You have to plan your finances such that your immediate and long-term financial needs are met. Investment planning is a key component of financial planning. Investments will aide in wealth growth and income generation.
After you retire, you will not have a regular salary but you will have monetary needs. Therefore it is important to have financial stability in life. It is easier to meet other challenges in life if the financial aspect is taken care of.
There are a variety of investment options in India like equity, mutual funds, bonds, PPF, etc. Check lesser-known investment options.
Lesser-Known Investment Options In India
- Exchange-Traded Funds (ETFs) & Index Fund – ETFs are funds that invest in other assets such as stocks, indices or commodities. They are like mutual funds that can be bought and sold on the exchange like BSE & NSE. There is lesser risk in ETFs as compared to direct equity as they are well diversified. But till date, active funds are giving better returns than ETFs but things will soon change – at least on the large-cap side. In developed countries, people have started preferring ETF over active funds but in India liquidity can be an issue. Some examples of ETFs in India are ICICI SENSEX Prudential Exchange Traded Fund (Underlying product – Sensex), Reliance ETF NIFTY BeES (Underlying product – NIFTY 50 Index), etc.
Check – DSP Equal Nifty 50 Index
2. Atal Pension Yojana – It is a pension scheme backed by the Government of India. The laborers in the unorganized sector are the target audience for this scheme though people working in the private sector and self-employed people can also participate in it. The participants are encouraged to save money for their old age. A person can contribute a fixed amount depending on the pension that he/she wants to receive. The contribution has to be done until one reaches the age of 60 years. The contribution depends on his/her age. The pension receivable can be Rs. 1000, Rs. 2000, Rs. 3000, Rs. 4000 and Rs. 5000 depending on the contribution. The pension will be paid to the spouse in case of subscriber’s death and to the nominee in case of spouse’s death. It is a scheme to help the unorganized sector in their old age when they may not have a source of income.
3. Sukanya Samriddhi Scheme – This scheme is a savings account that can be opened in the name of a girl child from the time she is born till she becomes 10 years old by her parents or her guardians. It can be opened in a post office or public sector bank like SBI or Bank of Baroda etc. The minimum deposit for the account is Rs. 1000 and the maximum is Rs. 1,50,0000 in one year. The rate of interest currently is 8.1%. It is a good scheme for the girl as it gives her some financial security. It is a less risky scheme compared to Mutual Funds and Equity. Check – Sukanya Samridhi Review
4. National Pension Scheme (NPS) – It is also a Pension scheme for people between the ages of 18 and 60 years. It is a market-linked retirement plan. There are two types of plans –
– Tier I Account – There are restrictions on withdrawal
– Tier II account – It is a voluntary plan where there are no restrictions on withdrawal
Check – What are alternative investment funds (AIFs)
The contribution is invested in different instruments such as index-based stocks, Public sector companies’ bonds, and Government bonds. 25% of the contribution made by a subscriber is exempted from income tax in partial withdrawal. When the subscriber reaches 60 years, 40% of the amount withdrawn is exempt from tax. Up to 60% is withdrawable and the rest has to be invested in an annuity product. Income from this investment is taxable. You can invest any amount from Rs. 6000 onwards. The contribution is deductible under Section 80CCD up to Rs. 50,000 and amounts up to 10% of salary are also deductible from taxable income. An investment up to 20% of gross annual income is deductible from taxable income, subject to a maximum of Rs. 1,50,0000 for self-employed individuals. Both resident Indians and NRIs can invest in NPS.
5. Fixed Maturity Plans – Fixed Maturity Plans (FMPs) are close-ended mutual fund schemes which invest in debt instruments such as certificates of deposits (CDs), money market instruments, or bonds. They are low-risk instruments and offer returns that are not guaranteed. The return is usually higher than that on FDs due to tax arbitrage if you hold for 3 years. Different plans have different maturity periods from 1 year to 5 years depending on the instruments invested in. In case you have to sell it before the maturity date, you will have to sell on exchanges but liquidity is an issue. It is therefore better to invest an amount that you will not need anytime soon. There is a tax applicable on dividends distributed and capital gains tax apply on FMPs based on growth.
It is important to invest in a variety of instruments for short-term returns as well as long-term returns so that you are financially secure whether you have a regular source of income or not.
Please share any other investment that you feel is lesser know & should be part of the above list.
Nice Post…though the FMPs are relatively less risky, investors should not treat these as dream products that offer high return with zero risks.
I am currently investing in an ELSS scheme for the last 3 years through SIP mode. Also i am investing lump sum amount of around 6000-7000 in the same scheme and folio every 3-4 months. I want to know if the compounding formula will be calculated together for SIP and lump sum or it will calculated separately.( SIP amount compound interest calculated separately and lump sum amount compound interest calculated separately).
Well written article, Hemant.
Thanks Manisha 🙂
I Pradeep kumar your friend and also student wants to seek your suggestion and also your guide to how to tackle financial and investment opportunities and also whether it improve my financial or my job or business prospectus.i also want to state you clearly that we have no financial planning and whatever has been left was squandered away by fraudulent relatives.
Nice article, SIP investment is the best investment scenario for the long-term perspective.
Tax saving bonds and tax-free bonds are normally available in the last quarter of the fiscal and it is very effective if you are looking at tax efficient investments in India.
Not necessary Samay.
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