4 Investment Options to Start With This Festive Season

If being rich is your goal, you must know that savings alone will not be enough thanks to inflation.

There’s no greater feeling than seeing your money work for you and increase in value. While investments are subject to market risks, there are plenty of options available for every kind of risk appetite.

Here are four of the most popular investment options that you can consider.

1. Public Provident Fund (PPF)

public provident fund (PPF)

Let’s start off with one of the most popular and safest investment options available in India. PPF or Public Provident Fund is a government-backed fund option that can be opened at any bank or post-office.

It is a long-term savings-cum-investment scheme that offers relatively stable returns. The current interest rate is 7.1% p.a.

This is for you if

You have a low risk appetite, wish to save on taxes,  and don’t mind a lock-in period of 15 years. Partial premature withdrawal is available after 5 years but only in certain circumstances. However, due to the interest rate offered, this instrument may not be the best to beat inflation.

Initial Investment

You can start off with as low as Rs. 500 per financial year up to Rs. 1,50,000. You can invest as frequently as you wish to.

Tax Benefits

One of the biggest benefits of PPF is the tax benefits offered. The amount you invest up to Rs. 1,50,000 per financial year is exempted from taxes under Sec 80C. 

It gets even better!

Not only is the principal exempted from tax, the interest accrued and the redeemed amount post maturity is also exempt from tax.

2. Mutual Funds

Mutual Funds

Have you heard of the saying ‘greater the risk, greater the reward’? This is quite true when it comes to investments. 

Less volatile when compared to options such as cryptocurrency or stocks but definitely riskier than fixed deposits, mutual funds are a middle ground of sorts for those looking to take a slightly riskier approach to their investments. Checkout this blog to know more about mutual funds.

This is for you if

You are ready for potentially higher risk and returns on your investment. There are many types of mutual funds, some riskier than others but the returns are much greater than those offered by traditional options such as PPFs or fixed deposits.

Initial Investment

Depending on whether you wish to invest in SIPs (Systematic Investment Plans) which require monthly investments or a lump sum, the initial investment starts at Rs. 100.

Tax Benefits

Only if you invest in an ELSS (Equity Linked Savings Scheme) through SIPs can you claim tax deductions under Sec 80C. Other mutual funds do not offer this provision.

3. Gold

If there’s one investment option that has stood the test of time here, it is that of gold. Whether it is to enhance spiritual/religious goodwill or because of its long term returns, gold is highly sought after.

You can invest in gold by buying coins, jewelry, or even through Sovereign Gold Bonds.

Did you know that gold returns are inversely linked to the equity market? Therefore, if you have invested in equities then investing in gold is a great way to offset the risks associated with each other.

This is for you if

You have a medium risk appetite and are looking for a long term investment. Bear in mind that the type of gold you purchase can determine your returns. Gold jewelry may not offer the same returns as SGBs or pure gold coins.

Initial Investment

The initial investment amount will depend on the value of gold on a particular day. Even if you start by purchasing 1gm of gold, you will need at least Rs. 5,000. However, this value will change based on the market conditions.

Tax Benefits

Gold investments do not have tax benefits. Additionally, you may even have to pay capital gains tax if you sell physical gold. But if you invest in SGBs which are held until maturity (8 years) then the returns are exempt from capital gains tax.

4. Fixed Deposits

How many of us have grown up listening to the many benefits of fixed deposits? Once upon a time, this was one of the only investment avenues available and most of our parents firmly believe in the many benefits offered by FDs but is it really as good as it seems?

Yes and no.

While FDs are one of the safest investment options available, the returns may not be good enough to beat inflation. However, you can always invest in these as a way to cultivate financial discipline or park your money safely for some time.

It is for you if

You are extremely risk averse or wish to keep a certain lump sum amount safely, temporarily. RDs or Recurring Deposits are another option to consider if you want to invest a certain amount each month.

Initial Investment

For FDs most banks require an initial deposit of Rs. 1,000 but this number can vary. For RDs, you can start your investment with Rs. 100 per month. 

The interest rates offered vary from 2.9% to around 8% depending on the bank or post office you open your account with.

Tax Benefits

While RDs do not offer tax benefits, tax saver FD provides tax benefits of up to Rs. 1.5 lakh. However, the lock-in period is 5 years and the tax benefit is only applicable in the first year of investment.

In Conclusion

“How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case.” – Robert G. Allen

While investing is risky, the rewards are generally worth it. 

There are plenty of investment options available. It will depend on the rewards you are looking for and your risk appetite. Regardless of where you want to invest, ensure that you have a thorough knowledge of it and consult a financial advisor if needed.

Do you want a part II of this blog with more investment options? Let us know in the comments below!