What are top 10 Long Term Investment Options in India for me ? Part # 2 of 2

You also took time to become STRONG,

Give time to Your INVESTMENT also to GROW STRONG…

Part – II of Top 10 Long Term Investment Options

Continued from Part –I, click Part I for learning more

Here we will discuss following Long term investment options:-

1.   Mutual Funds- Debt or Equity

2.   Direct Investment in equity shares of company

3.   Real Estate

4.   Government Bonds

5.   Investment in Gold

6.   Fixed Deposit in Bank account

7.   SCSS –Senior Citizens’ Saving Scheme

Follow my next blog where we will discuss other Long term investment options

Mutual Funds (MF) Investment – Debt or Equity

Mutual Fund is another popular type of investment option which is getting popular at very fast pace. Indian Mutual Fund industry as on 30 Jun 20 stands at Rs. 26 trillion i.e. 26 Lakhs crore which in comparison to US Mutual Fund industry is still small which stands at $ 2.2 trillion.

Generally Mutual Fund are subjected to market risk, which means the investment is done in the open market to make returns for the Mutual fund investor and Asset management company managing the mutual fund.

Q- Who should invest in Mutual Funds?

A- Usually this investment is good for long term investor, having moderate risk appetite and looking for investment returns better than Fixed Deposit or government bonds but less risk in comparison to direct investment in stocks.

Q- Why someone should invest in Mutual Fund?

A- Mutual fund are good mode of investment because it gives flexibility to investor to enter the investment at lower amount, and exit. Mutual fund also gives you the choice in the type of fund you want to invest. There are different types of funds in the market ranging from size (Small Cap, Mid, Large Cap) to class (Bluechip etc.) to risk category etc.

Q- What is the Tenure of Investment?

A- Some of the Mutual Fund that has tax benefit has minimum lock-in period of 3 years and other mutual fund can be remain invested till they continue or invested money is not withdrawn. Here, it is important to note, most of the mutual fund have exit load of 1% as deduction if you move out before end of 1 year from investment.

Q- Amount of Investment?

A-  Most of the Mutual fund can be started with a minimum investment required is Rs. 500/- and usually no limit on maximum amount. Person interest in MF investment can opt for weekly or monthly Systematic investment plan (SIP) or System Withdrawal Plan (SWP) depending upon the need of business.

Q- What is the rate of return earned by Mutual Fund investment?

A- The rate of return earned by Mutual Fund scheme depends on how well the fund is managed by Fund Manager investing in market and scheme selected or it belongs like Debt or Equity or balanced etc. Debt Mutual Fund can reap return of about 6.5%-8% p.a. while equity mutual fund can reap out a return of 10%-15% per annum basis.

Q- Where I can go for investing into MF?

A- One can do it both online and offline, but the most prefer way to start is Online. Now there are lot of broker there which are affiliated with NSE or BSE. One may choose to invest directly or with GROWW app which also facilitate direct MF investing. Otherwise if someone needs guidance also, there one can choose broker like Sharekhan, Zerodha etc.

Q- Is there any tax benefit available investment or return of MF?

A- The person investing in ELSS fund are exempted from tax subject to the conditions as specified, however if you make a short term or long term gains, all that shall be treated same as other gains are treated under income tax act.

For more information on Mutual Fund check this link- https://charteredadvice.blogspot.com/2018/07/mutual-fund-hai-to-sahi-hai-start-as.html

Direct Investment in equity shares of company

Direct investment in equity shares of company is also an option for lot of investor especially for those who are looking for big value at the end of investment term. Since this investment comes with high risk, thus expected returns can also vary significantly from extreme negatives to highly positive gains.

This investment is more suitable to those who are looking for very long term investment i.e. 10 to 15 years and have patience to ignore negative trends and sail through the ups and down of stock market. One should be able to wait for positive trends in market.

Here investor need to be very cautious and alert, either he should understand and invest in right stock or good/great companies or follow expert stock market advice.

To address this concern one should read and understand the stock more before investing or go with reliable consistent bluechip companies only.

However suggestion here is – investor should not park all the money in one basket i.e. one stock or direct shares, especially when you don’t understand stock market well, because at times investment value could show negative results also. However still lot of people make lot of returns in long run when they invest direct in strong companies.

Also read this blog for more information on Stock Market how volatile it could - https://charteredadvice.blogspot.com/2020/07/How-to-Become-Crorepati.html

                                         Real Estate

Real Estate is also very popular in India, especially with those who have large amount of money to invest in and remain invested for long run. This investment option is good for those looking for long term capital gain or some amount of recurring rental incomes.

Now a days – investor can earn returns by become owner of commercial property but not doing business there. In this concept a piece of large space in commercial building is sold to multiple investor, which later on given to big investor or commercial shop owner like Big Bazar, PVR, or a big corporate etc. who in return pays rent to builder and builder pays to owner as per the agreed terms or after taking his share. This concept is popularly known as Virtual Space.

Usual before Covid-19 the expected rate of return on residential property was approximately 4% p.a. and commercial property could fetch you 8% p.a. on amount invested. However after demonetization and RERA property regulation act enacted by Indian government, this sector has become less attractive. Now other than tangible feeling of having a property, capital gain is not that lucrative now. May be again in future it becomes more

However, in some place Land or luxury projects on outskirts are still lucrative option. 

Government Bonds

Government bonds are issued by central or state government and much safer option from safety perspective. It is like giving debt given to government or may be called a Debt Instrument.

Usually Government Issue these bonds to get more money in their hand when state or central government is running through crisis and looking to build better road network, bridges or other needs of public.

There is coupon or interest rate declared by government on these bonds, which is paid by government to public investing with them. The tenure of these bonds could be 5 to 10 years usually carrying 7% - 8%.

Since the returns could be fixed and floating therefore one should check the scheme of return and liquidity before investment.

Gold

Gold is the oldest mode of investment in India and popular among household. It is a yellow shining metal which usually goes up in the price when share market is falling and used against hedge. However now a days with GOLD ETF option made available in the market, which in turn gets invested in gold only- you need not to invest in physical gold.

With ETF option you can buy it electronically and no risk of damage or theft.

Fixed Deposit in Bank account

It is an investment instrument which gives you fixed amount of interest after term ends. But not a preferred mode of investment because of rising inflation rate and tax on return. This means your return becomes negative due to inflation and tax applied on return.

Invest only where you don’t want to take any risk and looking for safety of your capital / principal amount.

Senior Citizens’ Saving Scheme

SCSS investment instrument is sponsored by government of India for senior citizen aged 60 years or above only. The main objective of this scheme is to provide social and financial security to retirees in terms of ensuring a regular flow of income.

Though this scheme is applicable to individual retirees who are Indian citizen having an age of 60 and above but this has an exception also, like individuals having an age ranging from 55-60 taken voluntary retirement scheme or superannuation and they apply for SCSS within 1 month of gaining retirement benefits. Retired defence personnel can also avail this scheme anytime, subject to other requirements.

·         Minimum deposit required to start is Rs.1000

·         Due to Covid-19 Interest income for Q1 FY 2020-21 reduced to 7.4% annually, earlier it was 8.3% - 8.7% per annum.

·         Returns on investment is guaranteed and received on a quarterly basis in the saving account as a simple interest method i.e. Principal amount * rate of interest applied for quarter. Rs. 1 lac should give Rs.1850 quarterly interest.

·         Tax benefits are available on investment under section 80C of Income tax act

·         Interest income earned above Rs. 50,000 is taxed

Thanks for reading and I hope you must have learnt something new. For any query or question, please comment and I shall try to answer.

What are top 10 Long Term Investment Options in India for me ? Part # 1 of 2

Long Term Investment need time to Grow - CharteredAdvice.blogspot.com

You also took time to GROW STRONG,

Give time to Your INVESTMENT also to GROW STRONG…

What are the best Long Term Investment Options in India? This is the basic question asked by lot of people in India looking either for tax saving, retirement benefits, insurance coverages or future goals like higher studies of children, girl marriage etc.

 

Lot of time my friends, colleagues and relatives do call me asking what long term investment options are available to them in India and where they can invest to meet future requirements.

 

There are plenty of long term investment choices available and each have different expected rate of return and features. There is nothing called as best investment option, because every investment option meets one or other different need and come with different risk and liquidity also.

 

However, one wrong decision could result frustration in future. Therefore, you should evaluate the following top 10 options in detail before you invest.

 

Here is the list of top 10 options available which we shall be discussing in detail one by one:-

 

1.Public Provident Fund

2.National Pension Scheme

3.Sukanya Samriddhi Scheme- for girls/daughters only

4.Mutual Funds- Debt or Equity

5.Direct Investment in equity shares of company

6.Real Estate

7.Government Bonds

8.Gold

9.SCSS –

10.Fixed Deposit in Bank account

 

 

Public Provident Fund (PPF)

 

This is the most commonly used name when it comes to long term investment. You must have heard about this name from your elders, parents and at the time of submitting tax proofs.

 

Q- Who should invest in PPF?

 

A- Usually this investment is good for long term investor, having low risk appetite and looking for reasonably safe investment returns and good for retirement benefits where you do not want to take any risk on financial needs.

 

Q- Why someone should invest in PPF?

 

A- This plan is created and mandated by government thus backed with guaranteed returns thereon. In my belief this investment should be done by high risk profile individuals also, to stabilize their portfolio.

 

Q- What is the Tenure of Investment?

 

A- The minimum lock-in period for this investment plan is 15 years, before which you may not be able to withdraw the complete money.

 

Q- Amount of Investment?

 

A-Minimum investment required is Rs. 500/- and a maximum of Rs. 1.50 lakhs can be invested annually in a year. You may decide the frequency of this investment also i.e. lumpsum or monthly or different intervals as may be suitable keeping the limit in mind. If you invest less than Rs. 500 a year – there could be some penalty applied on your account.

 

Q- What is the rate of return decided for PPF?

 

A- The rate of return decided for PPF by government is 7.1% as applicable from 1 July 20, earlier it use to be higher.

 

Q- Where I can go for investing into PPF and what are other benefits?

 

A- One may choose to go to any bank SBI, ICICI or post office and you may use this account to obtain loan also, for more procedural information forms and other formalities you may check with the bank. Now days with

 

Q- Is there any tax on investment or return of PPF?

 

A- Nil, exempted from tax, rather gives you a benefit under Income Tax Act. You can claim deduction if you have invested in PPF as per the running income tax provisions.

 

 

National Pension Scheme (NPS)

 

NPS is a defined contribution plan which means in this scheme a defined contribution is made to the fund. But it is not same as PPF where investment is made on a regular basis to earn interest to be withdrawn at later stage. NPS has two types – Tier I having pension option and Tier II with flexible withdrawal options along with pension.

 

This scheme is popular among individuals who are looking for extra tax saving at early life stage and for pension income post-retirement.

 

Q- Who should invest in NPS?

 

A- Any person looking for additional tax saving and pension income after retirement.

 

Q- Why someone should invest in NPS?

 

A- This investment gives is better than FD or PPF and less risky than share market stock

 

Q- What is the Tenure of Investment?

 

A- Here you start investing as soon as you become 18+ and remain invested till 60 years of life, after that you can withdraw 60% of corpus tax free and remaining stay there for pension income.

 

Q- Amount of Investment?

 

B-There is no maximum limit on investment in NPS but minimum Rs 1,000 investment per annum is required to keep the NPS account active.

 

Q- What is the rate of return decided for PPF?

 

A- In my understanding, the expected rate of return to be earned on NPS is 7.1%, because of the nature of investment done under NPS.

 

Q- Where I can go for investing into NPS and what are other benefits?

 

A- NPS account can be opened both online and offline process. Offline- Bank or Post office. For Online check

 

Q- Is there any tax on investment or return of NPS?

 

A- Tax depends on the event of withdrawal of NPS amount, for instance, at retirement (40% is exempt), pre-retirement (annuity taxed in the year of receipt) and at death of subscriber to NPS account holder (no tax). However partial withdrawal (as specified in the conditions) are exempt from tax.

 

 

Sukanya Samriddhi Yojana (SSY)

 

In India due to rising sex ratio gap, girl education and girl marriage, Sukanya Samriddhi Yojana was started by Indian government to support parents of girl child and give additional benefit to girl child who is an Indian resident.

 

Q- Who should invest in Sukanya Samriddhi Account (SSA)?

 

A-Parents of a girl child can open SSY account with SBI, post office or other bank as may be designated by government for this. Here parent of girl child has to share the documentary proof of girl child, and PAN, residence proof, Aadhar of parents to open this account or other document as may be requested by bank / PO.

 

B-Girl child who has not attained an age of 10 years, there guardian / parent / child anyone can contributed. After 18 years this account is necessarily be maintained by girl only.

 

Q- What is the Minimum and maximum amount has to be deposited.

 

A- Rs. 250 and maximum of Rs. 1,50,000 per annum upto 15 years.

 

Q- What is the % Return on deposit made to this account.

 

A-The rate of interest for the 1st quarter of FY 2020-2021 i.e. 1 April 2020 to 30 June 2020 is 7.6% p.a.

B-No interest is paid once tenure is completed of SSA, i.e after 21 years from account opening or girl child happens to become non-citizen / Non-resident of India.

 

Q- When and how the account gets closed ?

 

A-Account matures after 21 years and balance in SSA is withdrawn using bank/PO specified application and documents thereon.

B-Premature withdrawal is allowed only in specific cases –

a.marriage time of girl (18+)

b.death of girl on submission of document

c.deemed closure –like girl becomes NRI or non-citizen etc.

d.Specific hardship of parents in depositing money i.e. after 5 years.

C-Withdrawal in other cases is subjected to 50% and meeting education requirements only i.e. for 10

For next part please click @ https://charteredadvice.blogspot.com/2020/07/what-are-top-10-long-term-investment-by-Chartered-Accountant.html