To build a strong financial backbone, one should invest the money in the right financial instrument. Though, not every investment guarantees substantial returns, but, if you invest wisely and for a good amount of time, the potential to gain healthy returns is higher. Especially, a salaried person who has to manage investments and expenses within a stipulated Income. Hence, a salaried individual need to consider amount, risk, risk, and return while determining the best investment option for them.
So, if you are someone looking out for a safe investment option, here are some of the best investment options in 2023.
1. Invest in Fixed Deposits
Most people consider the Fixed Deposit investment as a part of their Retirement investment options because it enables money to be deposited with banks for a fixed maturity period, ranging from 15 days to five years (& above) and it allows to earn a higher rate of interest than other conventional Savings Account. During the time of maturity, the investor receives a return which is equal to the principal and also the interest earned over the duration of the fixed deposit
Bank fixed deposits can be one of the Best Short Term Investment Options, as these are secure investments. Also, many banks provide better interest rates on FDs, which typically range from 3 percent to 7 percent, per annum. Investors can park their money for a minimum period of seven days to a maximum of 10 years.
A Recurring deposit is an investment cum savings option for those who want to save regularly over a certain period of time and earn a higher interest rate. Every month, a fixed amount of money is deducted either from a Savings Account or a current account. At the end of the maturity period, investors are paid back their invested funds with accrued interest. At a public sector bank, an RD account can be opened with a minimum amount of as less as INR 100. While, at private sector banks the minimum amount to be deposited is INR 500 to INR 1000, whereas in a post office one can open an account at just INR 10. The interest rate at every bank may vary, but it typically ranges between 7 percent to 9.25 percent, p.a, and at the post office it is 7.4 percent (depending on prevailing Market condition). Senior citizens get 0.5 percent extra.
3. Invest in Systematic Investment Plan (SIP)
Salaried people can consider Investing in an equity-oriented product. While investing in Equity Funds, one should consider taking a systematic way, i.e. one should put a fixed amount of money every month instead of putting the money all at once. Also, within equity funds, one should diversify investment as per risk and return expectation. Ideally, a salaried person should stay invested for a long duration to earn good returns.
Since equity funds have various categories, investors with a moderate risk appetite can go for large-cap or multi-cap equity funds and investors with a high-risk appetite can invest in a mid-cap and small cap fund. Equity investment through SIP mode reduces the risk in the long term.
Best Equity SIP Mutual Funds 2023
Some of the best mutual funds to invest in India having Assets more than 300 Crore and having best CAGR returns for last 5 years are :
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 13 Jun 23
4. Invest in Public Provident Fund (PPF)
Public Provident Fund (PPF) is one of the most popular long term investment options in India. Since it's backed by the Government of India, it is a safe investment with an attractive interest rate. Moreover, it offers tax benefits under Section 80C, of income tax 1961, and also the interest income is exempted from tax. PPF comes with a maturity period of 15 years, however, it can be extended within a year of maturity for five years and more. Annual deposits of minimum INR 500 to maximum INR 1.5 lakh can be invested in PPF account.
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5. Invest in National Pension Scheme (NPS)
New Pension Scheme is gaining popularity in India as one of the best retirement investment options. NPS is open to all but, is mandatory for all government employees. An investor can deposit a minimum of INR 500 per month or INR 6000 yearly, making it as the most convenient for Indian citizens. Investors can consider NPS as a good idea for their Retirement planning because there is no direct tax exemption during the time of withdrawal as the amount is tax-free as per Tax Act, 1961. This scheme is a risk-free investment as it's backed by the Government of India.
6. Invest in Gold
Indian investors often look for Investing in Gold and it's also one of the good long term investment options. Gold is used as an Inflation hedge. Investing in gold can be done via buying physical gold, gold deposit scheme, gold ETF, Gold Bar or gold Mutual Fund. Some of the best underlying Gold ETFs in India are as follows:
High-quality bonds and fixed-indexed annuities are often considered the safest investments with the highest returns. However, there are many different types of bond funds and annuities, each with risks and rewards. For example, government bonds are generally more stable than corporate bonds based on past performance.
