Best investment options in 2021

Multiple investment options and don’t know where to invest, we are going to discuss some of the best investment options in this article. Will find out schemes with high returns along with capital security and tax benefits. there are many factors associated with an investment Scheme that indicate how safe your investments will be and what the benefits are and how much profit you can make. First of all, you should consider your investment horizon and goals that will help you choose from the best investment Schemes.

It is advised that you carefully look at all the available financial instruments before making the final decision. Consider the risk involved and the returns given by the investment plan you are going with.

Following are a few of the best investment options in India:

1.Mutual Funds

If you are willing to invest in equity markets but do not have time, and expertise, Mutual funds are an excellent option for you to start with. Mutual Funds are specially designed portfolio managed by dedicated fund managers investing in multiple financial instruments such as equity stocks, debts, Govt. securities, money market instruments, etc.,

The main objective of a fund is to provide investors with optimal returns by investing in securities that are consistent with the objectives of the fund. The performance of a mutual fund depends upon the underlying assets and securities.

Mutual funds are mainly classified into 3 categories depending on their asset allocation equity funds, debt funds, and hybrid funds;

Equity Mutual Funds:

Equity funds mainly invest in stocks of companies across all market capitalizations. These funds invest a minimum 65% of its portfolio in equity instruments. Equity funds have the potential to offer a higher rate of returns. The returns provided by equity funds depend on market performance. Since the returns offered are high, the risk involved is also high in equity funds.

The equity funds are further classified according to market capitalization (large-cap, small-cap, mid-cap, and multi-cap), tax saving mutual funds (ELSS), and sectoral or thematic funds.

Debt mutual funds:

This type of fund invests primarily in fixed-income securities such as government securities, corporate bonds, commercial paper, treasury bills, and other money market instruments. These funds are ideal for investors who have a low-risk appetite, as they provide a stable ROI.

Hybrid Mutual Funds:

This type of fund is a balanced portfolio investing across both equity and debt instruments. The objective of hybrid funds is to reduce the risk of investors by diversifying the portfolio into equity and bonds. The asset allocation of hybrid funds can either remain fixed or change over time depending on the market situation.

Hybrid funds are good for conservative investors looking for low-risk investment options with substantial exposure to equities. An investor can consider these funds as a substitute for fixed deposits for an investment horizon for more than 5 years.

2.Unit Linked Insurance Plans (ULIP)

A Unit-Linked Insurance Plan (ULIP) provides twin benefits of life insurance cover and market-linked returns on investment. A portion of the premium paid by the policyholder is utilized for insurance coverage to the policyholder and the remaining amount is invested in equity, bonds, and money market instruments.

Similar to other insurance policies, the policyholder can pay a premium monthly, quarterly half-yearly, or annually. Traditional insurance policies offer returns of merely 4% –6% but Unit-linked Insurance Plans can give you double-digit returns in longer terms if invested in equity funds option.

Investment in ULIPs is eligible for tax benefit up to a maximum of Rs 1.5 lakhs under Section 80C and the maturity amount is also exempted from income tax. Investors looking for the dual benefit of life insurance and equity-linked return in a single investment can invest in ULIPs. ULIPs have dedicated fund managers like Mutual funds to keep track of your portfolios and returns.

3. Public Provident Fund (PPF)

Public Provident Fund (PPF) is a government-backed safe investment scheme that helps an investor to enjoy risk-free investment for the long term. PPF has a maturity period of 15 years. However, the money in your PPF account can be partially withdrawn after 6 years. The interest rate of PPF is revised and paid quarterly by the government. The current interest rate is 7.9%.

The Investment amount and interest earned are completely safe in PPF as the scheme is regulated by the government of India. Investment (up to Rs 1.5 lakh) to PPF account is eligible for deduction under Section 80C of the Income Tax Act. Also, PPF comes under the EEE category (exempt-exempt-rebate) in which, interest and maturity amount are completely tax-free.

4. Bank/Company Fixed Deposit (FD):

Fixed deposits (FDs) are financial instruments offered by the bank and Non-banking financial company (NBFC). Fixed deposits are one of the most popular and traditional investment options available. The tenure of Deposits varies from 7 days to 10 years. Fixed deposits come with a lock-in period. If you want to withdraw within the lock-in period, the bank will impose a penalty as a deduction in the interest earned on the investment.

The Fixed deposits provided by NBFCs are called Company or Corporate fixed deposits which offer higher Interest rates than bank FDs. Senior citizens are being offered slightly higher interest rates. An investor can also save income tax by investing in a 5-year Tax saving FD.

5. Gold/Gold ETF

Gold is one of the favorite traditional investment options in India. Investments in Gold are made in the form of purchasing gold jewelry, coins, and Gold bars. Instead of possessing physical gold, investments in gold can be made by investing in gold ETFs and sovereign gold bonds.

Gold ETFs are exchange-traded funds that invest in gold as investments. These funds are traded on the National Stock Exchange (NSE) and can be bought and sold just like any other stock. Gold ETFs are passive instruments based on gold prices, and fully transparent in terms of pricing.

6. National Pension System

NPS is a government-backed retirement scheme, that allows its investors to invest in market-related instruments such as equity and debt. The scheme is managed by the Pension Fund Regulatory and Development Authority (PFRDA). NPS is a combination of the diversified portfolio like equities, liquid funds, fixed deposits, and corporate bonds. Any persons between the ages of 18 and 60 can invest in NPS.

Investors looking for tax-saving option can choose to invest in NPS as Investment is tax-efficient U/S 80 CCD of income tax

7. Senior Citizen Savings Scheme (SCSS)

SCSS is a 5-year saving plan for Indian citizens of 60 years and above, SCSS comes with guaranteed return declared by the government of India. The current interest rate for this scheme is 7.4% and is paid quarterly. SCSS is a 5-year Scheme which can be extended for another 3 years after maturity, but the prevailing rate of interest will apply. The investment comes with tax benefits under section 80C. Only those who are above the age of 60 can invest in SCSS and the maximum amount in this senior citizen deposit scheme is Rs 15 lakh.

8.Post-office Monthly Income Scheme (POMIS)

The Post office monthly savings scheme is one of the best plans for monthly income offered by the post offices in India. It is a government-backed savings scheme that allows investors to save a specific amount every month. Currently, the interest rate on the Post office monthly income scheme is 6.6 percent payable monthly. The tenure of this scheme is 5 years from the date of the account opened. The maximum investment limit in Post office monthly income scheme in a single name is Rs 4.5 lakh and Rs 9 lakh on a joint name. Any person who is a resident of India is eligible to open a post-office MIS account with a minimum of Rs. 1,500. Post Office Monthly Income Scheme does not provide any tax exemption on investment or maturity amount.

Happy Investing!!!