Amidst the ever-evolving realm of personal finance, selecting appropriate investment alternatives is paramount in developing a resilient financial portfolio. Here is a curated list of India’s 17 most advantageous investment plans as of 2024, representing a range of risk profiles, time horizons, and financial goals.
1. Unit Linked Insurance Plan (ULIP)
Period: 5 years
Investors: Those seeking wealth creation and life cover
Risks: Medium-to-High
Returns: 10-24% p.a.
Limit: Rs. 1000—No Limit
Tax Benefits: Available under Section 80C and Section 10 of the IT Act, 1961
2. Capital Guarantee Plans
Period: 5 years
Investors: Ideal for low-risk tolerance individuals
Risks: Low-to-Medium
Returns: 5 – 18% p.a.
Limit: Rs. 1000—No Limit
Tax Benefits: Available under Section 80C and Section 10 of the IT Act, 1961
3. Pension Plans
Period: 5 years
Investors: Risk-averse individuals with a long-term horizon
Risks: Medium-to-High
Returns: 12 – 22% p.a.
Limit: Rs. 1000—No Limit
Tax Benefits: Available under Section 80C and Section 10 of the IT Act, 1961
4. Child Plans
Period: 5 years
Investors: Those saving for their child’s future
Risks: Medium-to-High
Returns: 14 – 22% p.a.
Limit: Rs. 1000—No Limit
Tax Benefits: Available under Section 80C and Section 10 of the IT Act, 1961
5. Senior Citizen Savings Scheme (SCSS)
Period: 5 years (extendable by 3 years)
Investors: Senior Citizens (>60 years) OR Superannuation/Retired Defence Personnel (55-60 years)
Risks: Nil
Returns: 8.2% p.a.
Limit: Rs. 1000– Rs. 30 lakhs
Tax Benefits: Available under Section 80C of the IT Act, 1961
6. National Pension Scheme (NPS)
Period: Up to 60-70 years (extendable by 5 years)
Investors: All Resident Citizens/ NRIs/ OCIs/ PIOs (18-70 years)
Risks: Low-to-High (Market-linked)
Returns: Tier I: Rs. 500 – No Limit, Tier II: Rs. 250 – No Limit
Tax Benefits: Available under Section 80 CCD (1), Section 80 CCD(2), and Section 80 CCD(1B) of the IT Act, 1961
7. Post Office Monthly Income Scheme (POMIS)
Period: 5 years
Investors: Indian Citizens
Risks: Nil-to-Low
Returns: 7.4% p.a.
Limit: Single Life: Rs. 1000– Rs. 9 lakhs, Joint Life: Rs. 1000—Rs. 15 lakhs
Tax Benefits: Nil
8. Public Provident Fund (PPF)
Period: 15 years (extendable by 5 years)
Investors: Indian Citizens with long-term goals
Risks: Nil
Returns: 7.1% p.a.
Limit: Rs. 500– Rs 1.5 lakhs yearly
Tax Benefits: Available under Section 80C and Section 10 of the IT Act, 1961
9. RBI Saving Bonds
Period: 6 years
Investors: Indian Citizens (Not available to NRIs)
Risks: Nil
Returns: 8.00% p.a.
Limit: Rs. 1000—No Limit
Tax Benefits: Income earned is taxable under the IT Act of 1961. Exempted from Wealth Tax under Wealth Tax, 1957
10. Bank Fixed Deposits
Period: 7 days to 10 years
Investors: Risk-averse individuals
Risks: Nil
Returns: 4-9% p.a.
Limit: Rs. 500– Rs. 5 Crores
Tax Benefits: Deductions available under Section 80C only for Tax-Saver FDs
11. Initial Public Offerings (IPO)
Period: As per your investment profile
Investors: Requires a Demat-cum-trading account
Risks: Moderate-to-High
Returns: 8-15% (depending on IPO performance)
Limit: Decided by the investor
Taxation: Taxable for LTCG (Long-Term Capital Gains) and STCG (Short-Term Capital Gains)
12. Stock Market Trading
Period: As per your investment profile
Investors: Individuals balancing risk and return
Risks: Very High
Returns: 7-20% (depending on asset performance)
Limit: Decided by the investor
Taxation: Taxable for LTCG and STCG gains
13. Mutual Funds
Period: For ELSS Scheme: Minimum 3 years
Investors: Those with medium-to-high risk appetite
Risks: Medium-to-High
Returns: 8-20% p.a.
