Best Investment Options 2018

Planning for your future this year and want to know what would be the best investment option for you? Read our guide to help you plan your investments depending on your risk-appetite and goals and decide the right asset class you want to invest in.

Gone are the days, when only two breeds of investors dominated the market space - aggressive investor (one who used to invest in direct equities to get sky-high returns) and passive investor (one who used to invest in the traditional form of investment methods). Nowadays, a new kind of breed is coming into the market called the hybrid investors. These millennial investors want to make the investments in such a way that they can earn lucrative returns as fast as possible without the risk of losing the amount invested. And this is the reason, why the investors always search out for the best investment plan where they can double the money in few years. However, such kind of products doesn't exist in the real world. In reality, the risk is in tandem with the amount of return that you wish to make. Here, in this article, we have enlisted the best investment option that is suited to different types of the investor class.

Public Provident Fund - It is one of the most popular investment options in India because it is backed by the sovereign guarantee.

  • This investment offers a tax benefit to the people under the section 80C, the interest earned and maturity are exempt from tax.
  • The scheme has a lock-in period of 15 years
  • Once the maturity is reached, the account can be further extended for the block of 5 years
  • The interest rate is reviewed by the Government of India and the present interest rate is 7.6% a year
  • The investor can avail partial loan on this scheme.

Fixed Deposits- Recently, SBI, Axis and HDFC banks have increased its fixed deposit rates to give this traditional form of investment a new revival. This form of investment is highly popular among the Indian citizens because of its low lock-in period and safety. The investors can avail loan up to 80% to finance their investments or can withdraw it prematurely without attracting any penalty. Bank FDs offer cumulative and non-cumulative interest options. In the Cumulative option, the interest is re-invested and is payable at the time of maturity, whereas, in non-cumulative option, the interest is paid periodically depending upon the bank. However, the interest income is taxable. The current interest rate offered by SBI is 7.15% for 1-year deposit.

Mutual Funds- The mutual funds can be further re-categorized into equity schemes, FMP and debt schemes depending upon the risk appetite of the investor.
  • FMP-The schemes invest the investors' money in bonds, bank certificate of deposits, etc. Though these investments come with a safety net, they don't offer the guaranteed returns. FMP has a tax benefit over the traditional FD if held for more than 36 months and qualify for long-term capital gain. It is taxed at 20% and gives better returns than bank FDs for the individuals in higher income bracket.
  • Debt Mutual Funds- these funds pool the investors' money and invest the same in various debt instruments like corporate bonds, treasury bills, government security, etc. These schemes are professionally managed by the debt managers and is categorized depending upon the time horizon and different levels of risk that the investor can stomach.
  • Equity Oriented- These mutual fund schemes have at least 65% of exposure in the equity market. The financial advisor recommends that one should invest in the equities for a long-term to generate high returns. ELSS is a prime example of it. This scheme has the shortest lock-in period of 3 years and offers tax-benefit under section 80C.
  • Direct equity- Aggressive investors who understand the intricacies of the stock market and are willing to take the risk can invest their money in direct equities. Direct equities are risky because of the price fluctuations and one could easily lose its capital. Investors might get bogged down about when to enter and exit the stock market. Currently, the returns earned from the Sensex in last 1 year are 13.63%, 2 years is 16.94% and 5 years is 11.47. Buying and selling of equity can be done only through the demat account.
NPS- National Pension Scheme- Retirement is a handicap for people who are financially dependent. So, the investors who are looking forward to receiving the pension in their retirement year can join this scheme. NPS is a defined contribution where the amount is invested in various assets like the government security, equity, bonds and alternative investments as per the choice. This investment scheme offers two options for the investor auto choice and active choice. In auto choice, the contribution is further divided depending into various asset classes depending upon your age, and on another hand, under the active choice, the investor selects the asset class in which funds are to be invested. The scheme matures when the investor turns 60 years. The lock-in period is determined at the time of entering into the investment. If you start investing in NPS at the age of 35 years, then the lock-in period would be 45 years. The returns of the investment are market-linked and will depend upon the corpus accumulated. This investment offers tax benefit maximum of 1.5 lakh and an additional tax benefit of 50,000 under the section 80CCD. However, the investor is allowed to withdraw 40% in a lump sum.

Gold- The weakening dollar has spruced up the price of gold. The spot gold has increased by 0.4% to $ 1305.87 and it is believed that the economic uncertainties (slow economic growth in the US) and weak political conditions (in Italy) will further cement the price of the gold. Hence, the investors can invest in the bullion trade through various forms like physical or paper gold, sovereign gold bonds.

NCD- NCD is issued by the company who need money to survive and thrive in a competitive environment. It can be secured or unsecured. The catch is NCD can be further converted into the equity shares in the future date and offer higher returns than conventional form of investment. There is one more edge. The interest income is not subject to TDS. The investor can easily pick them up by submitting the physical form along with the details, but before that, the investor needs to exercise due diligence. He/she needs to look into the credit rating, coupon rate and the capability of the promoter.

All these investment options depend upon the risk appetite. We have tried to simplify your investment decision by enlisting the best investment products. Happy investing!


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