An investment plan means allocation of funds towards different financial instruments in the hopes of earning better returns and creating wealth in the process. Its main objective is to grow the invested amount to achieve a higher sum at the end of your investment period.
Investing is a necessary strategy to achieve your goals. It is also the only way to secure your future and make it better. By making investments, you will be able to build a huge corpus of funds that will help you in your rainy days. Apart from that, making regular investments encourage you to set aside a sum regularly, thereby inculcating a habit of financial discipline.
Here are the best investment options available in India to help you create a robust investment plan.
- Stock Investment
This is perhaps one of the most potent investment plans. When you buy a company’s stocks, you basically invest in its growth and development directly. Stocks are offered through recognized stock exchanges for public listed companies. By actively managing your stock investments, you will be able to earn guaranteed returns over a period of time.
- Mutual Funds
No investment plan is complete without the inclusion of mutual funds. When you invest in a mutual fund, your investments are pooled in with that of institutional investors who have the same financial objective as yours. This investment amount is managed by a fund manager who will invest in securities and assets to generate maximum benefit for its investors. There are three types of funds within which a mutual fund manager will invest your money – equity, debt, and balanced funds. These funds are chosen on the basis of the investor’s risk-taking capacity. These investment instruments offer flexibility to the investor in which they can start and stop the investment as per their convenience. Anyone can consider investing in mutual funds. You neither require time, nor knowledge to dabble in mutual funds as your fund manager will take care of your portfolio. Financial experts recommend investment in only those portfolios that match your financial objectives and risk levels. You also need to understand that the returns in mutual funds are not guaranteed as they are based on market performance.
- Fixed Deposits
The best investment plan is the one that has long-term and short-term investment products across various risk profiles. Fixed deposits are considered to be a safe option that gives you interest on a lumpsum deposit of funds for a fixed period of time and earn you a predetermined rate of interest. Unlike other financial products that are subject to market risks, FDs offer complete security of your investment as well as guarantee returns. They are an ideal instrument for a risk-averse investor. While these investments are locked in for a certain period of time, the investors are allowed to take loans or overdraft facility during an emergency. You can also save tax on a fixed deposit of Rs. 1.5L for a lock-in period of 5 years.
- Recurring Deposits
You can also add a recurring deposit to your investment plan and balance the overall risk profile of your portfolio. A recurring deposit will allow the investor to save a fixed amount every month for a predefined tenure and earn a fixed rate of interest on that amount that builds a corpus for you over time. RD offers complete protection of your investment and gives you guaranteed returns.
- Public Provident Fund
This long-term investment product comes with a lock-in period of 15 years. It is also a great tax-saving option offered by the government of India. The interest rates offered on PPF are revised every quarter. The corpus that you withdraw at the end of the term is also tax free. Investors can take out partial withdrawals and loans after meeting certain conditions. You can also extend your investment for another five years after maturity.
- Employee Provident Fund
Also known as EPF, this is another option that should be considered for your investment plan. It helps you save money on taxes under provisions of 80c of the Income Tax Act. When you invest in an EPF, you invest a percentage of your monthly salary, and the same amount is invested by your employer. The amount that you receive after maturity is tax free. The EPF rates are determined by the government of India and the invested amount matures only upon retirement.
- National Pension System
This investment option stays locked-in until you have reached your retirement. However, an investor earns much better returns than PPF or EPF. This is because NPS plans invest your money in equities. The corpus at the end of maturity is not tax-free and a portion of this corpus is used to annuity benefits to the investor as a regular pension.
When you are looking to build an investment plan, do consider these options and choose the ones that suit your budget and lifestyle needs.