There are plenty of investment options in India ranging from low-risk, low-return ones to high-risk, high-return ones. Let us discuss some of the popular types of investment available in India.
Top investment options in India
We’ll discuss various types of investment available in India to get you started. Let’s dig in.
Unit Linked Insurance Plan (ULIP)
ULIP is an investment vehicle that provides insurance coverage along with investment options.
Features of ULIP
1. The investor’s life is insured during the plan’s tenure.
2. The policyholder can choose from a range of equity, debt, or balanced funds.
3. The policyholder can switch between funds, adjust the premium payment frequency, and allocate premiums according to personal investment goals.
4. The policyholder receives tax benefits under Section 80C and Section 10 (10D) of the Income Tax Act.
5. There are financial charges levied in ULIP.
6. ULIPs offer updates on the invested funds’ net asset values (NAVs).
Public Provident Fund (PPF)
PPF is a long-term savings scheme of the Indian government. It provides safety, attractive returns, and tax benefits to investors.
Features of PPF
1. The investment can range from a minimum of Rs. 500 up to a maximum of Rs. 1,50,000 per financial year.
2. The tenure is 15 years.
3. It has a fixed interest rate revised periodically. Currently, it is 7.1%.
4. After three years, the account holder can take a loan against the PPF balance.
5. Partial withdrawals are permitted after the completion of the seventh financial year.
6. Account holders can nominate a person to receive the maturity amount in case of death.
Mutual funds create investment opportunities for multiple investors to pool their money into a diversified portfolio of stocks, bonds, and other financial securities. Professional fund managers use their expertise to make investment decisions.
Mutual fund issues investors units/shares in the fund. The value of the portfolio of the investments is divided by the total number of units/shares issued by the fund. This is the NAV. NAV is calculated daily, and individual investors can buy/sell units/shares based on the day’s NAV.
Let us look at different types of mutual funds:
Equity mutual funds
In these funds, the investment portfolio of investments will involve companies’ equity stock to generate maximum profits for the investors through dividend payouts and capital appreciation. The risk is spread across diverse companies in various sectors.
Debt mutual funds
Debt funds invest in fixed-income securities. The funds focus on the safety of capital and protection from the volatility of the stock market. Debt funds generate a regular income through the interest amounts received from securities.
Features of mutual funds
1. The contributions of multiple investors fund the portfolio.
2. Mutual funds invest in assorted securities—shares of companies, debt instruments issued by companies/government, etc.—so that the spread minimizes the risk.
3. Investors can easily buy/sell mutual fund shares/units according to the day’s NAV on any working day.
4. The choice of the investment and the timing of the sale/purchase of the securities is in the hands of experienced fund managers, so the risk is minimal.
5. The mutual fund investor can see the portfolio, performance, and expenses incurred by the fund at all times.
6. Since these funds have minimum investment stipulations, many investors can afford them.
7. Whatever capital gains have accrued are taxed at the rate applicable to the individual investor and can also be deferred till the investor sells the mutual fund shares.
8. Government agencies have introduced regulations to protect investors’ capital.
Bank fixed deposits
An individual can deposit money with a bank for a specified period for a pre-specified rate of interest. The bank guarantees repayment on the maturity date.
Features of bank fixed deposits
1. The interest rate is fixed, so there is a steady, stable income assured.
2. Up to a certain amount, the Indian government guarantees bank deposits.
3. Depositors can choose tenures from seven days to ten years according to their needs.
4. Even though the tenures are fixed, you can redeem FDs before maturity after paying the penalty.
5. Depositors can choose to compound the interest receivable, thus increasing their returns.
6. Sec 80(C) of the Income Tax Act provides tax benefits.
7. Banks permit loans to depositors against their deposits.
National Pension Scheme (NPS)
NPS is a government scheme for providing retirement benefits to subscribers. The scheme invests subscribers’ contributions in equity funds and government bonds. The income generated from these investments is used to purchase an annuity at retirement so that subscribers are assured a steady income stream.
Features of NPS
1. Subscribers switching jobs and moving to a different city can continue using the same NPS account.
2. Options are available in various asset classes.
3. Subscribers can avail tax benefits under Section 80C and Section 10(34) of the Income Tax Act.
4. The scheme allows partial withdrawal for specific purposes like higher education, housing, etc.
5. On reaching 60 years of age, you can withdraw up to 60% of the corpus, and the rest can be used for purchasing an annuity.
6. Government bodies regulate it.
In this blog post, we have provided details of various types of investment available in India. Choose the one that suits your individual circumstances, needs, and priorities. There is no “one-size-fits-all” answer.
Which is the best place to invest money in India?
Depending on your specific needs and requirements, choose the investment that suits you—if you have an appetite for risk, and you desire capital appreciation, choose equity mutual funds, not to mention other types of investment.
Where can I invest ₹50,000 in India?
If you have a long-term investment plan and do not require the funds immediately, PPF could be your choice.
Where do I invest money in India for monthly income?
For an assured monthly income, bank fixed deposits, or debt mutual funds could be a good choice.