High-quality bonds and fixed-indexed annuities are often considered the safest investments with the highest returns. However, there are many different types of bond funds and annuities, each with risks and rewards. For example, government bonds are generally more stable than corporate bonds based on past performance.
A Systematic Investment Plan (SIP) is an investment tool which allows the investor to invest a fixed amount at regular intervals in a Mutual Fund scheme. SIP works by investing a fixed amount at a defined frequency. With this an investor does not need to time the market and can invest in a hassle-free manner.
By investing Rs 50,000 per month one time, he could look to accumulate Rs.19.16 lakhs in twenty years with 20% annualized returns. We have taken a weighted average of the return of each fund after considering the lower 3-year and 5-year returns as the return over the 20 years.
RD Vs SIP Calculator: According to Post Office RD Calculator, if you invest Rs 5,000 per month for five years the total return on your investment will be Rs 48,740 (with monthly compounding frequency).
To understand this, let us take an example. A monthly investment of Rs 5,000 for 10 years at an expected rate of return of 12 per cent will earn you Rs 11.61 lakh.
What are the safest types of investments? U.S. Treasury securities, money market mutual funds and high-yield savings accounts are considered by most experts to be the safest types of investments available.
For example, bonds and real estate projects are the safest methods for investing $1 million dollars. Bonds are undoubtedly one of the preferred ways for investors just starting since they represent a minimum risk of loss, ensuring a return equal to the initial investment. They also provide earnings through interest.
Systematic Investment Plan is a better investment option in comparison to Fixed Deposit especially if you consider the flexibility of investment, advantage of diversification, tax benefits, and higher returns. That is why it is better to invest in a systematic investment plan than in fixed deposit.
You will not incur income tax on SIP returns if they are below ₹1 lakh for a financial year. This rule will apply to long-term and short-term capital gains from equity-based mutual funds.
If you're earning a 10% average annual return and investing $400 per month, you'd be able to go from $100,000 to $1 million in savings in just over 20 years. Again, if your actual average returns are higher or lower than 10% per year, that will affect your timeline.
Consider the following: Only 15.5% of Americans earn between $100,000 and $149,999 per year. Although, this does make up the largest percentage of Americans who do make over $100k, which only 8.3% earning between $150,000-$199,999, and 10.3% earning over $200k.
How much interest can $100,000 earn in a year? If you put $100,000 in CDs, high-yield savings or a money market account for a year, you could earn anywhere from $3,000 to $5,000 based on current interest rates.
Those will become part of your budget. The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals.
If someone begins a SIP of 5000 per month for a span of 20 years, at 12% assumed annualized rate of return per annum, your total investment in 20 years is Rs. 12 lakh and the accumulated corpus at the end of tenure is close to Rs. 50 lakhs.
According to tax and investment experts, if an investor invests ₹10,000 per month in mutual fund SIP for 30 years, he or she can accumulate around ₹12.7 crore at the time of maturity provided it has used 10 per cent annual step-up.
15,000 per month via SIP for 10 years, you are actually just investing about Rs 18 lakh. But return you are getting is around Rs 35-36 lakh. It is double of what you originally invested over the 10-year period. And the longer you keep investing, the better the returns get!
The mutual fund SIP calculator shows that a monthly investment of Rs 10,000 in this fund would have grown to approx. Rs 10.9 lakh in three years. The regular plan of the scheme has given a return of 62.19% in three years.
If an investor invests 20,000 per month for 10 years at the interest rate of 12%, he will be able to generate INR 47 lakh, i.e., more than double the amount he earned in the first five years. In addition, the earnings in 15 years will double the income that an investor had generated in the first 10 years.
