Salaried individuals have different investment requirements than self-employed or other professionals. They have fixed monthly cash inflow to meet their expenses and save for various life goals. Financial planning for salaried person is necessary to make the most out of your hard-earned money. In this article we would give you an insight into best investments options that a salaried person could go for.
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Best Investment Options for Salaried person In India
Every individual has different goals, levels of risk tolerance, and financial situations. A goal must be kept in mind when investing, and that objective may be to generate wealth for present or future needs. Risk is another element that should be taken into account when investing. How you see risk has a big impact on the investments you make. You can be either risk-averse or risk-loving, or you can be moderate and fall somewhere in the between. Hence, a salaried individual needs to consider the amount of return and risk while selecting the good investment alternatives for themselves. Additionally, a salaried person has to manage his savings and investment within a specific income.
Money Investment Options for Salaried person - Risk Averse
A risk-averse person is highly sensitive to market movements. Even a small movement in the market can make them question their investment choices. Hence, the ideal investments for them are those that give guaranteed returns. If you think you fall in this category, then the following are some of the safe investment options available for you.
National Savings Certificate (NSC)
National Savings Certificate is a government scheme with a tenure of 5 years. The scheme pays an interest of 6.8% per annum. Both the investment and interest are tax deductible.
Recurring Deposit Account (RD)
Recurring Deposit account is a kind of term deposit available with banks. A fixed amount is deposited by the people having regular income monthly into an RD account. It is one of the safest investment options.
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Fixed Deposit
This is the best investment options for salaried person in India as FDs are offered by all banks. It is also the easiest method to start investing for future requirements. After maturity, you can withdraw the invested amount along with interest. Though the taxes levied on fixed deposit returns eat up most of the returns, it is still one of the safest investment options for a salaried person to invest their hard-earned money.
- Rate of return: 2.5% to 5.5% per annum
- Term available: 7 days to 10 years
Savings Account
Opening a savings account in any of the banks is the best form of savings schemes in India. Just start putting whatever little amount you have in this account. It is highly liquid and can be withdrawn anytime. It is one of the safest investment options, but the returns are not that huge compared to other options.
- Rate of return: 3-4% per annum
- Term available: Not applicable
Chit Funds
Chit fund is basically an investment option as well as a borrowing tool. They yield better returns on investment and are comparatively better on the liquidity front.
The Money Club is India’s trusted AI-driven digital chit fund platform regulated by the Registrar of Chit Funds. It offers a reliable, new-age platform for flexible savings, high returns and easy borrowing. FDs and RDs offer low interest rates of 3%-6%. On the contrary, chit funds are a much more attractive investment where you can invest a certain amount every month and earn high returns (25% annually), and more value for money. If you want high liquidity, low risk, high returns and minimal paperwork, a chit fund is the best option.
Since its inception, The Money Club has created more than 50,000 groups/clubs and has more than 3 lakh registered members/subscribers.
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Debt Funds
Debt funds are short term, low-risk investments that offer expected returns. They majorly invest in fixed income securities for a tenure of 1-5 years. Debt funds are not market-linked but give you reasonably predictable returns. They are a safe investment option for a salaried person who doesn’t want to take risks.
RBI BONDS
Until the year 2003, the Government of India was issuing 8% savings bonds that were taxable. Then it got replaced with 7.75% taxable bonds that come with a tenure of seven years. RBI bonds are available in both physical as well as Demat format.
Gold Bonds
Gold is one of the most safe investment options for salaried person in India, as it holds a lot of value and purpose in Indian families. The returns on gold are generally high and are also the safest asset. Gold is usually purchased in the form of ornaments, coins, or bars. Nowadays, gold can be bought digitally in the form of bonds but still, the returns are linked to original gold.
- Rate of return: Gold bonds offer 2.5% interest on amount invested semi-annually.
- Duration: 1 to 3 years
Post Office Monthly Income Scheme (POMIS)
The Post Office Monthly Income Scheme (POMIS) is a Government of India backed small savings scheme that allows an individual to set aside a specific amount every month. Consequently, interest at the rate 6.6% currently is added to this investment and paid out to the depositor on a monthly basis. This is a good investment option for salaried person with low to medium income per month.
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Public Provident Fund/ Employee Provident Fund (PPF/EPF)
Public Provident Fund is a statutory scheme by the Central Government, meant for both salaried and self-employed individuals. The motive of this scheme was to offer old age financial security to self-employed individuals and workers from unorganized sectors. You can open a PPF account with any post office or authorised bank and start investing in it with as low as Rs. 500 per year to earn guaranteed, tax-free returns. A PPF account has a minimum lock-in period of 15 years.
On the other hand, the Employee Provident Fund is a financial help for retirement planned for salaried employees. It is a fund in which both the employee and the employer contribute 12 per cent (or the minimum of Rs 780) of the employee’s basic salary amount every month.
Both PPF and EPF are eligible for tax exemption under Section 80C, which means there is no tax deduction on the maturity amount. This is a must-have investment option for salaried person in private sectors.
Related: Various Types Of Post Office Schemes And Their Benefits
Money Investment Options For Salaried person - Risk Taker
A risk-taker is one ready to take up more risk for a higher return. They do not react immediately to sudden market movements and are more patient. Hence, market-linked investments are more rewarding for them. If you think you fall in this category, then the following are some of the good investment options available for you.
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SIP in Equity Mutual Funds
Systematic Investment Plans (SIP) are picking up interest among the youth mainly because of the attractive returns generated by stock markets. If you have the patience to wait for your investment to grow in the longer term, this is the best investment option available. If you want to start a SIP in equity mutual funds, it is advised that you continue it for at least a year to see the results visibly as stock markets perform well in the longer term.
- Returns: 8% to 15% per annum
- Duration: 6 months to 5 years
Related: What are chit funds and how is it a better investment option than SIP?
Stock Market
Stock markets are a good investment option if you are a high-risk taker and want to enjoy huge returns on your investment. You can even double your investment if you invest in the right companies. Although you stand chances to lose, it is still a good investment option to grow your money.
- Rate of return: 10% to 50% per annum
- Duration: 1 month to 5 years
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National Pension Scheme (NPS)
NPS is one of the best government-backed investment schemes which is a fixed contribution based pension system for the citizens of India. Depending on the investor’s preference, it invests the money in equity, bonds, government securities, and alternative investment avenues. You can withdraw your investments in NPS only after you attain the age of 60.
If an individual withdraws the scheme before 60 years, 80% of the accumulated savings must be used to buy life annuity from an IRDA regulated insurance provider. The remaining 20% can be withdrawn as a lump sum. On exiting the scheme after the age of 60 years, 40% of accumulated savings must be used to buy life annuity.
Unit Linked Insurance Plans (ULIPs)
Another popular money investment option offered by the insurance companies is ULIP. It provides dual benefits of insurance as well as investment under a single integrated plan. With ULIPs, the investor pays a premium in which a portion is invested in equities, debt, or hybrid funds and the remaining portion is utilised to provide life insurance for the investor.
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Corporate Deposit
Corporate deposits are the deposits corporates collect to fund their operations, and expansion plans. They function similarly to bank FDs but offer significantly better yields. As private companies collect the deposits, the risk is also often considerable because there is a danger of default if things do not go as planned. These are ideal for those who are more willing to take on risk and are seeking better returns but do not wish to engage in the stock market.
- Rate of return: 6% to 8% per annum
- Duration: 1 to 5 years
Conclusion
The power of savings can be understood only during your struggling days. With each of the money investment options explained in detail, it is up to you to choose the correct option. You need to consider your financial goals, investment horizon, and risk appetite before investing your hard-earned money in any investment avenue.
