Top 5 Investment Options in India : Best Investment Options

Updated on: Jan 11th, 2022


7 min read

You have multiple options for investment today, and it may seem a daunting task to choose the right one. While you must choose investment plans depending on your risk profile, time horizon and other factors, some investment platforms offer excellent options for you to start your journey towards wealth accumulation and growing rich.toc

Mutual Funds

Mutual funds are one of the most sought after investment options in India. Amongst mutual funds, equity mutual funds invest most of the assets in stocks. It has the potential to offer inflation-beating returns over some time. The point to note is that with high rewards come high risks as well. You must invest in equity funds to achieve your investment objectives only if it matches your risk tolerance. 

You may choose mutual funds only after checking the investment style of the fund manager. Investing in these funds is pretty simple and straightforward. You can start investing in mutual funds with a sum as low as Rs 500 a month through the systematic investment plan or the SIP. It helps you invest small amounts of money regularly in the mutual fund scheme of your choice. Moreover, you get the benefit of rupee cost averaging as you are investing across all levels of the stock market. It helps you average out the purchase cost of units over time. 

You have different types of mutual funds such as equity, debt, hybrid, solution oriented schemes, index funds and fund of fund schemes . It helps if you pick the right mutual fund to achieve your financial goals based on the risk profile. If you find it difficult to shortlist the right mutual fund plan, then you can choose to invest in our expert-curated mutual fund plans consisting of the top-performing funds by downloading the BLACK by ClearTax app

National Pension Scheme

The National Pension System or NPS is a government-backed retirement cum pension scheme. With the sovereign guarantee backing the scheme, you get the much-needed safety for your investment. This scheme provides a monthly pension when you retire as you have to compulsorily invest 40% of the corpus accumulated at 60 years in an annuity plan. Also, investing in the NPS entitles you for additional tax benefits up to Rs 50,000 per annum under Section 80CCD(1B) of the IT Act. This deduction is over and above the regular tax deductions available under Section 80C, Section 80CCC and Section 80CCD where you can save up to Rs 1.5 lakh a year in taxes. 

NPS invests your money in the broader asset classes such as Equity (E), Corporate Bonds (C), Government Securities (G) and Alternate Investment Funds (A). If you are a conservative investor you may opt to have most of your investments in corporate bonds and government securities. However, young aggressive investors may choose to allocate a higher proportion towards equities. You may allocate a maximum of 75% towards equities under the NPS under the active choice.

NPS offers you the opportunity to design your own portfolio by allocating funds across the four asset classes under the active choice. However, you also have the auto choice option where money is automatically invested across the asset classes in defined proportions depending on your age. 

Public Provident Fund

If you are a risk-averse investor, then the Public Provident Fund (PPF) is the suitable investment option for you. PPF is one of the most popular tax-saving investment options for the common man. You can open this account in a bank or even at a post office. PPF comes with a lock-in period of 15 years, with an option of extending your account in a block of five years.

 If you are a salaried person, then you may find the PPF an excellent investment option as it offers a higher interest as compared to bank FDs. If you require a loan, then you can avail one against your PPF balance, and even make a premature withdrawal after the 7th year of opening the account. One of the most attractive features of a PPF account is it qualifies for the EEE tax benefit. The amount you invest enjoys a tax deduction of up to Rs 1.5 lakh per year under Section 80C. Moreover, the interest you earn and the withdrawal at maturity are tax free. You have to invest a minimum of Rs 500 per month, while you can invest a maximum of Rs 1,50,000  per annum.

Real Estate Investment

Real estate is a good investment option for those who have sizable disposable income. It is an excellent option for long-term investment. The Real Estate Regulation and Development Act (RERA), which came into force in 2016, has further boosted the real estate  market in India. The industry is well regulated with safety measures in place for buyers and sellers. With fast-paced development and urbanisation, the demand for real estate has witnessed a rise like never before. The availability of accessible home loans at lower interest rates has removed the barriers to affordability. It also allows buyers to save a significant amount of income tax annually until the payment of the home loan.

Stock Market Investment

You may invest in stocks to achieve investment objectives only if it matches your risk appetite. It helps if you select the right stocks to maximise your returns over time. For instance, you could select stocks of companies that enjoy an economic moat. It is a competitive advantage a company enjoys over its competitors and peers which may translate into a higher market share. 

You must diversify your stock portfolio by investing in stocks across sectors and different industries. It helps if you invest in stocks through the systematic investment plan or SIP. It is a method where you invest fixed amounts regularly in the stocks of your choice. It helps you average out your purchase costs of stocks over time as you invest across all market levels. 

You must select undervalued stocks with sound fundamentals. It helps as these stocks have a market price below their intrinsic value. You may earn a higher return by investing in undervalued stocks as the market eventually recognises their potential and the price rises over time. If you find it tough to pick the right stocks, then you can choose to invest in our expert-curated equity mutual fund plans consisting of the top-performing funds by downloading the BLACK by ClearTax app.

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