We all know that the law of compounding works wonderfully for those who invest regularly across instruments. It is a good idea to start investing small amounts each month, even if it is very small. Here are a few places you can begin by starting with your March salary.
SBI Magnum Equity
You can place small amounts in the SBI Magnum Equity Fund through an SIP of as low as Rs 500. We are recommending this SIP for a number of reasons. The first is that it has given very good returns in the past, the expense ratio is not too high and the exit load is pretty normal of 1% before 1 year. The mutual fund scheme has generated returns of 18 per cent in the last one year and 19 per cent in the last three years. The fund has a good quality portfolio including the likes of HDFC Bank, Infosys and State Bank of India. The net asset value under the dividend plan is Rs 30.72. Go for a systematic investment plan from each month's salary. The dividends earned are also tax free in the hands of investors.
Public Provident Fund
This is another scheme that we like for three reasons. The first is that no bank gives you an interest rate of 8.1 per cent, like PPF does. The second is that the interest earned is tax free and the third is that the amount invested qualifies for tax rebate under sec 80C of the Income Tax Act. The only problem with the PPF is that the amount has a tenure of 15 years, though you can do partial withdrawal after 7 years. Also, there is a cap of Rs 1.5 lakhs per year, which means at best you can invest around Rs 12,000 to Rs 13,000 each month.
Quantum Long Term Equity Fund
This fund allows you to invest a small sum of Rs 500 each month. In the last one year the fund has generated a superb return of 18 per cent. However, that is not all. The beauty of the fund is that it has the lowest expense ratio among all mutual fund schemes at just 1.1 per cent, which is why we have recommended the fund. A great place to park your money. The portfolio is also good, which is why we are also recommending the stock. Among the portfolio includes name likes Infosys, State Bank of India and ICICI Bank. The dividends earned are tax free in the hands of investors.
Shares of Coal India
You can systematically invest in the shares of Coal India every month as the company gives you a solid dividend yield of near 8 per cent. The dividends are tax free and the company is a cash rich debt free company with assured revenue flows. The company is now slated to declare dividends once again on March 8 which should make the stock pick a good one at the current levels.
KTDFC Fixed deposits
These deposits give you an interest of 8.5 per cent over three years. However, the minimum amount that is needed for investment is Rs 5,000. Go for it, if you have to invest for three years. The deposits are backed by the government of Kerala and are hence very safe. At the moment, you do not get an interest rate of 8.5 per cent per year in any of the banks. However, there would be a TDS that is applicable on interest earned above Rs 5,000.
Bank recurring deposits
Recurring bank deposits offer you an interest rate of around 7 per cent. Go for them if you do not have anything else to invest in.Not the best list from all of the above.