A lot of people are drawn to investing in high-yield securities. But with so many possibilities, it might be challenging to pick the best path.
There are many investment opportunities in India, including some lesser-known investment ideas in India, of which many citizens are still unaware. This article will decode various investment options in India for short-term and long-term goals.
Ideally, the tenure of investments varies from instrument to instrument. But, it is important to understand both the benefits and drawbacks of such high-return investments.
Here is a list of the best investment options in India, sorted in order of the risk they entail. More significantly, we’ll discuss how you can mix different investment options to construct your optimal investment plan.
Best Investment options in India:
Some of the best investment options in India are listed below, representing good investment options in India as well as where to invest money in India for maximum returns:
|Best Investment Options in India
|Public Provident Funds (PPF)
|ELSS (Equity Linked Saving Scheme)
|National Pension Scheme (NPS)
|Unit Linked Insurance Plans (ULIP)
|Sovereign Gold Bonds (SGBs)
|Exchange Traded Funds (ETFs)
|Senior Citizen Savings Scheme (SCSS)
Let us take a closer look at some of the top investment options in India for building personal wealth.
1. Public Provident Fund (PPF):
PPF, often recognized as the best investment strategy for maximizing returns in India, is a government-backed fixed-income plan and can be called a risk-free investment. It is accessible at almost all banks and post offices in India. There is a single account limit.
Age requirements to open an account are not enforced. Until they turn 18, a minor’s guardian manages their account. The annual minimum investment is 500 rupees. The maximum annual payment is Rs. 1.5 lakh. Within a financial year, you may deposit one to 12 times.
Currently, the annual interest rate is 7.10%. Since PPF interest rates are variable, they may alter every three months. Typically, the interest rate change ranges from 0.25% to 0.75%.
A PPF fund has a maturity period of 15 years. After 5 years since the account’s creation, partial withdrawals are permitted. PPF investments are tax-free. The interest you earn on your investment is also tax-free.
2. Mutual Funds:
Mutual fund investments which are among the different investment options in India, are subject to market risk; thus, one should consider the risk before investing. Mutual funds can be your best investment option to double your money if you know the market and its risks.
You can build an investment portfolio based on your preferences, whether you are looking for short-term or long-term investments.
Monthly systematic investment plans or systematic withdrawal plans can be good investment choices if you prefer a fixed income and have a lesser risk tolerance from mutual funds.
It can also be a good option if you want to make a high-return investment in India.
The following are the top two investment choices provided by mutual funds:
Equity Mutual Fund:
Equity funds, also referred to as market-linked securities, offer growth opportunities for investors.
As one of the most well-known mutual funds in India, equity mutual funds provide excellent returns on investment by purchasing shares of businesses with various market capitalizations.
Equity mutual funds often cited as one of the best investment options in India for the long term, give significantly higher returns than other investments available in India, such as debt or fixed deposits. But there is more risk involved.
The equity mutual fund scheme invests 65% of assets in equities and equity-related securities and 35% in debt and money market instruments.
Debt Mutual Fund:
Debt funds are regarded as one of the greatest investment options for investors seeking a consistent return on investment. When investing in a debt fund, money is put into fixed-interest instruments, including,
- Corporate Bonds
- Government Securities
- Treasury Bills
- Commercial Paper
- Other Money Market Instruments
The primary goal of investing in debt funds is to generate capital appreciation and interest income.
Stocks, regarded as some of the best investments in India, are one of the most effective means to grow your wealth for long-term financial goals. It is about a company’s equity shares, which bind you in legal terms to the company’s ownership.
You acquire the right to participate in shareholder meetings and influence corporate decisions by purchasing company shares. Additionally, you receive a percentage of the company’s profits as a distribution based on the number of shares you own.
You must understand as an investor that a company’s performance affects the share price, both positively and negatively. You can also decide to later return the shares to the company or a third party, depending on the market conditions and your risk tolerance.
Bonds, a good investment option in India, similar to individuals, companies, and governmental organizations, require funds for social programs and infrastructure development. As a result, they issue bonds to the general public as a means of raising capital.
The interested parties then purchase the bonds to aid these organizations in raising money.
In other words, bonds are fixed-income investment choices that serve as collateral for a shareholder’s loan to a governmental or corporate borrower.
The fact that the terms for fixed interest payments, loan principal, and tenure are all covered in the bond specifics makes them one of the top investment plans in India. As a result, it guarantees both the security of your investment and a higher return.
Furthermore, bond prices are inversely proportional to interest rates. Therefore, as interest rates rise, these prices fall, and vice versa. The RBI Taxable Bonds have a 7-year maturity period and an annual interest rate of 7.75 %.
These bonds are exclusively provided in Demat mode, and the investor’s Bond Ledger Account (BLA) is authorized. Bonds are issued for Rs. 1000, and investors receive a Certificate of Holding as evidence of their investment.
5. National Pension Scheme (NPS):
The National Pension Scheme often viewed as the best investment scheme in India, is for people who want to create a significant retirement fund to invest their savings in a government-monitored pension fund that invests in varied stock market portfolios, including government bonds, corporate debentures, and shares.
