Very few investors want to invest so that high returns are achieved as quickly as possible without risking losing the principal money. This is why multiple investors are always searching for top investment plans without bank deposits. Therefore, prior to investing, you must balance your own risk profile with the risks associated with the commodity when choosing an investment method. So here we discuss the top 7 financial assets and non-financial assets to invest in India, which are better than bank deposits.
Invest in Direct Equity
Direct equity investment is all about prosperity in the long term. If one purchases stocks, he/she becomes part-owners in that company. Investors prefer equity since no other investment option promises long-term growth as high as equity. Thus, one can share both profit and loss made by a company. One can invest in a company either directly through the purchase of shares, or indirectly through mutual funds. Direct investment in equities can be very beneficial.
At the same time, this is also true that there is a significant risk of loss of direct equity. The winners are those who can manage risk and return when dealing with direct equity. If you can invest in equities by SIP (indirect equity), you don't need to worry about market timing. You could diversify across sectors and market capitalizations to some point to reduce the risk. At present, the market returns of 1-, 3-, and 5 years are around 13%, 8%, and 12.5% respectively. However, the only prerequisite is that one should be conscious of the value of stocks and of market time.
Invest in Tax Free Bonds
Tax-free bonds are provided by the government to raise funds for a specific purpose. Some of the top tax saving bonds in India are Dewan Housing Finance Corporation Ltd, Reliance Home Finance Ltd, SREI Infrastructure Finance Ltd and much more. Generally, members of the HUF, trusts, cooperative banks and qualified institutional investors tend to invest in such bonds. Tax Free Bonds deliver a fixed interest rate and is, therefore, an investment source with low risk. For addition, tax-free bonds have a long term tenure of 10 years or more
This bond is the ideal choice for taxpayers and senior citizens searching for a fixed income. The government invests in infrastructure and housing projects through the issuance of those bonds, therefore the risk in those funds is much lower. You can start investing in Tax Free Bonds through a demat account. Note, the investment subscription span is only available for a given time. Apart from this if an investor applies for the post-issuance bond, he/she will be able to invest using the trading account. Tax Free Bonds offers attractive interest rates, however, the rates are subject to fluctuations as they are related to the current rate of government securities.
Invest in Debt Mutual Funds
Debt mutual funds can provide better returns than bank deposits since the money is invested in various government bonds and corporate bonds. Debt funds are best suited for investors looking to achieve consistent returns. Debt Mutual Funds are volatile in comparison to equity funds and therefore less risky. If you have a surplus fund you can also invest in debt fund. Another incentive to participate in debt funds is to have the investment portfolio diversified. This can be a great way to reduce the overall portfolio risk if you have a higher share allocation in your portfolio. One can generally invest in Debt Mutual Funds by Lump sum investments and Systematic Investment Plans (SIP).
Yet debt fund investments have many more complexities as a particular debt fund can only buy specific securities with different maturity periods, a gilt fund can only purchase government bonds while a liquid fund can purchase maturity securities up to 91 days. Additionally, debt funds do not give guaranteed returns but have market-linked returns that can vary significantly. You can invest in different types of Debt Funds such as Liquid funds, Short / Medium / Long Term funds, Dynamic bond funds and Fixed Maturity Plans. Currently, the last 3 year return of Debt Mutual Fund is around 7.16% to 9.27% based on the fund with different investment horizon.
Invest in Monthly Income Scheme
One of the hardest challenges in today's market is the search for the best options of a guaranteed monthly income. There are several schemes on sale, so adequate analysis and information is important before you choose. So you have to think about the various monthly income schemes before you agree to choose the right one. Monthly Income Scheme (MIS) is provides guaranteed returns to the investor at an interest rate of 7.3% for the Post Office Monthly Income Scheme per year.
The period of maturity for the monthly income scheme is 5 years. The consumer should therefore preferably deduct the sum after this time. Investors can start investing with minimum documentation.
Some of the best Monthly Income Scheme in India are Corporate Deposits, Post Office Monthly Income Scheme, Government bond, and Senior Citizen Savings Scheme.
Invest in NCD's
Non-convertible debentures (NCD) are fixed-income securities, typically issued in the form of a public issue by high-rated companies to raise long-term capital appreciations. Compared with convertible debentures they pay comparatively higher interest rates. NCD's are not convertible into equity or stocks. NCDs have a set maturity date and the interest may be charged along with the principal amount, either monthly, quarterly or annually, depending on the specified fixed term. It provides high returns, liquidity, low risk and tax benefits as compare to convertible bonds.
NCDs offer high interest rates. Interests usually range from 8 per cent to 12 per cent. Interest charges are either monthly, quarterly, half-yearly or yearly. NCDs also offer a cumulative payout option. The tax implications of the NCDs depend on the tax bracket under which the investor falls. If the NCDs are sold within one year or less, the STCG will apply as per the income tax leaf rate. If the NCDs are sold after one year or more or before the maturity date, the LTCG will apply with an indexation rate of 20%. There are two types of Secured NCDs and Unsecured NCDs. The interest rate on unsecured NCDs however is higher than that of secured NCDs.
Invest in RBI Savings Bond
This bond is classified as 7.75 and have a seven-year term and come with cumulative and non-cumulative choices. Compared with many fixed-income options, this bond is one of the best choices for Indian Citizens. If you are looking for regular revenue, the non-cumulative plan, with its favourable interest rate and half-year interest payments will be the best for you. If you are looking for cumulative investment, these bonds may be considered after you have exceeded your investment cap under Section 80C or if your earning is within the tax-exempt limit of 5 lakh. The yield on the cumulative bond is comparable with the national savings certificate (NSC) and the five-year postal deposit, with a supplementary half year duration of 7.9%, without considering tax breaks.
The RBI Savings Bonds is one of the best investment options as issued by the RBI on behalf of the Indian Government. Individuals and Hindu Undivided Families are eligible to buy these bonds with a minimum investment of approximately 1,000 and no upper limits. While cumulative bond interest is paid at maturity with the principal, interest is paid half-yearly, with non-cumulative bonds being paid on 1 August and 1 February respectively for the period ending on 31 July and 31 January. Investments in those bonds are not eligible under section 80C of the Income Tax Act for tax benefit. Also, interest income is taxable according to the slab rate of income tax on the investor. At the point of interest payment, a 10% TDS will be withheld if the total interest earned in a year reaches about 40 000 per year.
Invest in PPF
The PPF scheme was introduced in 1968 by the National Savings Institute of the Ministry of Finance. The main aim of the PPF scheme is to help people make small investments and generate investment returns. A PPF account must have a tenure of 15 years. Account-holders may however extend the account duration by 5 years. The sum required to open a PPF account would be Rs.100. For one year, if the total investment made toward the plan exceeds Rs.1.5 lakh, no interest on the excess amount will be paid, and no tax deductions can be claimed as well. PPF provides different deposit modes, the individual can make PPF payments via PF Transfer, DD, Cheque or Cash.
PPF investment is payable in a lump sum or in installments, the maximum number of installments allowed is 12. The minimum investment and the maximum investment which can occur in a financial year is Rs.500 and Rs.1,5 lakh, respectively. A PPF account, owned by the government of India, offers risk-free guaranteed returns and capital protection for the Indians. Presently the interest rate is provided in PPF is ranging from 7.9& to 8.7% per annum. Interest shall be paid on 31 March and the interest rate of PPF shall be set annually by the Finance Ministry. The interest calculation is based on the minimum balance between the end of the fifth day and the final day of the month.
About the Author
Vipul Das has an experience of 1 year as a Finance Writer for Goodreturns.in. Vipul has done BCA from Dr C.V Raman University.
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