10 Best Investment Options for Salaried Person in 2021
Are you an investor looking for ways to accelerate your earning capability? Do you wish to achieve stunning profit margins while undertaking little or no risk? Then just keep reading and enlighten yourself about the 10 best investment options for salaried person.
However, it would be folly to claim the high-return and low-risk potential of a product. A practical investor would chuck this Utopian fantasy out the window. In fact, if you invest in a high-risk product you are likely to be rewarded with higher returns. Investing in a low-risk product would conversely earn you lower returns.
An investor must pay heed to his risk appetite, time horizon, liquidity, and tax slab before embarking on an investment venture. Careful evaluation of one’s risk profile and thereby the risks associated with the concerned product are important.
The younger generation has an upper hand in good investments. A young person can create a safe and stable future by choosing the best investment options for salaried person. You can let your money grow with time so as to avoid financial worries in the future.
Investment options can be divided into two tiers according to the investors’ preference. One tier comprises financial assets. These include market-linked products like stocks and mutual funds and fixed income products like bank fixed deposits. Non-financial assets come under the other tier, involving gold and real estate.
Here are 10 of the best investment options for salaried person.
Best Investment Options For Salaried Person
Equity Mutual Fund
The Securities and Exchange Board of India (SEBI) has stipulated the investment procedure of an equity mutual fund in its Mutual Fund Regulations. Such a fund scheme must invest 65% of its assets in equity and equity-related instruments. Equity mutual funds are categorized according to several factors. They can be actively traded funds or passively managed index funds and exchange-traded funds (ETFs). Various market sectors also influence the nature of an equity mutual fund. Categories also emerge with respect to domestic or overseas companies.
Investors devoid of adequate experience can opt for the growth potential of equities. Types of equity mutual funds include large-cap funds, small-cap funds, Equity Linked Savings Scheme (ELSS), value funds, and contra funds.
Direct Equity
An investor seeking to avoid probable risks may not want to go for this option. One cannot rely on guaranteed returns as it is a very volatile asset. The risk of losing one’s capital money may not vibe well with the majority of the population. Yet direct equity spells advantages that are worth considering. Equity can promise higher profits than inflation-adjusted returns stretching across long periods of time.
One can exercise the stop-loss method to reduce the potential of risks. By this method, the investor can place an order in advance to sell a stock at a specific price. These advantages place direct equity among the best investment options for salaried person.
In order to directly invest in equity, one has to open a Demat account.
Hybrid Mutual Funds
Hybrid mutual funds engage in versatile investments to generate improved profits. Investment is extended to equity, debt, and other asset classes. This indicates better management of the risks involved with returns.
The strategy of allocating assets is brainstormed by mutual fund managers. Hybrid mutual funds include conservative hybrid, aggressive hybrid, multi-asset allocation, and arbitrage funds among others.
Debt Mutual Funds
Among the best investment options for salaried person, debt mutual funds mean less volatility. An investor can invest in fixed income instruments without batting an eyelid about steady returns. A debt fund invests in money market instruments, corporate bonds, government securities, treasury bills, commercial paper, among other fixed interest securities.
Despite being less volatile than equity or hybrid fund assets, debt mutual funds also come with risks. These involve interest rate risk and credit risk. Debt funds range from overnight and ultra-short duration funds to long duration and dynamic bond funds.
Public Provident Fund (PPF)
With its maturity and interest components being tax-free, Public Provident Fund (PPF) has earned a place among the best investment options for salaried person. The long tenure of 15 years with building up tax-free interest definitely strikes a chord in people. Safety is likewise promised with a sovereign guarantee backing up the principal capital invested. The Finance Ministry reviews the Public Provident Fund every quarter of a financial year.
However, a lack of flexibility is an issue with this investment asset. One has to stipulate conditions formerly for partial withdrawals, loans against PPF, and premature closures of PPF.
Bank Fixed Deposit (FD)
With higher stability and greater interest rates, a bank fixed deposit is one of the best investment options for salaried person. The Deposit Insurance and Credit Guarantee Corporation (DICGC) has laid out rules with respect to FDs which are in effect since February 4th, 2020. Accordingly, every depositor in a bank has his principal as well as interest amount insured up to a maximum of INR 5 lakh. Earlier the insurance ceiling was at INR 1 lakh.
One can evaluate one’s financial situation and accordingly choose between cumulative and non-cumulative FDs. People eager to get high returns may go for cumulative FDs, whereas those inclined toward periodic earning options may choose non-cumulative FDs.
However, FDs offer premature withdrawal only in accordance with the concerned bank’s policies. Bank fixed deposits can be renewed in a hassle-free manner and also give an added cherry on top. One can get a higher interest rate on one’s FD investment upon choosing the same financial institution.
Flexi Deposit
A Flexi Deposit is a bank fixed deposit’s half-brother. Both investment assets are almost similar barring a few crucial areas. On choosing a Flexi deposit, one is given the power to choose the tenor or lock-in period of any length of time. Premature withdrawals can be executed flawlessly only with the issue of prior notice. Better still, no penalty amount will be charged when one makes a premature withdrawal. These aspects make a Flexi deposit sparkle as one of the best investment options for salaried person.
National Pension System (NPS)
The National Pension System is a retirement savings scheme designed to ensure a good future for working individuals. First visualized in 1999, the NPS came to life in 2004 and it was not until 2009 that it was introduced as an All Citizen Scheme. It is supervised by the Pension Fund Regulatory and Development Authority (PFRDA).
The NPS comprises a medley of a variety of assets – equity, fixed deposits, corporate bonds, liquid funds, and government funds. An NPS Tier-1 account can remain active with a minimum annual (April-March) contribution of INR 1000. Previously, the contribution amount had stood at INR 6000.
Real Estate
It is customary among many people in India to invest in a second plot of land or property. An important factor to keep in mind while investing in real estate is the location. A sprawling green space or forest adjacent to your land is likely to garner a hefty value of the property and also shoot up rental costs. This makes real estate one of the best investment options for salaried person.
However, real estate has disadvantages in lacking liquidity options. One also has to acquire the necessary regulatory approvals, though this has been solved to an extent with the real estate regulator.
Gold
The attraction towards the glittering metal possesses many people. Yet owning any amount of gold entails a series of risks such as security. High costs also prevail owing to the gold rate and making charges that vary between 6-14% of the cost of gold. Banks sell gold coins as well as paper gold. Choosing paper gold is a good investment option as it caters to your budget. One can invest in sovereign gold bonds or gold mutual funds in order to own paper gold.
The investment options mentioned above are either market-linked or fixed-income. While market-linked assets entail high risks and great returns, fixed-income one’s aid in accumulating wealth in a safe environment. Both are helpful once you are sure about your own financial needs. Keeping in mind risks, time horizons, and tax slabs, one can easily choose among the best investment options for salaried person.
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