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 options 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 markets regularly or lack knowledge of the same. Going through the SIP route could be one of the best investment options for beginners. One should invest for long term goal in mind. SIP will give you benefits of Rupee Cost Averaging and Power of Compounding to build wealth for yourself in the long term. For lump sum amount in your bank account, one can choose Debt, Balanced or Equity Mutual Funds, depending on the time horizon, purpose of investment and 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:
Returns not matching historical 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:
National Pension Scheme: are also called Liquid Funds, with liquidity as the primary benefit. These generally generate slightly higher returns than Savings Accounts. They can be used to create your Emergency Funds. 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 for building long term wealth to meet financial goals. They can be considered if the investment horizon is 10 to 15 years or more. These funds historically have been inflation beaters in the long term.
When one starts her/his investment journey and invest their hard earned savings, one need to make sure that his/her money works for fulfilling financial goals.
So it is advisable to know all investment options from mutual fund distributors before you take the decision. We at Hexagon Investments give all investment options for Beginners.