Evaluating this equation, the future value of the monthly SIP of Rs 1000/month over 10 years at a 12% annual rate of return would be approximately Rs 2.32 lakhs. In this, you are making an investment of Rs 1.2 lakhs and gaining Rs 1.12 lakhs, making a total return Rs 2.32 lakhs.
If you'd invested $600 in a lump sum and allowed it to grow for 10 years at 10.3% a year, you'd have almost exactly $1,600. Stock market returns are never guaranteed, of course. But the longer your holding period is, the higher your odds of success are.
A stock represents a share of ownership in a company. Stocks offer the biggest potential return on your investment while exposing your money to the highest level of volatility.
Most investors would view an average annual rate of return of 10% or more as a good ROI for long-term investments in the stock market. However, keep in mind that this is an average.
In most cases $300,000 is simply not enough money on which to retire early. If you retire at age 60, you will have to live on your $15,000 drawdown and nothing more. This is close to the $12,760 poverty line for an individual and translates into a monthly income of about $1,250 per month.
Cash equivalents are financial instruments that are almost as liquid as cash and are popular investments for millionaires. Examples of cash equivalents are money market mutual funds, certificates of deposit, commercial paper and Treasury bills. Some millionaires keep their cash in Treasury bills.
Once you have $1 million in assets, you can look seriously at living entirely off the returns of a portfolio. After all, the S&P 500 alone averages 10% returns per year. Setting aside taxes and down-year investment portfolio management, a $1 million index fund could provide $100,000 annually.
Will $1 million still be enough to have a comfortable retirement then? It's definitely possible, but there are several factors to consider—including cost of living, the taxes you'll owe on your withdrawals, and how you want to live in retirement—when thinking about how much money you'll need to retire in the future.
But let's be conservative and assume that the average SIP returns in 10, 15 or 20 years will be about 12% per annum. Here is what a Rs 50,000 monthly in a Systematic Investment Plan can do over the years: 5 year SIP of Rs 50000 monthly = Rs 42 lakh.
3000 SIP will become Rs.1,71, 647 in 5 years. You can start investing in any of the best SIP for 3000 per month or even more. You can consider other SIP schemes but make sure that you go through the reputation of the fund house, NAV, annual returns, and risk factor.
A regular SIP best suits all kinds of investors who have a regular source of income and who prefer saving up for a secured future. A step-up SIP helps reach the financial goal faster and helps in accumulating a higher amount of corpus as the investment keeps increasing every year.
Investors don't have to monitor the market closely
Lump-sum investments are most beneficial when you invest during a market low. However, with SIPs, you have the chance to enter during different market cycles. Investors do not have to watch market movements as closely as they would for lump-sum investments.
SIP under Equity Linked Saving Schemes (ELSS) comes under the EEE (Exempt, Exempt, Exempt) category. This means, the amount invested, the amount on maturity and the withdrawal amount all are tax-free. With SIP in ELSS fund, one can claim a deduction of up to Rs. 1,50,000 per year.
However, you make short-term capital gains on the units purchased through the SIPs from the second month onwards. These gains are taxed at a flat rate of 15% irrespective of your income tax slab. You will have to pay the applicable cess and surcharge on it.
Exclusive Tax Benefit to all NPS Subscribers u/s 80CCD (1B)
An additional deduction for investment up to Rs. 50,000 in NPS (Tier I account) is available exclusively to NPS subscribers under subsection 80CCD (1B). This is over and above the deduction of Rs. 1.5 lakh available under section 80C of Income Tax Act. 1961.
Saving $1,500 a month is an excellent goal to have. It can help you build up your savings and put you in a better financial position for the future. Having this amount of money saved each month can give you more flexibility when it comes to making decisions about spending or investing.
With inflation stubbornly high, 58% of Americans are living paycheck to paycheck: CNBC survey. Between higher costs and a possible recession looming, families are increasingly feeling under pressure. More than half of all Americans are now living paycheck to paycheck, according to a new CNBC report.
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