By Soniya Gaonkar on Feb 24, 2022 4:54:33 PM
Today, you have a lot of investment options to pick from, and it might be difficult to figure out which one is best for you. While you must choose investment plans based on your risk profile, time horizon, and other variables, some investing options provide ideal starting points for accumulating wealth and becoming wealthy. Here are the top five of them.
1. Mutual Funds
In India, mutual funds are one of the most popular investing options. Over time, it has the potential to provide inflation-beating returns. Mutual funds come in a variety of forms, including equity, debt, hybrid, solution-oriented schemes, index funds, and fund of fund schemes. It will help you achieve your financial goals if you choose the proper mutual fund depending on your risk profile.
Though there are different types of MFs, equity MF is the most popular choice. Equities mutual funds invest the majority of their assets in equities. It's important to remember that large rewards come with high risks. Only if your risk tolerance allows it, should you invest in equity funds to meet your investing goals.
You should only choose mutual funds after researching the fund manager's investment approach. Investing in these funds is straightforward and simple. Through a systematic investment plan a.k.a. SIP, you can begin investing in mutual funds with as little as Rs 500 each month. It enables you to invest small amounts of money in a mutual fund plan of your choice on a regular basis. Furthermore, because you are investing at various levels of the stock market, you gain from rupee cost averaging. It aids in the averaging of unit purchasing costs over time.
2. National Pension Scheme
The National Pension System, also known as the NPS, is a government-sponsored retirement savings plan. You gain the much-needed safety for your investment with the sovereign guarantee behind the scheme. Because you must invest 40 percent of the corpus accumulated at 60 years in an annuity plan, you will receive a monthly income when you retire.
In addition, under Section 80CCD(1B) of the IT Act, investing in the NPS enables you to receive additional tax benefits of up to Rs 50,000 each year. This deduction is in addition to the standard tax deductions available under Sections 80C, 80CCC, and 80CCD, which can save you up to Rs 1.5 lakh in taxes every year.
NPS invests in a variety of asset types, including stocks (E), bonds (C), government securities (G), and alternative investment funds (AIF) (A). If you're a cautious investor, you may want to put the majority of your money into corporate bonds and government securities. Young, ambitious investors, on the other hand, may prefer to allocate a bigger amount of their portfolio to equities. Under the NPS's active choice, you can allocate up to 75% of your portfolio to equities.
Under the active choice option, NPS allows you to create your own portfolio by distributing funds across four asset classes. However, you can use the auto-choice option, which invests your money in preset amounts across asset classes based on your age.
3. Public Provident Fund
If you are a risk-averse investor, the Public Provident Fund (PPF) is an excellent investing alternative. The Public Provident Fund (PPF) is one of the most popular tax-saving investing options for the average person. This account can be opened at a bank or even a post office. PPFs have a 15-year lock-in term, with the opportunity to extend your account in five-year increments.
If you are a salaried person, the PPF may be a good investment option for you because it pays a greater interest rate than bank FDs. If you need a loan, you can use your PPF balance to get one, and you can even take a premature withdrawal after the account has been open for seven years.
A PPF account qualifies for the EEE tax benefit, which is one of its most appealing characteristics. Section 80C allows you to deduct up to Rs 1.5 lakh from your investment each year. Furthermore, both the interest and the withdrawal at maturity are tax-free. You must make a minimum monthly investment of Rs 500 and a maximum annual investment of Rs 1,50,000.
4. Stock Market Investment
Only if your risk appetite matches your investing objectives should you invest in stocks. To optimise your gains over time, it helps if you choose the appropriate stocks. You could, for example, invest in stocks of companies with a strong economic moat. It is a competitive advantage that a company has over its competitors and peers that can lead to increased market share.
You should diversify your stock portfolio by buying stocks from various sectors and industries. Investing in equities through a systematic investment plan, or SIP, can assist. It is a process in which you invest a set amount of money in the stocks of your choice on a regular basis. It assists you in averaging out your stock purchase costs over time when you invest at various market levels.
You must select undervalued stocks with sound fundamentals. It helps as these stocks have a market price below their intrinsic value. You may earn a higher return by investing in undervalued stocks as the market eventually recognises their potential and the price rises over time.
5. Real Estate Investment
For people with a significant amount of disposable income, real estate is a fantastic investment alternative. It is a fantastic long-term investment opportunity. The Real Estate Regulation and Development Act (RERA), which took effect in 2016, has boosted the Indian real estate sector even more. The industry is well-regulated, with consumer and seller protections in place.
The demand for real estate has risen to unprecedented levels as a result of rapid urbanisation and urbanisation. Affordability restrictions have been reduced thanks to the availability of affordable house loans with lower interest rates. It also enables buyers to defer a large amount of income tax until the property loan is paid off.
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Investment options are gateways to aspirations. You could multifold your wealth by investing in any of the mentioned above but true value can be mapped only after an experience. Every gateway is experiential. Some might find it joyous to invest in stocks while some might find it thrilling to grow their wealth through the real estate market. The answer lies in the process and your experience.
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