Now, Investing at a young age does not necessarily mean that you have to buy stocks or invest in real estate…there are various investment options which are easier and should be considered in the beginning.
Investment Options for Beginners
- Mutual Funds- SIP and Lump sum:
Best Investment tips for Beginners in India is to follow investment consistently & with purpose which can be Investing in Mutual Funds –SIP or Lump sum way.
Mutual Funds are ideal for a new investor who cannot follow market regularly or lacks knowledge of the same. Going through the SIP route could be the best investment options for beginners. You should invest for long term goal in mind. SIP will give you benefits of Rupee Cost Averaging and Power of Compounding to create wealth for yourself in the long term.
For your lump sum amount in your bank account, you can choose Debt, Balanced or Equity Mutual Funds, depending on the time horizon, purpose of investment and your risk appetite.
- Public Provident Fund:
It is the safest and secure long-term investment product amongst the best investment options in India. It is totally tax-free. Under the PPF account opened in bank or post office the money get locked for the time of 15 years and you can earn compound interest from this account. You can also extend the time frame for the next five years. It gives you tax benefit u/s 80C.
The drawbacks of PPF are:
1. Falling Returns
2. Poor liquidity
3. Returns not matching Equity Returns for such Long Term Investment.
- Bank Fixed Deposits (FDs):
Bank FD comes with a fixed tenure of investment which acts like a lock in period. While early withdrawal is possible it entails a 'penalty'. It is essential to 'plan' this investment since it comes with a fixed tenure/lock in. This avenue may not yield good post- tax returns for investors who are in higher tax brackets.
- National Pension Scheme:
Also known as NPS, is a voluntary defined contribution pension system in India. ... Starting from 2016, an additional tax benefit of Rs 50,000 under Section 80CCD(1b) is provided under NPS, which is over the Rs 1.5 lakh exemption of Section 80C.
NPS (National Pension System) is a defined contribution based Pension Scheme launched by Government of India with the following objectives.
• To provide old age income
• Reasonable market based returns over long run
• Extending old age security coverage to all citizens
- Money Market Funds: are also called Liquid Funds, with liquidity as the primary benefit. These offer slightly higher returns than Savings Accounts. They can be used to create your Emergency Money Corpus. The period of investment can be as short as one business day.
- Tax Saving Mutual Funds – ELSS Plans (Equity Linked Saving Scheme):
These belong to Mutual Fund class where you get the added benefit of tax saving u/s 80C. It has a 3 year lock in period which is shorter compared to other 80C investments.
ELSS funds have given highest average of returns historically as compared to other tax saving investments, but there can be volatility in returns in the short term.
- Diversified Equity Mutual Funds Investments:
The primary goal of Diversified Equity Mutual Funds is wealth creation to meet your financial goals. They can be considered if your investment horizon is 10 to 15 years or more. These funds are the best inflation beaters in the long term.
When you start your investment journey and invest your hard earned savings, you need to make sure that your money works for you in fulfilling your financial goals.
So it is advisable is to seek an experts advise. We at Hexagon Wealth Advisors give you Best Investment Options for Beginners.