Most people generally invest with the objective of obtaining high returns and with the minimum risk involved. To achieve this objective, most of the investors seek a proper investment planning which not only achieves the desired results but also keeps a tab on the risk profile of the investor.
As a general principle, the higher the risk, the higher the return and vice versa. Investors should carefully choose investment plans according to their risk appetite. This should be carefully evaluated as it will impact the overall risk-return profile of the investor.
Investment plans should be capable of meeting the investment objective and generate a handsome return at the same time.
Types of Investments Plans Based on Risk
Based on the risk appetite of the investor, investments are classified into different risk levels called low risk, medium risk and high risk. Let us look at these classifications in detail:
Low-risk investments are instruments which provide a fixed income and are also not affected by the volatile movements in the stock market. Investments included in this category are FDs, bonds, debentures etc. The common factor amongst all these investments is that they provide fixed returns and are not dependent on the stock market.
For instance, a fixed deposit can be done for a varied time period, but there are certain instruments like government bonds and insurance policies which can provide better returns but have a longer lock-in period.
The investor needs to carefully evaluate his/her risk profile from time to time in order to make suitable investments.
These investments carry a higher-risk but are capable of offering high returns as well. There is also a component of ‘debt’ involved in such instruments which is dependent on the interest rates movement in the markets. The top products in this category are debt funds, balanced mutual funds and index funds.
This category of investments includes stocks of companies listed in the stock exchange, equity mutual funds etc. These instruments carry a high degree of risk but at the same time can offer significant returns. Also, the tenure of such instruments is not fixed and can vary depending on the investor’s preference.
Best Investment Options in India
Before making any investment, investors need to consider the outcome of their investment. For example, many investors invest their money for capital appreciation, some do it to ensure their financial security and wealth creation, etc.
The ‘actual value’ via investment only comes when the investors make an informed decision on the type of investment product that would complete their requirements.
By investing in some of the best investment plans in India, investors can achieve their financial goals within the specified period of time. Furthermore, the key also lies in staying invested till the completion of the tenure of the plan. Let us discuss some of the best investment plans in brief:
Investors looking for investment over a long-term period find mutual funds as the best for their purpose. A mutual fund is a market-linked scheme that pools the money from the investors and invests in financial instruments like equity, debt, money market etc.
Mutual funds offer better returns than all other investment plans provided the investors are willing to keep themselves invested in the long-run. There are the following three categories under which we can classify these funds:
- Equity Mutual Fund
- Debt Mutual fund
- Hybrid Mutual Fund
Let us understand a bit about each of the above:
Equity Mutual Fund:
Equity mutual funds are funds that invest in the shares of the companies of different market capitalization. While compared to other instruments, the risk is higher in equity funds, but there is also a possibility of high returns.
The following table summarises the best equity funds :
|Kotak Standard Multicap Growth||Diversified|
|Mirae Asset Large Cap Fund Regular Growth||Large Cap|
|Axis Bluechip Fund Growth||Large Cap|
|Invesco India Growth Opportunities Fund-Growth||Diversified|
Debt Mutual Fund:
A debt mutual fund is a mutual fund scheme that invests in fixed income generating instruments with lesser risk and lesser volatility like Certificate of deposit, Corporate Bonds, treasury bills, commercial paper. Debt mutual funds are also popularly known as Bond Funds or Fixed Income Bonds.
The main objective of this fund is to provide regular and fixed interest during the investment period. Also, aim for capital appreciation for an investor.
For investors, who are looking for more stable returns, debt-instruments are considered as a suitable investment product. Apart from offering better returns, these instruments are highly liquid in nature, meaning it can be converted into cash much faster than other instruments.
Below are some of the best-recommended debt funds:
|Axis Liquid Fund Growth||Liquid|
|Kotak Savings Fund Growth||Ultra Short|
|ICICI Prudential Savings Fund Growth||Low Duration|
Hybrid Mutual Fund:
Hybrid funds invest in both equity and debt instruments. By investing in both, it allows the option to divest the investors’ fund along with risk and return.
