Financial Planning :7 Best Investment Options for the Year 2017-18
Written on Monday, April 17, 2017
By Amit Chauhan - Senior Manager - Corporate Communications
Whether you are a conservative investor or an aggressive investor, diversifying your investments is important as you need both 'Security' as well as 'Inflation beating returns.' Thus, your investment portfolio requires a combination of instruments that offers guaranteed returns plus instruments that have the potential of wealth creation. This way you respectively. of both.
To keep your investment portfolio diversified, it is important to review it regularly. Now that we have entered in the new financial year, this is the best time to review the portfolio and begin our investments for 2017-18. Thus, this blog lists down 7 Best Investment Options for the Year 2017-18.
Whether you are investing for wealth-creation or for tax saving, whether it's a long-term investment or a short-term, early planning is the right and smart move because the sooner you start investing, the quicker your investment starts earning returns on it.
Below is the list of some of the most prominent schemes to look for in next financial year -
For Wealth Creation:
Mutual Funds: Mutual fund investment is a good option for investors, who are looking for wealth creation. It gives you the flexibility of investing lump-sum or investing in small amounts through the mode of Systemic Investment Plan (SIP). Mutual Fund offers a wide variety of schemes that suits well at various stages of your life. It also helps investors generate better inflation-adjusted returns. People looking for highly liquid mutual fund schemes can always go for liquid funds. Every investor, whether conservative or aggressive, should invest in mutual fund schemes to get inflation-adjusted returns.
For Girl Child's Future Planning:
Sukanya Samriddhi Yojna: It is a good investment product for children future planning and it is suitable for parents with girl children. The Sukanya Samriddhi Yojna offers a return of 8.4% for April-June 2017. An account can be opened with a minimum deposit of Rs. 1000, and up to Rs. 1.5 lakhs can be invested each year. Tenure of the investment will be till the girl child turns 18. If you are planning to invest for your daughter's higher education and future wedding, then you can think of SSY as one of the option to build the corpus. Most importantly, maturity corpus is tax-free.
Risk Averse Investors' Savings Paradise For Tax Benefits:
Voluntary Provident Fund: Employee Provident Fund is a highly preferred investment option for risk-averse investors. If you are also a risk-averse investor, then you can increase your EPF contribution using the VPF i.e. Voluntary Provident Fund scheme. Under VPF, you can voluntarily contribute any percentage of your salary to the provident fund. Although, the contribution must be more than 12% i.e. the PF ceiling that has been mandated by Government. An employee can contribute 100% of his basic salary and DA towards VPF. Interest offered will be the same as of EPF.
National Saving Certificate: Popularly known as NSC, National Saving Certificate is a Government of India Saving Bond certificate. The interest rate on the NSC is guaranteed. Currently, the interest rate on NSC is 8.1 per cent on the five-year option, compounded half yearly. Once you have invested in the NSC, the interest rate applicable that time of investment will remain the same throughout the tenure of the investment. Certificates are available in denominations of Rs. 100, 500, 1000, 5000 and 10,000/-. The premature encasement is possible after three years or in the case of death of the certificate holder.
Public Provident Fund (PPF): PPF is a Government of India scheme, suitable for saving for long-term. It is one of the safest options to build a corpus for retirement. But nowadays, along with PPF, investors also include Mutual Funds and National Pension System (NPS) in their retirement planning. This is because PPF interest rate is declining every year and inflation is rising. Compared to PPF, Mutual Funds and NPS have the potential to provide more inflation-adjusted returns. Currently, PPF provides 7.9% interest rate for April-June 2017, with a maximum investment of Rs. 1.5 lakhs in one financial year.
For Tax Benefits and Wealth Creation with Shortest Lock-in:
Equity Linked Saving Scheme (ELSS): It is market-linked mutual fund scheme that comes with 3 years compulsory lock-in period. It is a tax saving investment under section 80 C of Income Tax Act. ELSS has the shortest lock-in period among all other tax-saving products under Section 80 C. It is suitable for all age group of investors with the vision of long-term wealth creation and tax-free corpus. If you are planning to invest in ELSS mutual fund schemes, you must pick 3-5 different AMC's ELSS schemes and divide your investments accordingly to diversify you are an investment and lower down the risk. It is better to invest in ELSS since the beginning of the financial year. For this, you have to take the SIP route. ELSS is a good option for young investors, who are below 40 years of age. For high salaried or high-income individuals, it is advisable to invest in ELSS amounts more than Rs.1.5 Lakh. However, the tax benefit will be limited to investment up to 1.5 Lakh, but the overall returns, accrued on the total investments, can help in building a big corpus in the future.
For Pension Post-Retirement Life:
National Pension System(NPS): NPS is market-linked retirement planning solution that goes beyond a regular pension solution. It is suitable for investors looking for long-term saving and tax-free corpus. Young investors, under 40 years of age, should use NPS as the main vehicle for wealth creation and retirement planning as well as for pension planning. This category has a long-time horizon & hence, they can opt for high allocation towards equity in their NPS Plan. Subscribers above 40 years of age should divide their retirement corpus between EPF & NPS in the ratio of 50:50.
Warren Buffet rightly said that ''Don't put all your eggs in one basket'', and indeed you should not do that because that a wave of risk can damage all your eggs, so diversification is the technique to glide over risks. Whether you are putting your money in secured investment schemes or market-driven investment schemes, avoid putting all your money in one type of investment products. Diversify Always!