Filing for AY 2024-25 is coming soon
Filing for AY 2024-25 is coming soon
Keep calm and sign up for early access to our super filing platform

Best investment plans for Beginners in India: Mutual Funds, Stock Market and Bank Deposits

Updated on: Jan 22nd, 2023

|

5 min read

social iconssocial iconssocial iconssocial icons

Novice investors are generally young and in the initial years of their professional life. Hence, they will have a long-term investment horizon. Having age and time on your side, a novice investor should look to make the most of their investments. We have covered the following in this article:

 

Why Should You Start Investing Early?

Starting to invest at a young age will let you utilise the advantage of long-term investment horizon to the fullest. As you have age on your side, you can go with an aggressive approach in your investment strategies. Even if something goes wrong, you would still have enough time on your side to recover and make good profits thereafter. Hence, starting to invest early is key to making the most of the investment opportunities.

Mutual Funds

As you have a long-term investment horizon, you can unleash the power of compounding by investing in mutual funds. Furthermore, you don’t need to have market knowledge. Mutual funds are professionally managed by fund managers who have an excellent track record of managing investment portfolios. Since you are a young investor, you can invest in equity funds as these are known to offer excellent returns in the long run.

Hybrid and debt funds are also a good option, but you would limit your returns by investing in these. If you are to save taxes, then you can invest in equity-linked savings scheme (ELSS). These funds are covered under Section 80C of the Income Tax Act, 1961, and allows you to save up to Rs 46,800 in taxes a year. ELSS mutual funds offer the dual benefit of tax deductions and wealth accumulation, which no other tax-saving investment does.

Stock Markets - Direct Equity

Investing in stock markets gives you a chance to earn the highest returns among all investment options. As you have age on your side, you can invest with a long-term investment horizon. This will tackle the market volatility and benefit you in the long run.

However, to invest in stock markets, you need to have market knowledge. If not, then you should stay away from stock markets. Investing in stock markets with no market knowledge is as good as gambling. If you had invested Rs 55,000 in the shares of Eicher Motors (the manufacturer of Enfield bikes) in the year 2001 (Rs 17.50 per share), then your investment worth would now be Rs 4.75 crore! Such is the power of stock markets.

Bank Deposits

Bank deposits are for those that are not willing to take any risk. However, low-risk investments come with low returns. If you have a lump sum at your disposal, then you can go ahead and invest in fixed deposits. The interest rate on fixed deposits are pretty attractive and can accumulate a considerable sum if invested for a long-term. If you can invest a fixed sum on a regular basis, say monthly or quarterly, then you can invest in a recurring deposit. One thing to note here is that the returns offered by bank deposits are never a match to the potential returns offered by mutual funds and stock markets.

Government Schemes

There are a handful of government schemes that you can invest in. The most popular government savings is the Public Provident Fund (PPF). it comes with a lock-in period of 15 years and offers returns in the range of 7-9% a year. Apart from that, you can invest in National Savings Certificate (NSC), Voluntary Provident Fund (VPF).

Unit Linked Insurance Plans (ULIPs)

These plans come with the benefit of an insurance cover along with the returns of long term wealth creation. It is considered a very good option for investors with a moderate to high risk taking ability. The investments that you make in a ULIP are split into two parts:

  • Premium for life insurance coverage 
  • Capital investment in debt and equity funds

The key to getting rich is starting to invest at a young age. This will give you an opportunity to accumulate a considerable amount over a period of time, and you can fall back on this to accomplish various goals.

inline CTA
Invest in Direct Mutual Funds
Save taxes upto Rs 46,800, 0% commission
CONTENTS

Clear offers taxation & financial solutions to individuals, businesses, organizations & chartered accountants in India. Clear serves 1.5+ Million happy customers, 20000+ CAs & tax experts & 10000+ businesses across India.

Efiling Income Tax Returns(ITR) is made easy with Clear platform. Just upload your form 16, claim your deductions and get your acknowledgment number online. You can efile income tax return on your income from salary, house property, capital gains, business & profession and income from other sources. Further you can also file TDS returns, generate Form-16, use our Tax Calculator software, claim HRA, check refund status and generate rent receipts for Income Tax Filing.

CAs, experts and businesses can get GST ready with Clear GST software & certification course. Our GST Software helps CAs, tax experts & business to manage returns & invoices in an easy manner. Our Goods & Services Tax course includes tutorial videos, guides and expert assistance to help you in mastering Goods and Services Tax. Clear can also help you in getting your business registered for Goods & Services Tax Law.

Save taxes with Clear by investing in tax saving mutual funds (ELSS) online. Our experts suggest the best funds and you can get high returns by investing directly or through SIP. Download Black by ClearTax App to file returns from your mobile phone.

Cleartax is a product by Defmacro Software Pvt. Ltd.

Company PolicyTerms of use

ISO

ISO 27001

Data Center

SSL

SSL Certified Site

128-bit encryption