Why do you need to invest money?
The money you earn is never enough to meet your needs and wants at the same time! How long can you earn money? Maybe till 60 or 65. Then what about your expenses after that? How will you earn your livelihood when you grow old and have no earning capacity left?
Many of you might think that your savings will help you in that stage of life. But will your savings be enough for that? Well, how much you are saving now will surely be not enough for your life after retirement until it’s in crores. And for your savings to be in crores you need to save in thousands monthly in your earning span. However, saving this much is not possible for everyone for sure. So what’s the option left? How are you going to secure your life after retirement? Think, what if you meet with an emergency and you don’t have funds to overcome that situation? This is where your investments are going to help you.
“Never depend on a single income. Make investment to create a second source”
– Warren Buffett
What is Investment?
Investment is basically spending your hard-earned money to buy an asset that will help you generate income in the future. This can be done in several ways as different types of investment give different returns in the future. Some will give you regular income while some will give you lump sum returns at once. You can start with any of the investment options seeing your requirements in the future and your capacity to contribute towards it in the present.
Investments are as important as earning in today’s world. This is because investing is the best way to grow your money without making any effort. In simplified words – we can say investments are all about putting our savings into assets or objects that become more than their initial worth and gives you returns or regular income over time. You just need to make wise decisions and select the best investment plan for you.
Best Investment Plans for You in 2021
Public Provident Fund (PPF)
PPF is one of the best options available to you where you can invest for the long term. It is considered to be one of the secure and safest investment options in India.
The amount invested in PPF is tax-free under the section 80C of the income tax act. The interest you get here is compound interest hence is it probably more than the others. The maximum time period for which one can invest under this scheme is 15 years, but it can be extended for the next 5 years. Partial withdrawal and loan against PPF are also allowed but under certain terms and condition.
PPF interest rate for the year 2018-2109 is 7.60% p.a
Mutual Funds have gained so much popularity in the last few years.
Investment under this scheme is best for those who want to invest under bonds and equity both along with the balance of risk and returns. There are different types of mutual funds investment plans in different securities. Under the equity mutual fund investment is made in stocks and equity-related instruments. Whereas in debt mutual funds investment plan, investment is made in bonds and papers. Hybrid mutual funds also exist where investment is made in equity as well as in debt.
Mutual funds are flexible investment plan, where you can invest as per your convenience, and you can begin and stop investing any time. One of the best parts about mutual funds is you can avail tax benefits for your investment. you can also redeem your investment made under this scheme at any time you want. Moreover, the interest offered by mutual funds is the maximum of all the investment plan available in the market.
Fixed Deposits are one of the most popular investment schemes in India. Under fixed deposit scheme investment is made for a fixed period of time against which you get fixed returns. FD offers you interest on monthly, quarterly and on yearly basis. Tax saving is also possible with FD when opted for a lock-in period of 5 years under some terms and condition.
FD offers you both cumulative and non-cumulative option both. Under the cumulative option, you will get the entire interest along with the principal amount at the time maturity of your fixed deposit. Whereas in non-cumulative you can get the interest as per the underwriting.
Interest offered by Fixed Deposit varies from 6.50% to 7% depending on your bank.
Share and Equity Purchase
Analysing a share stock before purchasing one is the most important thing required here. When you buy a stock of a company, you own a small portion of the company you bought into. It is best among all the investment plans but contains some risks. You can get maximum returns on the purchase of share and equity when done for a longer period of time.
As when the value of the company grows over time, the price of the shares you own grows as well, means that you can sell them at a higher profit.
Investment in Bonds
While purchasing a bond, you are loaning money to a company or the government of which you are purchasing the bond.
The company selling you the bond will pay you interest in purchasing the bond for the duration of the bond’s lifecycle.
Generally, bonds are considered ‘less risky’ than stocks, however, the potential for returns is much lower on the same hand.
Investment in Gold
Investing in gold is one of the oldest and safest investment options persisting in India from decades. The value of gold always increases with time and hence you can good returns by selling them. You can also take a loan against your gold and the interest charged for this is as low as 2% per annum. There are various options available to invest in gold and those are- Gold ETF, gold bars, gold mutual funds, gold deposit scheme. Moreover, investment in gold can be beneficial even for a short period of time.
Post Office Savings Scheme
There are several post-office savings schemes which offer high returns to you.
Postal life insurance (PLI), MIS, Fixed deposits are some of them.
Post office savings schemes are suitable for the retired person as they provide regular income to them. The other benefit associated with post office schemes is there is no risk involved in it, but the interest earned may be low somewhat as compared to the others.
- Savings Schemes under Post Office Investment
- Post Office Savings Account
- Sukanya Samriddhi Accounts (SSA)
- Post Office Time Deposit Account (TD)
- Post Office Monthly Income Scheme Account (MIS)
- Senior Citizen Savings Scheme (SCSS)
- National Savings Certificates (NSC)
- Kisan Vikas Patra (KVP)
- 5-Year Post Office Recurring Deposit Account (RD)
- 15 year Public Provident Fund Account (PPF)
National Pension Scheme (NPS)
NPS is an initiative of the government of India which aims to provide pension solution to all the government and private-sector employees within the country.
In this funds can be invested in equity and bonds as well. The scheme offers two choices to you, which is Auto and Active.
Under this scheme, funds will be invested automatically in different assets whereas you will also be allowed to make choices latter.
The scheme matures when the investor turns 60, on the same had there is also lock-in period associated with this, which depends on the age of the investor. The accumulated interest is tax-free, whereas when the investor withdraws a lump sum amount it is 40% taxable. On the same hand if the investor chooses for pension after he/she retires, then, in this case, the amount is taxable as any other regular income.
Here is a great quote to sum it up!
“When you invest, you are buying a day that you don’t have to work”
– Aya Laraya.