Options in 2021
Investment products fall into financial and non-financial assets. Financial assets include market-linked products (like stocks, MFs) and fixed income products (like PPF, bank FD).
Non-financial assets include physical gold and real estate.
Investing in stocks might not be for everyone - it is a volatile asset class and there is no guarantee of returns.
However, over long periods, equity has been able to deliver higher than inflation-adjusted returns compared to all other asset classes.
Equity MF schemes invest largely in equity stocks. As per SEBI regulations, equity MF schemes must invest at least 65% of its assets in equity and equity-related instruments.
The returns are largely dependent on a fund manager's ability to generate returns.
Debt MF schemes are suitable for investors who want steady returns. They are less volatile and risky compared to equity funds.
Debt MFs primarily invest in fixed-interest generating securities like corporate bonds, government securities, treasury bills, etc.
National Pension System
NPS is a long term retirement-focused investment product managed by the Pension Fund Regulatory and Development Authority (PFRDA).
It is a mix of equity, fixed deposits, corporate bonds, liquid funds and government funds, among others.
Public Provident Fund
A popular choice. Since the PPF has a 15-year tenure, the impact of compounding of tax-free interest is huge.
Plus, since the interest earned and the principal invested is backed by sovereign guarantee, it makes it a safe investment.
A bank fixed deposit is considered safer (than equity or MFs).
Under the deposit insurance and credit guarantee corporation rules, each depositor is insured up to a maximum of Rs 5 lakh with effect from February 4, 2020 for both principal and interest amount.
The house you live in is not an investment. If you do not live in it, the second house you buy can be an investment.
Real estate delivers returns as capital appreciation and rentals - rental and value is determined by the location of the property.
Gold in the form of jewellery has its own concerns such as safety and high cost - gold coins may be a safer option.
An alternate way of owning gold is via paper gold. Investment in paper gold is more cost-effective and can be done through gold ETFs.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.