Smart investments for people to make in 2023

Updated on: Dec 29th, 2022


4 min read

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2022 has begun finally and you just got your salary. Remember, you made a resolution to spend wisely. But the to-buy list of wishes is making you vulnerable to splurge. Before getting impulsive, stop and introspect! Don’t waste your salary on unimportant things. Instead, use this money to build a brighter and financially liberated future for yourself.

Here are the Six smart investments that you can embark upon in 2022:

Invest in equity

The stock market is at its all time high. Even a correction doesn’t seem around the corner. If you are the one who loves to take risks and knows the capital markets inside-out, then investing in equity stocks is the thing for you. Keep a long-term investment horizon of at least 7 to 10 years in mind. Moreover, be meticulous while picking stocks. Go for stocks which have a lower P/E ratio as compared to the P/B ratio. It means that stocks are undervalued and there’s scope for a price rise.

After a dry spell of two years, mid caps and small-caps happened to be blockbuster performers in 2021. You can even think of adding a small proportion of quality mid/small-cap stocks to your portfolio.

Start SIP in an Equity Linked Saving Scheme (ELSS)

All this time you wanted an exposure to equities; but you were not well-versed with the market movements. Don’t worry, go for ELSS! It is one of the smartest and the most tax-efficient havens to grow wealth. ELSS are diversified equity mutual funds. These invest your money in the most promising equity shares of companies. These can become an ideal retirement planning instrument. Your capital gains in ELSS becomes tax-free after a lock-in period of 3 years. If you fall in the highest tax bracket, then you can save upto Rs 45000 using ELSS. So start early and retire rich.

Park your contingency money in liquid fund

Thinking of a career transition? Build a contingency fund. Contingency fund helps you to meet financial emergencies like sudden illness, job loss, disability, etc. You need to keep at least 3 to 6 months equivalent salary in the contingency fund. This way you would protect yourself from unplanned debt traps. Instead of a bank account, you may invest this money in a liquid fund to earn decent returns in the short-term on the idle money. Liquid fund is a debt mutual fund that invests in short-term fixed income bearing securities like commercial paper, certificate of deposits, etc. It gives higher returns in the short-term compared to an FD.

Invest in yourself

The job market has become skill-based & extremely competitive, isn’t it! Why not get certified this year. Investing in yourself gives you an edge over your competitors. Additionally, it helps you fetch a higher pay package. So, go ahead and learn a new skill this season.

Prepay loans that are tax-inefficient

Not every loan makes you eligible for a deduction. Especially credit card debt and personal loans are ones that you need to pay off on a priority basis. You might be aware that the government has capped the total deduction on home loan to Rs 2 lakh. So, your second home isn’t eligible for a deduction. If your bank doesn’t levy any prepayment penalty, then it would be wiser to prepay your home loan this year.

Invest in risk cover

Have you got your risks covered yet? If not, then this year is a golden opportunity to do so. Start with buying a term insurance. Term insurance takes care of financial needs of your dependents when you are no more around them. The sum assured needs to be at least 10 to 15 times your net income. Additionally, health insurance is the next best thing money can buy. The rising incidence of critical illness coupled with high cost of treatment makes it a must. With health insurance by your side, you can avail the best treatment at the most reasonable prices.

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