If you are looking to secure the future with an investment that spans around 10 to 15 years, there are plenty of options. The problem right now with investment plans that insurance companies and fund houses offer, is that their returns are not very encouraging. Here are 5 investment plans that would help secure your child's future.
Public Provident Fund
This has to be your obvious choice for a number of reasons. The first and the biggest is that the interest earned on this instrument is tax free, unlike mutual funds and bank fixed deposits, where the income earned is taxed.
The second is that the interest rate of 7.9 per cent, is way higher than most banks in the country. SBI at the moment offers an interest rate of just 6.5 per cent on its deposits. Apart from this, investment in PPF qualifies for tax exemption under Sec 80C.
This means any amount upto Rs 1.5 lakh deposited in the PPF account will be deducted from total income for the payment of tax.
The PPF runs for 15 years, which makes it a great planning instrument for higher education or marriage. Lastly, it is backed by the Government and is hence very safe.
Sukanya Samriddhi Account
This is another scheme that is a great child investment plan, but is meant only for the girl child. Like the PPF the amount qualifies for tax exemption under SEC80C of the income Tax Act.
It's important to note that the account can be closed after the completion of 18 years of the child provided that the girl is married. Otherwise, it can be closed after 21 years.
The beauty of the scheme is its interest rate, which is way higher than any other fixed yielding instrument. At the moment, the Sukanya Samriddhi Account attracts an interest rate of 8.4 per cent, which is not bad at all. A good investment bet for those looking at a long-term investment for the girl child.
This should be an option for those willing to take risk. The returns like the PPF and Sukanya Samriddhi Account mentioned above are not guaranteed. In the longer term, equity mutual funds have given decent returns. However, there can be no assurance.
You have an option of investing in equity or debt mutual funds. The one good thing about this unlike the two schemes mentioned earlier is that they are easily liquid. This means that you can encash the same anytime. However, there is also a drawback in the sense that it would never result in a forced saving for a pre-determined objective.
This is another interesting bet over the long term. Here again the returns are not guaranteed. But, you must look at the gold prices and how they have moved in the last 10 years. In fact, 10 years ago at the same time, gold was trading near the Rs 15,000 levels per 10 grams mark. Today, it is near Rs 36,000, depending on which city you are in. That is not bad at all and equals returns from debt instruments.
Here again, it is difficult to predict which way the precious metal will move, but, in the longer term it has always given good returns.
Fixed yielding instruments
One can also look at fixed yielding instruments like bank deposits and company deposits. However, this would be good if you are looking at a slightly shorter term tenure of 5 to 10 years. Deposits are unlikely to come beyond that maturity period.
All in all, one needs to stay focused and disciplined when one needs to meet the objective of child investment plan. You need to look for safety as well as returns to meet your objective