Depending on the money invested in either equity or debt instruments, hybrid funds are classified under 2 categories:
Equity-Oriented Hybrid Fund:
These funds allocate more than 65% of the total funds in equity and the rest in debt instruments and money market securities.
Debt-Oriented Hybrid Fund:
Debt oriented- hybrid funds allocate more than 65% of the total fund in fixed income debt instruments, money market instruments like corporate bonds, government securities, treasury bonds, etc. the rest of the fund is allocated to equity i.e. shares and stocks of companies.
Equity Linked Savings Scheme or ELSS are tax saving mutual funds which invest the majority of their fund in equity schemes. ELSS comes with a mandatory lock-in period of 3 years and provides tax benefit up to 1.5 lac per year.
This serves as an ideal investment product for investors who are looking to save their tax and also obtain better returns. However, ELSS is a comparatively much risky product and the investors need to stay invested throughout the investment period in order to take advantage of the product.
As with every mutual fund product, ELSS allows the investors to invest either a lumpsum amount or do a SIP. Investing through SIP mode allows the investors to take the benefit of the rupee cost averaging.
Below are some of the best-recommended ELSS funds:
|Motilal Oswal Long Term Equity Fund – Regular Plan-Growth||Tax Saving|
|Mirae Asset Tax Saver Fund -Regular Plan-Growth||Tax Saving|
Bank Fixed Deposit
Fixed deposits are another popular investment product amongst the investors. It offers a fixed return over the investment period and the interest is payable either monthly, quarterly, or half-yearly. Hence these are good monthly income schemes.
The investment in fixed deposits can be made via the respective bank’s website or by visiting the branch. Fixed deposit offers rate of interest ranging from 6.5% to 7.0% and also provide various tenure for investment.
- Tax-saving instruments
- Offers varied tenure for investments
- Attractive interest rate
- Safer instrument
National Pension Scheme or NPS, as commonly referred, is a retirement plan for salaried individuals who are looking to save money for their retirement. NPS is one of most popular investment plans in recent times and is managed by the Pension Fund Regulatory and Development Authority.
Furthermore, investing in NPS offers benefits under the income tax act under section 80CCD(1) and 80CCD(1B). However, NPS contributions are lock-in until retirement. On retirement, 60% of the fund is withdrawable. The rest 40% of the fund is utilized in purchasing annuities.
The underlying money collected in the NPS account is managed by the pension fund managers like:
- LIC Pension Fund
- SBI Pension Funds
- ICICI Prudential Pension Funds
- UTI Retirement Solutions
- HDFC Pension Management
- Kotak Mahindra Pension Funds
- Birla Sunlife Pension Management
- Regulated by PFRDA, which makes it transparent and trustworthy.
- Gives the investors the option to choose their own funds
- It is simple to operate, providing the investor to operate through Tier-1 and Tier-2 accounts.
Provident Fund is one of the safest and best investment options in India when it comes to investing. It has a lock-in period of 15 years which can further be extended by another 5 years. A facility of loan is also provided against the balance standing in the investor’s account.
A Public Provident Fund PPF investment of up to Rs. 1.5 Lakhs under section 80C is available for tax savings under the Income Tax Act
|Financial Year||Time Period||Returns (per annum)|
|2020-2021||April 2020 – June 2020||7.1%|
|2019-2020||January 2020 – March 2020||7.9%|
|October 2019 – December 2019||7.9%|
|July 2019 – September 2019||7.9%|
|April 2019 – June 2019||8.0%|
Short Term Debt Mutual Fund
Short Term mutual fund is an open-ended debt scheme investing in instruments having a duration between 1 year and 3 years. These, short term debt funds offer a highly safe investment avenue with stable returns.
The duration of 1 to 3 years helps you earn an additional interest income and provides you a higher reinvestment opportunity when compared to liquid funds.
