5 Best Long Term Investment Options in India

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Long term investments offer you several advantages. The first is that they tend to compound interest as in the case of bank fixed deposits. The second is that they are more tax efficient, as is the case with certain mutual fund investments. Long term investments are those that are held for more than three years. These kind of investments need commitment despite the fact that you might face financial obstacles.

Most of the long term investments tend to give superior returns with the passage of time. When it comes to planning investment for your child it gets tougher as you need to consider various factors such as education, marriage, comfortable lifestyle.

Investment should be planned considering the financial goals and risk factors attached to the investment.

Long term investment works only when it is untouched. However, it does not mean that you should not keep a tap on your investment.

Before opting for long term investment one should always set aside certain amount as an Emergency Fund. While we had initially only suggested 5 best long term investments in India, we added a sixth slide for bank deposits.

Invest in PPF and EPF

The Public Provident Fund is one of the most popular long term investments in India. The reasons for the same are several. One is that with interest rate of 8.7 per cent, it remains the best bet.

It is among the few investments that not only offer you tax benefits under Sec 80C of the Income Tax Act, but also the interest income is exempted from tax.

Invest in Stocks

Stocks tend to give better return over the long term. However, there is no guarantee that you would come back with returns. One can opt as a part of the portfolio and percentage of allocation should be based on the risk capacity.

Invest in Mutual Funds

Investing in Mutual Funds are for those who want to invest in equities and bonds balancing the risk and return. There are various types of funds in which you can invest depending on the risk capacity.

One can also opt for Systematic Investment Plan which enables you to build a portfolio over a longer time horizon with small investments at regular intervals reducing the risk of market volatility.

Invest in Real Estate

Investment in real estate is a ideal investment option for those who have huge cash as the returns from previous investment are encouraging.

Invest in Bonds

One can lock in money if they feel investing in stock market is very risky and they expect the market to see a downfall. Government 10 Year Bond which is currently giving an interest rate currently it is 7.70 per cent.

One can also opt for Inflation Indexed bonds as the government set the interest rates on bonds based on the inflation.

Bank Fixed Deposits

Fixed deposits are the last of our options, simply because interest rates have fallen dramatically in the last few years.

These deposits, unlike PPF are not very tax efficient. Hence, they may not be the best long term investment in India, but are relatively safe.

Read more about: investment, ppf, mutual funds
Story first published: Tuesday, February 10, 2015, 9:46 [IST]
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