According to the statistics 90% of total India’s population is employed, bringing home a salary in the first week of the month. And if you’re one of this 90 %, then it is highly recommended you to check out the best investment options, available in India, for a salaried person.
According to various studies and researches, the average Indian middle-class person should save 30% of his or her earning to survive in an uncertain world like ours.
For instance, if someone earns Rs. 1 lakh per month, then he/she should save at least Rs. 30,000 out of it, to maintain a similar standard of living later.
The investment options, given below, will ensure that you meet your expenses and, still, be able to achieve various future goals in life. Though, a lot many employees are covered under the post-retirement security in the form of EPF and PPF. Yet, this is not enough to generate enough corpus to meet post-retirement expenses and schemes.
8 Best Investment Options for Salaried Person
1) Equity Mutual Funds
In the case of Best Equity Mutual Funds, at least 65% of the total corpus is invested in Equities and Stocks. Learn how you can evaluate the best equity mutual funds. If the money is invested in for the long term, then the returns from these funds would beat the fixed income instruments and inflation by a wide margin. The general investors who wish to invest in stocks but don’t have the required experience should go for Mutual Funds Investment. If an individual opts for Equity Linked Savings Schemes (ELSS) option, then under Section 80C of the Income Tax Act he/she is qualified to avail tax deduction. These funds also have the shortest lock-in period of 3 years among the Tax Saving Investment options, under Section 80C. Must read on how to invest in ELSS.
You can opt to initiate the investments in equity mutual funds with just Rs. 5,000 lump sum and then Rs. 1,000 as additional investments. Furthermore, if you choose ELSS Funds with the Systematic Investment Plan (SIP) mode, then the minimum and subsequent investment amount are Rs. 500 monthly. Keep learning on why ELSS is the best way of investment now. And the additional installments for SIP and ELSS is Rs. 500 and Rs. 1,000 respectively.
2) Debt Mutual Funds Investment Options for Salaried Person
The investments in the case of Debt Mutual funds are invested in instruments, having, more or less, fixed interest rates. Therefore, it guarantees a regular fixed income. If you are looking for the best investment options as a salaried person, to support your existing income. These instruments include corporate debt securities, corporate bonds, government securities, and money market instruments among others. These funds are less risky as compared to equities and generate higher returns than fixed deposits. Unlike fixed deposits, most of the Best Debt Funds may not levy a premature withdrawal penalty. But if you wish to withdraw the amount, from certain Debt Mutual Funds, before a pre-determined period then an Exit Load will be charged.
3) Bank FDs (Fixed Deposits)
If you choose to invest in fixed deposits then you’d be getting the income and principal repayment at booked rates. Even if there occurs a change in the card rate during the deposit tenure. In the present scenario, the small finance banks offer the highest card rate of about 8.6% p.a. (up to 9.1% for senior citizens) while the highest rate offered by private sector banks is approximately 7.3% p.a. (7.80% p.a. for senior citizens). But in the case of public sector banks, the rate is approx 6.75% p.a. (up to 7.25% p.a. for senior citizens). An individual can save taxes under Section 80C by investing in tax-saving FDs. But the interest earned is taxed as per tax slab of the depositor and the lock-in period varies between 1 to 5 years.
4) PPF (Public Provident Fund)
It is considered one of the safest among all the investment plans given here because of the sovereign guarantee from the government. It also includes tax deductions under section 80C. The returns offered is 8% compounded annually with a lock-in period of 15-years. You can also extend this period with a 5-years block. The maximum and minimum limit to invest in PPF in a financial year is Rs. 1.5 lakh and Rs. 500 respectively. Learn which is better PPF or ELSS.
Some may not prefer this due to the absence of liquidity. Also, only after the 7th financial year is the withdrawal permissible. You can avail the option of premature closure of the account after the 5th financial year for the reason of the medical treatment of serious ailments or life-threatening diseases or for higher education.
5) NPS (National Pension Scheme)
NPS or National Pension Scheme is a product used for retirement planning. Must read on what are the best pension plans to invest in 2019 now. This is one of the best investment options for a salaried person who is not entitled to any pension scheme under his/her current employer. That is, all the investors not falling under the ‘Government or corporate’ model can join this scheme under the ‘All Citizens of India’ model. The lock-in period is until you reach 60 years of age but this could be extended up to 70 years. At least 40% of the total investment has to be kept invested to avail annuity. And the remaining amount can be withdrawn on the date of maturity. This withdrawal is tax-exempt. You have the option to avail of a tax deduction of up to Rs. 1.5 lakh under Section 80C and an additional of up to Rs. 50,000 under Section 80CCD 1(B).
6) Voluntary Provident Fund Investment Options for Salaried Person
Voluntary Provident Fund yields the same interest rate as in the case of EPF. In addition to the mandatory contribution towards EPF, you have the option of choosing to increase this amount up to 100% of your basic salary and dearness allowance (D.A.) in VPF. The invested amount qualifies for tax deduction under Section 80C. The interest earned on these investments is also tax-exempt, provided the employee continues to be in service for 5 years or more.
7) NSC (National Savings Certificate)
Investments under this scheme come with a lock-in period of 5 years that offers an interest rate of 8% p.a. compounded annually. These rates are reviewed every quarter. Also, you can invest as low as Rs. 100 and as much as you can, as there is no upper limit to the investment. You can claim a tax deduction of up to Rs. 1.5 lakh under Section 80C.
8) ULIP (Unit Linked Insurance Plan)
The investments under this combine life insurance with market-linked investment. Some proportion of this investment is in stocks, bonds, market instruments, etc. while the rest goes towards insuring your life. The lock-in period is of 5 years and it qualifies for tax deduction under Section 80C. There are other fund options, by Insurance Companies, that may suit investor’s varying risk appetites. You can also switch between these fund options to cater to the changing risk appetite or market conditions.
Regulation and self-discipline are the basics of a successful investment plan. And though it is very difficult to cut away expenses when there are such new and tempting offers and discounts coming up every day. Besides, a lot of expenses are incurred because of the immense peer pressure nowadays.
And, though, money doesn’t buy happiness, it would buy relief, relaxation and maybe medicines, should you need in the golden age.
In case you still feel overwhelmed because of the sheer quantity of the data and numbers involved. We suggest that you take help and advice from professionals. Take advise of WealthBucket. We make investing easy and responsibly manage your hard-earned money. Out of the many services on offer, a few are Equity Mutual Funds, Debt Mutual Funds, Income Funds, etc.
Do Go Through: