What is the fastest way to earn money for a person who earns 5 figures a month? In most financial cultures, it is more about saving than earning. According to the salaried person’s beliefs, the more you earn, the more you will be able to save. Contrary to this belief system, we say that the more you invest, the more you save.
When it comes to earning money, your parents/grandparents paint the financial picture of your life; how you should save your salary for future needs, for children’s education, marriages, and so on.
Their share of experience does play a keynote in your spending behavior as well – including the investment plans. Investment has the potential for saving prospects. It provides you a strong financial backbone in the different phases of booming, depression, or even inflation.
However, not every investment is worth the effort, you need to make adequate choices that don’t rob you of your income.
Since investments are risky, substantial returns can become questionable. A salaried person cannot afford to take that risk, so what could be the possible way to manage the investments and expenses in your stipend income?
Worry not, keeping the average salaried person in mind, this article will help you to choose one or maybe more than one option that will determine the best investment option for you.
List of Best Investment Options for Salaried Persons in India
Here is a list of top investment options for salaried persons in India.
1. Fixed Deposit Investments
2. Recurring Deposit Investments
3. Public Provident Fund (PPF)
4. Mutual Funds
5. ULIPS
6. Traditional Plans
7. National Pension Scheme
8. Systematic Investment Plan
9. Gold Investment
1. Fixed Deposit Investments
A levied way of investing your money foremost includes the fixed deposit. Usually, it is considered to be part of your future retirement plan.
You can deposit money in banks for a fixed maturity period (15 days to 5 years). Another benefit is earning a higher rate of interest than a savings account. As the account reaches its maturity, the investor earns returns equal to the principal amount (invested amount). It also includes the interest earned over the duration the fixed deposit account reaches its maturity.
If you are looking for a short-term investment (5 years or > 5 years), a fixed deposit investment is a secure form of investment. Now, most banks provide better interest rates on these accounts, being an investor you can park your money for a minimum duration of 7 days or as long as 10 years.
2. Recurring Deposit Investments
If you want to plan for an investment option by which you can save a specific amount at a higher interest rate, then you can opt for a recurring deposit. Every month, a specific (fixed) amount will be deducted from your account from your savings or current account. By the end of the maturity period, the invested amount is paid back with the accrued interest.
For the public sector, the investor has the convenience to open the account with as minimum as a 100INR. The deposit in the private sector begins with INR 500- INR 1000. The interest rates will vary in every bank however the standard rate is between 7-9.25% per annum. If you are a senior citizen, you get an extra 0.5% of the interest rate.
3. Public Provident Fund (PPF)
One of the safest lines of investment is the Public Provident Fund among all other investments. This fund induction comes with a sovereign guarantee that increases the reliability factor. One of the included benefits is that PPF has the status of tax-free interest. The maturity of the fund is more than 5 years.
The Finance Ministry reviews the interest of PPF every quarter. This ensures that the small saving instruments and other components are taxable as per the depositor’s tax slab.
Despite the guarantee of a risk-free investment, one heavy drawback lurks in the background due to a lack of liquidity. The depositor cannot withdraw the money before the fund has reached its maturity of 15 years. Even if the depositor wants to make a partial withdrawal, take a loan against the PPF, or close the PPF prematurely, it is only allowed in a few pre-laid cases.
4. Mutual Funds
Another safe zone investment for a salaried person is the Mutual Fund. With its help, a depositor is introduced to the capital market and learns to make a smart investment as well. Even certain translators indicate this mode of investment because it is safe and easy.
So keeping the risk factor, investment goals, and expected returns in mind, a salaried person can invest in two ways; either in debt mutual funds or equity mutual funds. If you are a risk-taker and want to have a higher interest rate, then you can invest in equity mutual funds. But if you are interested in making a less risky investment with a moderate return, then it’s better to invest in a debt mutual fund.
5. ULIPS
Some investors do not hesitate to a heavy risks when it comes to investment. Unit Link Insurance Plan provides a dual benefit – insurance and investment. It is an ideal investment for high-risk investors. Some part of it is utilized to offer insurance to the policyholder, whereas the other part of the investment is invested in the form of equity and debt schemes.
An investor can buy units with allocated premiums, possibly with the ongoing NAV. It can vary from one ULIP to another, as it depends on the market conditions and the performance of the fund as well. The policyholders can make a premium choice for the fund. They can either use options for funds, debt, or equity.
Technically, it depends on the investor’s ability to take the risk and vice versa. So a salaried person needs to make a wise decision regarding this investment plan.
Note: NAV is per unit value of the scheme announced regularly.
6. Traditional Plans
Funds are based on debt, thus traditional plans include a life insurance policy covered with investments. The main advantage the investor can enjoy is the longest tenure with annual premiums (<15 years). However, there is a morality charge (a part of the premium that covers your life insurance) while the rest is debt.
Some of the most common types of traditional plans include:
1. Term plans
Insurance that provides risk cover over the exchange of the year paid premiums. It is accountable in case of death as well. The nominee is handed over the amount. You can take off one’s family with the insured amount.
2. Whole life plans
These insurance plans are workable as long as the insured person is alive regardless of the premium payment term. If the insured person survives the policy term, the maturity proceeds will be paid, and the sum assured is retained too. The sum assured is payable in the case of the death of the policyholder to the nominee.
3. Endowment plans
These planes continue for 15 – 30 years. In case the insured person dies, the insurer (the one claiming the amount) needs to pay the sum assured with a bonus. In the opposite case, the policyholder will be eligible to receive the guaranteed maturity benefits (along with a bonus).
7. National Pension Scheme
NPS, a fixed pension system implemented by the government of India, allows the investor to contribute their funds (debt and equity). They are free to choose the percentage amount that will go towards the debt and equity fund.
In this investment scheme, if the investor is unable to choose their age as per requirement, then investment allocation depends on the general age criteria. Until the investor reaches the age of 35 years he/she will be exposed to only 50% of the equity and debt fund. After 35, the exposure is reduced to 10%.
The investor also has the benefit of a minimum investment starting from 500/- only. If an investor withdraws from the scheme before reaching the age of 60 years then 40% of accumulated savings are used to buy a life annuity.
8. Systematic Investment Plan(SIP)
SIP is an equity-oriented product best pictured for a salaried person. It is important to consider the equity funds systemically (due to high-risk factors). A fixed amount of money is to be put into the investment plan. To level the risk factor, one also needs to diversify its investments. This also increases the chances of high return expectations.
For a salaried person, it is highly suggested to invest for a long-term duration. This will guarantee them to earn good returns for a longer time duration. Remember to do thorough research on the various categories. The investor must take these categories into account before making a final decision. They need to invest according to the risk factor.
9. Gold Investment
If you are looking for a guaranteed long-term investment option, then try investing in gold. Used as an inflation hedge, gold investment is common. It can be done by buying physical gold, a gold deposit scheme, a gold ETF, or even a gold bar.
Each market has its ETF (exchange-traded fund). The most highly liquefied form of gold investment includes gold mutual funds and ETFs. These allow the investors to hold gold even in the paperless form. Such gold can be sold on the stock exchange.
Conclusion
Before you invest in any of the above-mentioned investment plans, conduct your research. It’s important to have a clear understanding of your ability to take risks. So make a wise decision eligible enough for you.
