Top Investment Plans in Indian market 2019

by aditi verma 2019-11-08 08:23:25

Direct equity
Equity mutual funds
Debt mutual funds
National Pension System (NPS)
Public Provident Fund (PPF)...

When it comes to investing money, we all have our doubts and fears of losing our money or not getting enough profit. While looking at investment options, you will have to first analyse your risk profile completely and find all the risks associated with a particular product before you make the investment.

Some investments may carry a higher risk factor but will give potentially higher returns than other assets in the long term. While other investments with lower risk factor may generate lower returns. Investment products can be grouped into two types namely, Financial assets and the Non-financial assets.

The financial assets are divided into two:

- Market-linked Investment products (Stocks, Mutual Funds etc.)
- Fixed Income Products (Public Provident Fund, Fixed Deposits in Banks etc.)

The Non-financial assets may include investments in Gold and other precious items or Real Estate etc. Most Indians prefer to invest in the non-financial assets according to research.

We have a list of the top investment options to look at when you decide to invest your money somewhere and have figured out your risk profile. Some of these include the following:

1. Direct equity

Investing in stocks may have a higher risk as it is a volatile asset and there is no guarantee of getting a good return on your investment. You will need to put a lot of time and effort into picking the right stock, making the investment and deciding when to leave it. The only good thing that may happen in such an investment is that over a long period, equity may deliver higher returns. But, there is always a high risk of losing capital in such an investment, unless you decide to choose the stop-loss method to prevent any losses. In this, an order is placed in advance to sell the stock at a specific price.

2. Equity mutual funds

Equity mutual funds are an investment in the equity stocks. As per the Mutual Fund regulations in India, one must invest a minimum of 65 per cent of its assets in the equity instruments. Equity funds can either be managed actively or passively. In an actively managed Equity Fund, returns will be dependent on the Fund Manager's capability to generate the returns. The passively managed funds may include Index Funds and the ETFs (exchange-traded fund). The categorisation of the Equity schemes is made as per the market-capitalisation and the sectors in which the investment is made. Some of the Equity Mutual Funds include:

A) SBI Small-Cap Fund
3-year returns: 11.20 %
5-year returns: 18.30 %

B) Mirae Asset Emerging Bluechip Fund
3-year returns: 11.33 %
5-year returns: 17.07 %

C) Axis Long-term Equity Fund
3-year returns: 13.14 %
5-year returns: 14.10 %

3. Debt mutual funds

Investors looking for steady returns, Debt funds are the best. Debt Funds are less volatile and have a lesser risk compared with equity funds. The Debt mutual funds include corporate bonds, government securities, treasury bills, commercial paper and many other money market instruments. Some of the Debt Mutual Funds include:

A) Aditya Birla Sun Life Liquid Fund
3-year returns: 7.03 %
5-year returns: 7.52 %

B) Reliance Liquid Fund
3-year returns: 7.13 %
5-year returns: 7.60 %

C) Kotak Savings Fund
3-year returns: 7.73 %
5-year returns: 8.25 %

4. National Pension System (NPS)

The National Pension System (NPS) is a Government-backed scheme. It is a retirement-focused investment plan for the long term. It is managed by the Pension Fund Regulatory and Development Authority (PFRDA). The investor can invest in equity, fixed deposits, corporate bonds, liquid funds and government funds, and others and the pension earned will be the returns from these investments. According to your risk profile, you can decide on how much money you are willing to invest in equities through this scheme. After three years of opening the account, the investor can withdraw a portion of the amount from it.

5. Public Provident Fund (PPF)

The Public Provident Fund (PPF) is a popular investment option with a tenure of 15 years and is considered a safe investment as the compounding of the tax-free interest will have a huge impact in the later years. The interest that will be earned as well as the principal amount will be backed by the sovereign guarantee. Here is a list of the interest rates that have been offered on PPF in the previous quarters:

July-September 2019 - 7.9% (The PPF will be earning the same interest rate for the quarter of October-December 2019)

April-June 2019 - 8.0%

January-March 2019 - 8.0%

October-December 2018 - 8.0%

July-September 2018 - 7.60%

6. Bank fixed deposit (FD)

Bank fixed deposit (FD) is considered the safest choice for investments in India.
You can opt from the various interest options that include monthly, quarterly, half-yearly, yearly or cumulative interest. The interest rate that is earned will be added to your income and will be taxed in accord with your income slab. Some of the current FD rates of Banks with a tenure of 7 days to 10 years include:

A) Axis Bank
Interest rate (p.a.): 3.50% - 7.25%

B) Bank of Baroda
Interest rate (p.a.): 5.00% - 6.75%

C) Bank of India
Interest rate (p.a.): 4.75% - 6.75%

D) HDFC Bank
Interest rate (p.a.): 4.00% - 7.40%

E) ICICI Bank
Interest rate (p.a.): 4.50% - 7.40%

F) IDBI Bank
Interest rate (p.a.): 4.00% - 6.85%

G) State Bank Of India
Interest rate (p.a.): 5.00% - 6.75%

H) Yes Bank
Interest rate (p.a.): 5.50% - 7.98%

7. Senior Citizens' Saving Scheme (SCSS)

Most retired people prefer this investment scheme. Only the senior citizens or the early retirees will be eligible to invest in this scheme. The scheme can be selected from any Post Office or a Bank near you. The minimum age limit to avail this scheme is 60. The tenure of the scheme is five years which can be extended by three years after the maturity. Currently, the interest rate that can be earned on SCSS is 8.6 per cent per annum, which is payable quarterly and is 100% taxable. The maximum limit for investment is Rs 15 lakh, and it is possible to open more than one accounts.

8. Unit Linked Insurance Plan

The Unit Linked Insurance Plan (ULIP) is an investment product that is being offered by insurance companies. The ULIP provides an investor with insurance as well as an investment under a single plan. The investor can pay their premium on a monthly or a yearly basis under the scheme. A small portion of the premium that you pay will go to the Insurance policy and the remaining amount will be invested in a mutual fund. It is up to the investor to either invest the money in equity or debt plans. However, the insurance plans are offering a return of 4 to 6 per cent. Under this scheme, returns can be earned in double digits especially when the money is invested in equity funds.

9. Real Estate

Your property can be your investment when you put it on rent. The value of your property may depend on many factors such as location and also the rental value that it can earn. Investments in the real estate arena can be of two types - capital appreciation and rentals. Real estate investment involves a huge risk as there is not much liquidity. Also, it is highly important to get the necessary regulatory approvals as well.

10. Gold

Buying gold as a form of investment is something that involves safety and cost factors. Another important factor to consider is the 'making charges' that may range from 6 to 14 per cent of the cost of gold. This may even go up to 25% in certain special jewellery designs. Another way of owning paper gold is by investing in Gold ETFs. This type of investment is done through the stock exchange mode at the NSE or BSE with gold as the underlying asset to buy and sell. Another option is to invest in the Sovereign Gold Bonds as this is also one of the options to own paper-gold.

It is necessary to diversify your investment with a rational mix of high risk, low risk, tax-free and taxable as well as the tenure of the investments. The market-linked investments are volatile but help generate a higher return. On the other hand, the fixed-income investments help to save up the accumulated money to meet the financial goals.

Thumbnail image source: Forbes