Investment is of crucial importance for any individual who seeks to create wealth and attain his/her financial goals amid rising inflation. In fact, if you start investing early in life, it will make a significant difference as compounded growth ensures higher returns in the long run, thus promising secured financial future. With an array of financial products available in the market, you do not need a huge amount of money to start investing. You can start with small amounts that will not burn a hole in your pocket. Even with small, monthly contributions, you can lay the foundation of a handsome corpus by starting early and continuing your investment in a disciplined manner with a long-term horizon.
- Mutual funds: as investment instruments, these are well placed to offer solutions to all your savings and wealth creation needs. The best way to make the most of mutual funds is to start a systematic investment plan (SIP). If you start early and intend to invest in the long term, go for equity mutual fund schemes. If your risk taking capacity is low, it is advisable to opt for debt mutual fund schemes.
- Public provident fund: this is a government-backed option with guaranteed returns. Currently, the rate of return being offered is 7.6%. The best thing about PPF is that it is triple exempt, which implies that you pay zero taxes on this investment and its returns. It comes with a maturity period of 15 years, and the monthly investment can be as low as Rs. 500. What’s more, the PPF investments are eligible for tax rebate under Section 80C of the Income Tax Act.
- Recurring deposit: Highly preferred by conservative investors, this involves saving a fixed monthly instalment with a horizon of a year to a maximum 10 years. You can start an RD with as little as Rs. 100 a month. Currently, the rate of returns on such deposits ranges between 6% and 7% depending on the bank. These are guaranteed returns but the investments are not eligible for tax rebate. The interest earnings from an RD are added to one’s income and taxed according to his/her slab.
- National Saving Certificates: you can opt for NSCs from Department of Posts. Such certificates are sold in post offices in denominations starting from a low of Rs. 100 to as high as Rs. 10,000. These instruments of investment, in today’s time, fetch about 7.6% rate of interest which is compounded annually. However, the total amount with interest is payable at maturity. Deposits made in NSCs qualify for tax exemption under Section 80C of the Income Tax Act for the financial year in which investments are made.
- Exchange traded funds: ETFs are a type of fund, a portfolio of securities such as stocks, listed on a stock exchange. They are traded like stocks, and can be purchased or sold at any point. What’s more, there are no lock-ins involved, they have very small exit loads and can be purchased in any quantity depending on your liking. Besides, you typically have the option of investing in equity and gold via ETFs. ETFs can be a good option for investors with a moderate to high-risk appetite, and these can be used to make periodic equity or gold purchases.