period is over.
Also Read: Best Investment Options in 2019
National Pension Scheme
Key Features of NPS
- Minimum amount of investment is Rs. 60,000 and there is no upper limit
- The returns depend on the percentage of investment in equity and debt
- Tax benefit is up to Rs. 50,000 under the section 80CCD (IB) along with the Rs. 1.5 lakh under section 80C
Benefits of NPS for Investors
- The returns are high compared to other traditional options because some part of the money is invested in equity
- You can select the investment option, fund manager and annuity plans
- You get multiple tax benefits
- The NPS account number remains same even if there is change in employment
Diversified Mutual Fund
This option is best suited for people who are new to the stock market and don’t want to take risks with their money. Mutual funds are managed by professionals.
The good mutual funds usually provide very good returns to the investor. Apart from this the mutual funds also offer liquidity, diversification, and convenience.
Benefits of Mutual Funds
- Professional management
- Good returns
Life insurance is comparatively new as an investment option. Earlier life investment was mainly in the form of term insurance which only provided death benefits to the dependents of the insured person. However, in the recent decades many different insurance options have been designed which provide money savings and investment options along with death benefits. Of course the most popular insurer in India is LIC, but there are many other private companies which provide well designed insurance plans and these plans provide great long term investment returns.