Money grows only with investments and never just by savings alone. The objective of investment is to get more out of the money you have and the purpose, channel, duration and amount is unique for everyone. With the ever increasing penetration of internet in our daily lives and information boom that it has brought is making more and more people active about investing after having surveyed all the options available. Now the importance is more on investing rather than saving. But this doesn’t rules out the fact that even saving is also important. Investment means spending to buy that which has a potential to increase the value of money with time like a policy, an asset, or a commodity. The ultimate motive remains to increase the worth of the current money over time.
Investment is a personal choice and depends on the individual’s choice and capability amount, duration of investment and the risk appetite. To be a successful investor and earn on the investment, one should follow certain principles, which are also called “Thumb Rules of Investment”. These thumb rules answer all questions about investment and make investing an easy affair. But still the question that remains is, which is the best way to invest money?
Best Ways to Invest Your Money
PPF stands for Public Provident Fund. PPF investment offers investors a lot of flexibility, like the account can be opened in a post office branch or a bank. The maximum amount that can be invested in a year is Rs 1.5 lakhs. This can be done as a lump sum or as instalments on any working day of the year. The PPF account matures in 15 years, and can be extended in blocks of five years each. The PPF account also offers liquidity to the investor.
Interest Rate: 7.8%
Tenure: 15 years (from first investment)
NSC stands for National Savings Certificate. NSC is an investment scheme floated by the Government of India that allows subscribers to save income tax. There is no maximum limit on the purchase of NSCs. Investments of up to Rs 1.5 lakh in the scheme are exempt from income tax under Section 80C of the Income Tax Act. The NSCs earn a fixed interest rate of 8.1% per annum. The interest earned is added back as investment and compounded annually.
Interest rate: 8.1%
Tenure: 5 years
Fixed Deposits or FDs is a type of investment scheme in which an investor, invests a fixed sum of money for a fixed period and earns interest on it. As such FDs are a great way to grow money, or even to plan for a large future expense. Fixed Deposits are considered to be one of the safest investment options available today, as they are independent of market fluctuations, and returns on them are fixed and guaranteed.
There are two types of fixed-deposit schemes – cumulative, and non-cumulative. In a cumulative fixed deposit, the interest earned is compounded on a regular basis but paid out only when the deposit matures. In a non-cumulative fixed deposit, the interest is paid to the investor at regular intervals, be it monthly, quarterly, half-yearly, or annually, depending upon the investor’s choice.
Interest rate: 8.5%
Tenure: 10 years
Real Estate investment refers to investing in land and property. The price of property rises day by day and hence buying a property is the best investment now days one can make. Real Estate investments are sure to grow with time. Real Estate investment can be done with own money as well as mortgage loans.
Gold is Gold! And we Indians are very much attracted towards it and have an affinity of accumulating it. In India, Gold has more emotional value rather than the economic value. In India, gold passes on in generations. Though investment in gold has lost its capability, but is still recommended by financial experts to invest 5-7% of your monthly income because gold is considered as a hedge against inflation and it also act as a medium of exchange during economic crisis. There are many options that are available to prospective investor to make an investment in gold via investing in physical gold, gold coins and Gold Bars, Electronic Gold, etc.
Term Insurance: Nobody is immortal here. Buy a Term Insurance so that family’s finances stay secured even after your demise. Given your young age, this should cost you around INR 5000 yearly premium (around INR 400 pm).
Term insurance is the form of life insurance cover, it covers your life for a defined period of time, and if the insured individual expires during that particular term of the policy then the death benefit is payable to nominee of the term insurance holder. Term plans designed to secure the family needs in case of death or any uncertainty. The insurance provides specific coverage for specific period of time.
Health Insurance: Whereas investment in a health insurance is somewhat different from having a term insurance. Health insurance covers only health related issues and does not provide the death benefit. Having these two insurances provide you tax exemptions too.
National Pension System or NPS is a voluntary and defined contribution retirement savings scheme so as to enable individuals to save systematically during their earning life. NPS was envisaged in 1999. NPS is a fit choice for those who want to save for retirement but are not fully aware with the know-hows of different investment channels, as retirement savings requires proper asset allocation and right investment scheme or channel.
Mutual Funds are a simple, tax efficient and effective tool to invest with wide bouquet of investment options such as equity schemes, fixed income schemes, money market schemes, hybrid schemes, ETFs etc. which an investor can choose as per their needs. Mutual Funds are investment instruments managed by finance professionals hence eliminating the need of investor having time or skill to manage their own portfolio. Mutual Funds provide the benefit of diversification across different sectors and companies and are very liquid investments unless they have a pre-specified lock-in period. Investors can benefit from the convenience and flexibility offered by mutual funds to invest in a wide range of schemes. The option of systematic (at regular intervals) investment and withdrawal is also offered to investors in most open-ended schemes.