Other Investment Alternatives

Stock Investment

Stock investment is one of the most preferred investment options due to the high return potential. As the stock investments carry a little higher risk and hence are also capable of generating high returns.

You can expect an annual return of 15% – 18%, if you know the art of investing in the right stocks at the right time. I would recommend you to start with a small investment in stock with an intent to learn before making big investments.

Best Investment Options for a Salaried Person

1. Public Provident Fund (PPF)

Apart from your regular pension contribution, an investment in PPF account can save lots of tax as all the deposits made are deductible under section 80C.

Further, all the accumulated principal and interest are exempted from tax at the time of withdrawal.

2. National Pension System (NPS)

NPS scheme is portable across jobs and locations. The added benefit is the returns from equity and debt investments.

All your contributions up to Rs. 1.5 Lac to Tier I capital are exempted under section 80C. Plus you can claim an additional up to Rs. 50,000 of tax benefits.

So here you can save Rs. 2 Lacs of tax.

3. Equity Linked Savings Scheme (ELSS)

You get a higher return of 15% to 18% while investing in ELSS. Investment in ELSS funds have a lesser lock-in period of 3 years and any earning over Rs. 1 Lac are taxable.

4. Tax Savings Fixed Deposit

If you want to have a safe investment option without investing in equities then pick tax saving fixed deposit of any bank or post office.

The interest rates vary from bank to bank and are in the range of 6% to 8.5%.

5. Unit Linked Insurance Plans (ULIPs)

Investments in ULIPs gives you wealth creation option along with life cover. Premium paid are eligible for deduction under section 80C. Plus the returns on maturity are exempt under section 10(10D).

The returns vary depending on the combination of equity, debt or hybrid funds.

Best Investment Plan with High Returns

6. Direct Equity Investment

All the equity investments carry higher risks and hence are also capable of generating very high returns. Opt for equity investment option if you are comfortable losing as much as 50% of the capital.

The last 1-year return of NSE is 12.40% and in the last 2 year generated a 26.5% returns. Likewise, shares of blue-chip companies have delivered huge returns in the near past.

7. Mutual Funds

Mutual funds are the safest and the most convenient way of investing in the markets when you do not have the time and expertise.

The equity mutual funds have generated consistently higher returns. With funds like L&T India Value, Mirae Asset India and ICICI Prudential Blue Chip delivering 3 years return in the range of 14% to 18%.

The investment in mutual funds can be a lump sum or monthly SIP for an amount as low as Rs. 500.

8. Commercial Real Estate

Commercial real estate provides rental income and capital appreciation. The higher appreciation is due to demand for office space and growth of corporate environment.

But the location, building quality, market space rent and the demand-supply plays a major factor in deciding returns.

A good investment in office and shop spaces not only fetches higher returns but also helps in the diversification of investment assets.

9. Initial Public Offer (IPO)

The best part of investing in IPO is that the money gets blocked only for 7 to 15 days. Prudent investment in a good company coming out with IPO can fetch returns as high as 20-25% over a period of time.

Best Investment Plan for 1 Year

10. Fixed Deposit

FDs are the safest and secure investment options provided by banks and post offices which earn higher interest rates than a savings account.

Any excess amount which you are not going to use for a certain period of time can be safely put into a fixed deposit.

11. Recurring Deposit

Like fixed deposit, RD to earns a higher interest rate than a savings account.

RD let you invest any amount which can be as small as Rs. 5 per month and is the best option for promoting the habit of savings.

12. Liquid Mutual Fund

The option carries the least amount of risk and is for persons who have idle money for short period of time.

The mutual fund invests your money in the highly liquid short term instruments like the bank’s CD, T-bills and commercial papers generally with a maturity period of less than 91 days.

13. Ultra Short Term Debt MF Plans

Unlike, liquid MF the money is invested in bonds and other instruments with maturity more than 91 days and less than 1 year.

Ultra ST debt MF does carry interest rate risk, are not so liquid and hence gives you higher returns.

Best Investment Plan for 3 Years

14. Savings Account with Sweep in Facility

The sweep in option lets you enjoy flexibility in managing your savings and also enjoy higher returns from a fixed deposit.

Here, any excess money lying in your savings account, above a particular threshold level gets automatically converted into a fixed deposit and vice versa.

15. Short Term Debt MF

Is a good option for generating stable returns with modest risk.

The funds are locked for up to 3 years and there is a 1% penalty for premature redemption. Still you can expect returns a bit higher than the fixed deposit in a range of 8-10%.

16. Equity Linked Savings Scheme (ELSS)

There are numerous benefits when you invest in ELSS like tax savings, higher returns (15% to 18%), option to invest monthly (SIP) and can be started with as low as investing Rs. 500.

17. Fixed Deposit

Returns on a 3-year FDs vary from bank to bank, usually in a range of 6.5% to 8%. Also there are no associated tax benefits in this investment option.

8. Recurring Deposit (RD)

The returns generated are almost the same as a fixed deposit for a 3 year period.