Short-term mutual funds are best for conservative investors who want to grow their money without fluctuations like equity. They can be used for life goals of expensive foreign vacation and meeting wedding expenses.
Gold funds/ETF have become a popular investment in recent times. Also, Gold has offered better returns thereby beating inflation.
Furthermore, Gold is inversely related to the stock market. Generally, gold performs best when the markets are down. Gold funds also provide an opportunity to diversify your overall investment portfolio.
ULIP’s acts as a combination of both insurance and investment products. A policyholder makes the payments towards the premium either monthly or yearly, out of which a portion goes towards insuring the policyholder and the balance amount is invested just like a mutual fund like equity or debt-oriented mutual funds.
The premiums that are paid by the investors are invested in the funds of their choice after deducting various expenses such as allocation charges, policy administration charges etc. The investors are allocated the units on the net amount in the proportion of their investment.
Unit-linked Insurance Plans offer the twin benefit of insurance and savings. Apart from generating higher returns, it’s also an investment product which takes care of the protection needs of the investors.
Liquid mutual funds invest the pooled corpus of investor’s money in highly liquid and safe instruments. The instruments are rated AAA and above and are backed by the issuers. The objective of the liquid fund is to provide seamless fund availability at all times.
Liquid mutual funds are necessary to create an emergency pool of funds to meet life exigencies like sudden medical expenses and temporary income loss.
The returns from liquid funds are higher than the traditional bank accounts, which offer 3.5% to 4% returns. So, you can use liquid funds to park your surplus money until you finalize your investment avenue.
Liquid mutual funds can also be used for creating provisions for payment of bills, fees, and monthly rentals.
|Axis Liquid Fund Growth Mutual Funds Investments||Liquid|
|Tata Liquid Fund Regular Growth||Liquid|
Comparison between best investment plans
Below is a comparison of the best investment options in India:
|Investment Plan||Lock-in period||Liquidity||Risk||Return||Who should invest|
|Public Provident Fund||15 years||Offers liquidity through loans and partial withdrawals||Offers complete capital protection and risk-free return. It is one of the government investment plans.||7.1%||Investors looking for long term financial goals such as retirement, child education etc.|
|Unit-Linked Insurance Plans||5 years||ULIPs are liquid only after the lock-in period of five years is completed. This is achieved by redeeming the units.||Risk is dependent on market volatility. Any movement in the same will have an impact on the net asset value.||12-14%||Investors having a long-term horizon over 5 years and saving for long-term financial needs like buying a car, house etc.|
|NPS||Till the age of 60 years||Not considered as liquid instruments||The risk is dependent on the markets and the tenure of the investment||Average 13.5%||The NPS is a good scheme for anyone who wants to plan for their retirement early on and has a low-risk appetite.|
|Fixed Deposit||Tax saving FDs have a lock-in period of 5 years.Other FDs come with various tenures ranging from 7 days to 180 days.||Liquid instrument. Can be withdrawn before the completion of the tenure upon paying a penalty||The biggest risk associated with FD is the interest rate risk, which is the risk of the investor’s money being locked up for a long period of time at a lower return.||Average rate of interest of 7%||Risk-averse individuals can invest in the fixed deposit.|
|Short Term Debt Mutual Fund||Debt Mutual Fund – Do not have any lock-in period||Since this is a debt fund instrument, it has better liquidity than other instruments without any penalty||Medium risk investment||Average 7%-8%||Investors who do not have a high-risk tolerance for their capital and seek to have returns better than their fixed deposits|
|Gold ETF||No lock-in period. Since they are listed on the exchange, they can be traded just like equity shares||Highly liquid||Much less as compared to physical gold||Average 8-10%||Ideal for all kinds of investors.Can be traded in lower denomination as well.|
|Debt Mutual Fund||Debt Mutual Fund – Do not have any lock-in period|
|The key risks to consider for Debt Mutual funds are credit risk and interest rate risk.||Debt Mutual Fund – 7%-8%%||Investors who have less risk tolerance should invest in Debt-Mutual funds.|
|Equity Mutual fund||Equity Fund (ELSS) – 3 years||Not redeemable before the lock-in period||For Equity funds, it is much risky as it invests in the stocks of companies||Equity Fund – 10-12%||Investors who can take more risk should invest in Equity funds for better returns in the long-run|
|Hybrid Mutual Funds||No lock-in period.||Highly liquid since no specific lock-in period||Moderately risky as it invests in both equity and debt instruments.||7-9%||Investors who are looking to diversify their investment portfolio..|
Modes of investing
A systematic investment plan (SIP) is a method of investment which is allowed by mutual funds to investors, to invest the money in instalments instead of lumpsum payment. This frequency of investment can be either weekly, monthly or quarterly.