Limit: Rs. 500—No Limit
Tax Benefits: Exemptions for ELSS scheme under Section 80C of the IT Act, 1961
14. Gold
Period: As per your investment profile
Investors: Anyone
Risks: Low-to-Medium
Returns: 8-18%
Limit: Decided by the investor
Taxation: Taxable for LTCG and STCG gains
15. Real Estate
Period: As per your investment profile
Investors: Anyone
Risks: Medium
Returns: 6-12% p.a.
Limit: Decided by the investor
Taxation: Taxable for LTCG and STCG gains
16. Real Estate Investment Trusts (REITs)
Period: As per your investment profile
Investors: Anyone
Risks: Medium-to-High
Returns: 10-15% p.a.
Limit: For REITs: Rs. 10,000
Taxation: Taxable as per rules specified for REITs
17. Cryptocurrencies
Period: Not applicable
Investors: Anyone
Risks: High risk & High returns
Returns: Not applicable (Market-driven)
Taxation: Profits earned are taxable at a rate of 30% p.a.
Note: The investment landscape is subject to market changes, and individuals should conduct thorough research or consult a financial advisor before making investment decisions.
Conclusion
For sustained financial success, it is crucial to conclude that investment portfolio diversification is predicated on a person’s risk tolerance, financial goals, and investment time horizon. It is essential to remain updated on market trends consistently and periodically reevaluate your portfolio to ensure it aligns with your progressive financial goals.
Low-Risk Investment Plans
A diminished likelihood of substantial monetary detriment distinguishes low-risk investment plans. Conservative investors, who place a premium on capital preservation instead of aggressive returns, may find these options more suitable. The following are examples:
Bank Fixed Deposits: These refer to deposits established with financial institutions for an advance interest rate for a specified period. Predictable interest rates and principal amounts contribute to the minimal level of risk.
Senior Citizen Savings Scheme (SCSS): SCSS provides a fixed interest rate and safeguards the principal amount, catering exclusively to the needs of senior citizens. It is an option with moderate returns and low risk.
Post Office Monthly Income Scheme (POMIS): POMIS, A principal amount returned at maturity, offers a fixed monthly income. Low risk makes this investment appropriate for risk-averse individuals searching for consistent returns.
Medium-Risk Investment Plans
The prospective returns and level of risk of medium-risk investment plans are balanced. Although they provide a degree of stability, these options offer moderate potential for growth. Instances consist of:
Mutual Funds: Mutual funds aggregate numerous investors’ capital by investing in a diversified portfolio of equities, bonds, or other securities. Based on the fund’s asset allocation, the risk level is moderate.
Real Estate: The purchase of tangible properties constitutes a real estate investment. The market may be susceptible to fluctuations, posing a moderate risk despite the potential for high returns.
National Pension Scheme (NPS): An NPS is a retirement savings scheme aiming to diversify investments across various asset classes. As returns are market-correlated, the risk is moderate.
High-Risk Investment Plans
Investing at high risk entails the possibility of substantial financial gain and a greater probability of suffering significant losses. Individuals at ease with volatility and pursuing high returns may find these options applicable. Examples consist of:
Cryptocurrencies: Bitcoin and Ethereum, among other cryptocurrencies, are highly volatile and susceptible to significant price fluctuations. As with the potential for high returns, there is an associated high degree of risk.
Stock Market Trading: Trading individual equities entails a substantial risk due to the volatile nature of the market. Although returns can be considerable, losses can also be significant.
Start-up Investments: As these enterprises may operate under-proven business models, investing in startups entails substantial risk. Yet, profitable investments have the potential to generate significant returns.
Risk management requires that investors diversify their portfolios and match their investment decisions with risk tolerance. Seeking the advice of a financial advisor can yield customised recommendations tailored to one’s unique financial goals and situation.
FAQs
What factors determine the risk level of an investment?
Aspects, including market volatility, the possibility of financial loss, and the asset’s characteristics, impact an investment’s risk level. Generally, low-risk investments prioritise capital preservation, whereas high-risk options may provide greater returns but entail more significant uncertainty.
How can investors choose a suitable investment based on their risk tolerance?
To determine their risk tolerance, investors ought to consider their financial objectives, time horizon, and level of familiarity with market volatility. Optimal investments for individuals with low-risk inclinations include fixed deposits and senior citizen schemes. Conversely, those with a tendency towards moderate to high risk may consider real estate, mutual funds, or even cryptocurrencies.
Why is diversification important in managing investment risk?
Diversification is the process of scattering investments across various asset classes to mitigate the adverse effects that underperforming assets may have on the overall portfolio. This approach reduces risk and increases the likelihood of achieving consistent returns. An adequately diversified portfolio generally comprises a combination of low-, medium-, and high-risk investments based on the individual’s financial goals.
