It is very common to see people seeking investment options only when the need arises, which is at the end of the financial year for tax saving purposes. At the eleventh hour, many salaried people are anxious about investments and “receipts management”.
New joinees might find it particularly daunting. Perhaps, this is because they find it too complicated or too boring to give it time.
But there are a number of good investment options available for the retail investors to put their money in, and reap good returns. The only thing that one should keep in mind is the trade-off between risk and return.
Let us have a look at some of the investment options. First in the list is mutual fund. It is a basket of more than one security (equity or debt). Depending on the desired returns and risk appetite, investors can choose a suitable mutual fund.
A diverse portfolio can help one mitigate risks and ensure good returns. But, these investments are “subject to market risks”. In the current scenario, there are a number of schemes being launched under the umbrella of Government’s “Make in India” plan, which appears to be a top priority plan of the Government. If this is true, mutual fund schemes associated with it will give extraordinary returns in the coming four to five years.
Equity Linked Savings Scheme (ELSS) is a tax saving mutual fund scheme, which is also a top option available for the retail investors. ELSS not only gives the tax benefit, but also provides very good returns if one considers past performance as a measure of the same.
One of the tax saver mutual fund schemes has given more than 100 times returns in last the 18 years. Mutual funds also have the Systematic Investment Plan (SIP) option where the investors can invest small amounts at regular intervals instead of paying the entire sum at once.
A benefit of SIP is to gain an average price of the investment when market linked price are not certain. Mutual funds such as ELSS and SIP are good options, particularly for salaried employees, who are ready to take a little risk and “save-tax” at the same time. ELSS is the thing to look for.
Another popular and conventional option is Public Provident Fund (PPF). During the FY2015-16, investors can reap interest at around 8.7% on their PPF account, which is almost the same as the interest offered on fixed deposits. PPF is one of the safest investment options.
However, fixed deposits offer lesser tenure than the 15 years lock in-period for PPF. Further, if one is risk averse and satisfied with relatively low returns on investments, life insurance is also a good option. It not only gives a return, but it also assures the family in case of any unfortunate events.
To add to the options, if one wants to set aside money towards retirement plans, National Pension Scheme (NPS), a long term investment plan, is a good investment. And in case one plans to buy their dream house, big banks like SBI, HDFC, and others have cut down the interest rates on home loans. Hence, home loan can also be an attractive option. Home loan has its own tax benefits, and one can get deduction of interest amount under section 24 of the Income Tax Act.
However, if one is disinterested in the conventional plans and is ready to take big risk in consideration of big returns, this may be the time to invest in the stock market, especially in the infrastructure, energy, banking, and capital goods sectors.
The writer is director, Aristotle Consultancy Pvt Ltd
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