A salaried investor is always looking for returns that offer him safety, along with tax benefits and liquidity. Based on the above here are a few investments that can offer you a combination of the above. However, there is no instrument that can offer a combination of the three.
KTDFC Fixed Deposits
If you are a salaried individual and have managed to save some money you can opt for the deposits of Kerala Transport development Finance Corporation.
This offers you an interest rate of 8.25 per cent on 1, 2 and 3 year tenures. This is pretty decent if you are looking at a short to medium term holding period. The deposits payment is guaranteed by the Government of Kerala, which makes it another good investment option.
The only hassle is that you may have to fill the form online, as there are no brokers you can approach. However, the interest earned is subject to taxes.
The Public Provident Fund is also an excellent option for the salaried class. This is because the interest earned is exempt from tax and it also offers you tax benefit Under Sec 80C. According to this section you get a tax benefit of Rs 1.5 lakhs for amount invested.
The interest rate earned currently is 7.9 per cent, which is not bad at all. The only worry is that there is a maturity period of 15 years, though you can avail of a loan after the third financial year. This is a good scheme for those looking at low risk and higher tax free returns, but not too much of liquidity. You can invest as low as Rs 500 each year.
SIPs of Mutual Funds
This is one proposition that has suddenly caught the fancy of investors. Many investors are now systematically investing small sums in Systematic Investment Plans (SIPs) of equity mutual funds.
However, they are going on the basis of hefty returns offered by equities in the last one year. One needs to tone down expectations as returns in the future could be minimal.
For example, some equity schemes have failed to deliver returns in the three years, while they have generated decent returns in 5 years. As far as the safety aspect is concerned, it cannot be guaranteed like the PPF, so if one is a conservative investor he could skip this.
The problem with recurring deposits is that they offer very low interest rates. These are also taxable, which means overall you end-up with very little, if you are in the higher or highest tax bracket. A better proposition would be other alternative investments.
Having said so, the one advantage of the recurring deposit is that it offers you good liquidity. One needs to compare the interest rates and look for online opportunities before investing. One other advantage is that recurring deposits can be used in a planned way for a future expense like a travel, marriage etc.
Bajaj Finance and Mahindra Finance FDs
The salaried class can also look at investments in the FDs of Mahindra Finance and Bajaj Finance. For example, Bajaj Finance offers a decent interest rate of 7.85 per cent, which can go as high as 8.20 per cent.
Mahindra Finance FDs offer you an interest rate of upto 7.80 per cent. FDs from both these companies are AAA rated and are hence very safe.
If you are a salaried person and need to diversify your risk, you must invest in gold. For example, if you have invested all your money in equities and if equities start to decline, you may lose substantial amounts.
A good way would be to look at gold as a diversification measure. The other reason to invest in gold is to look at meeting gold requirements for an occasion like marriage, anniversary etc. However, gold returns in the last few years have been very subdued. Do not expect too much from gold.
Some of the above investments can be risky and Greynium Information Technologies and the author cannot be held responsible for the losses of the investor based on information in this article, though all efforts have been made to ensure accuracy.