A fixed amount is debited from the investor’s bank account and is invested in the specified mutual fund and the investor is allotted the units on the current net asset value(NAV).
SIP allows the investors to be more disciplined towards their investment and offers the flexibility to invest without the burden of lumpsum investment.
Investors can use our SIP calculator to evaluate their investments and manage their investments.
A lumpsum investment method is when the investor deposits a significant sum of money on a particular mutual fund scheme. As compared to SIP, there is no fixed day to deposit the same and can be made at any point of time.
Things to Consider while Choosing the Best Investment Plan
It is important to understand the purpose of the investment for which the investor is looking to make the investment. This can be for creation of a large corpus or a retirement fund or to repay an existing loan.
Knowing the investment objective helps you clearly identify the target amount and the assets that can help you reach the goals.
The investment tenure can be either short-term and medium to long-term. Creating a corpus of funds for repaying a loan, taking a foreign vacation etc. are some of the short-term investment objectives for which investment is made. The short-term investment period is considered for up to 3 years.
Medium-term goals can be buying a house and repay a loan that you want to achieve Up-to 7 years. Retirement plans and creating a corpus for children’s education or marriage are long-term investment goals.
Short-term goals are better achieved using debt investments and equity investment are preferred for long-term investment goals. Knowing the investment period will help you select an appropriate investment plan.
Certain investment plans offer the advantage of tax exemption under different sections of the Income Tax Act. For example, ELSS, PPF, NPS, ULIPs and tax-saving FDs investment plans offer tax benefits.
Likewise, you need to check taxation of the returns. The returns from PPF are entirely exempted from taxes whereas returns from ELSS are partially taxable. Whereas, the earnings from tax-saving fixed deposits are fully taxable
Ways to Invest
You also need to check the investment methods available. The online investment methods are quick, paperless and hassle-free. Whereas offline methods are time-consuming and require loads of paperwork.
You can invest in mutual funds online using an online mutual fund investment platform. Scripbox is an investment platform that helps you select the appropriate scheme, invest, track, manage and also redeem your mutual fund investment from a single account.
Certain investment plans like tax-saving fixed deposits require you to invest a lump sum amount upfront.
On the other hand, mutual funds which offer the SIP method of investment helps the investors to invest a small amount at a regular interval. This allows the investor to manage their cash flow and also maintain financial discipline at the same time.
How to invest in a Mutual Fund with Scripbox?
You can invest in algorithmically and scientifically selected mutual funds to grow your money, and meet your life goals
You can invest in Scripbox recommended mutual funds in India by following the below-mentioned steps:
- Login to Scripbox
- Click on ‘ Let’s Get Started’
- Begin your investment journey by setting up your investment goal
- Select the mode of investment i.e. monthly SIP, one time or STP
- Enter the amount of investment
- Based on the amount of investment, the recommended mutual funds will be provided. You can change the funds and the distribution of the amount
- Select the payment mode and proceed toward the payment
Investment plans help you grow money to fulfill your upcoming life events. They help you save and also invest systematically. But you need to be prudent while selecting the best plans.
Ideally, your choice of the plan should match your investment objectives, the tenure and also your understanding of risk.