At the end of the scheme cycle, a portion of the earnings or cumulative pension money generated from such investments is used to buy a life annuity. There are two different types of NPS accounts:
- Tier I NPS Account
- Tier II NPS Account
Tier I NPS Account:
Indian citizens can invest between the ages of 18 and 65. You can open an account by going to an authorized bank or one of its branches, known as a Point of Presence (POP) designated by the Pension Fund Regulatory and Development Authority (PFRDA). As an alternative, you can go to the eNPS online portal.
You receive a 12-digit number after submitting an account opening request, and a permanent retirement account is generated. You need to deposit Rs. 500 to open this account. You must deposit at least Rs. 1,000 in a financial year to keep the account active.
The maximum amount you can invest annually is limitless. You can only withdraw your invested money once you are 60 years old.
You can only withdraw up to 60% of your total balance once you turn 60. You must spend the remaining 40% to purchase your preferred pension plan.
Under Section 80 C and Section 80CCD, investments up to Rs. 2 lakh annually are exempted from income tax. Taxes are not applied to returns made on NPS tier I accounts.
Tier II NPS Account:
Only those with an NPS Tier I account can open this voluntary account. Any approved bank or its designated POP by the PFRDA will allow you to open an account offline. You can access the eNPS portal to create an online account.
You must open the account with a minimum investment of Rs. 1000. Similar to an NPS Tier I account, there is no required annual payment. There is no upper limit on the amount you can invest.
Each year, you decide how much money to invest in the available asset classes: government bonds, corporate bonds, equities, and alternative assets. There is no lock-in period for this investment.
6. Unit Linked Insurance Plans (ULIP):
ULIPs, or Unit Linked Insurance Plans, which can be considered as the best investment policy in India, provide dual benefits of insurance and investment.
Consumers can avail of insurance coverage while also growing their investments.
It’s easy to understand how ULIPs operate: the policyholder can buy an insurance plan, and the money they pay in premiums is split between equity and debt funds, with the remaining amount used to provide coverage.
It is an additional investment choice for people who desire insurance and returns linked to the market. You can get life insurance, which allows you to invest in various funds while providing life insurance coverage. It has evolved into one of India’s greatest investment plans.
This best investment option in India provides the benefits of insurance and market investments, which aid in the systematic growth of your funds.
Depending on whether you choose long-term or short-term investing alternatives, you can select the policy tenure that is most suitable for you. According to Section 80C of the Income Tax Act of 1961, ULIP also provides tax advantages.
7. Liquid Funds:
Liquid funds are similar to stock market investments in that funds are invested in government bonds and securities. It is one of the best investment options on the market because there is no lock-in time, and you can withdraw money as needed.
Liquid funds, which are part of the best investment plans in India, are among the best options for short-term investments. You can put money into it for 3 to 5 years and take money out as needed to achieve short-term objectives.
They are also one of the greatest investing options because they are less vulnerable to market risks than mutual funds.
8. Sovereign Gold Bonds (SGBs):
Government securities known as sovereign gold bonds (SGB) are issued by the Reserve Bank of India (RBI) and are valued in grams of gold.
They have a minimum investment of 1 gram and are issued in multiples of grams of gold. On dates specified by the central government, SBGs are available for auction.
The RBI issues these bonds several times every year. To purchase an SGB, you need a PAN Card. SGBs are available for purchase from banks, post offices, and stock trading organizations both online and offline.
Based on the average closing price of gold over the previous three business days, each bond unit you buy is worth one gram of pure gold. SGB purchases are limited to 4 kg per individual and 20 kg per trust.
Return on Investment – 2.5% paid twice a year.
Maturity Period – 8 years. Early redemption after 5 years.
Taxation – Interest payments are taxed depending on your tax band. Any gains made at maturity are tax-free.
In conclusion, India offers a plethora of investment plans in India with high returns, including stocks, mutual funds, real estate, and more.
It’s crucial to carefully evaluate and choose the best investment options in India based on your financial goals, risk tolerance, and time horizon.
Seeking expert advice and staying informed about market trends can lead to wise investment decisions for a secure financial future.
What is a Systematic Investment Plan (SIP)?
A systematic investment plan (SIP) is an investment option in mutual funds where you can invest a fixed amount of money at regular intervals, such as monthly or quarterly. This helps build a disciplined approach towards investment and reduces the impact of market volatility on your investments.
What is the National Pension System (NPS)?
The National Pension System (NPS) is a retirement savings scheme offered by the Indian government. It allows you to invest in a mix of equity, debt, and government securities and offers tax benefits.
What is the Public Provident Fund (PPF)?
The Public Provident Fund (PPF) is a long-term savings scheme offered by the Indian government. It provides a fixed rate of interest and tax benefits, and the investment is locked in for 15 years.
What is a Fixed Deposit?
A fixed deposit is a type of investment where you deposit a sum of money in a bank or financial institution for a fixed period and earn a fixed rate of interest on it.
Which Investment Option is Best for Me?
The best investment option depends on your investment goals, risk tolerance, and financial situation. It is advisable to consult a financial advisor or do thorough research before making investment decisions.