Along with the New Year, starts a season of New Year Resolutions. While some focus on their physical growth and development, some keep their eyes on achieving financial growth and development. And if you are amongst the people who wish to make the most of this new year to improve their overall financial health, here are some of the best investment options for 2022.
As they say, the best way to utilise your money to create wealth for yourself is by investing it. Let’s start your journey towards improving your overall financial wellness and achieving your financial goals with the best investment options in 2022.
Keeping in mind that the most important aspect of investment planning is identifying the investor’s financial goals, risk appetite, investment tenure and accordingly suggesting the ideal investment options that will meet all the investors’ requirements.
So, here are the Best Investment Options For The Financial Year 2022 according to your risk-taking capacity that will not only take care of your wealth creation requirements but also help you save tax and plan your retirement;
Table Of Content
- Public Provident Fund
- Bank Fixed Deposit
- Sukanya Samriddhi Yojana
- Tax Saving FD
- Senior Citizen Saving Scheme (SCSS)
- Life Insurance
- Debt Mutual Funds
If you believe in taking a minimum risk with extremely less volatility, these low-risk investments are the best investment options for you. These low-risk investment plans are the best way for you to grow your investments and create the required wealth while ensuring minimum risk and minimizing losses due to market volatility. However, even though these investments offer extremely low risk, you need to stay invested for the long term and it is also recommended to understand the details and if required consult a certified financial planner before making a decision.
Public Provident Fund
The Public Provident Fund (PPF) is one-of-the most popular investment options amongst salaried individuals and investors seeking low risk and high returns. If you are comfortable with a lock-in period of 15 years, PPF can help you get better returns than Bank Fixed Deposit. However, you can choose to make a partial withdrawal after 5 years, which may be subject to certain conditions. Currently, investing in PPF can help earn an interest of 7.10% per annum.
Apart from the returns, PPF’s EEE feature also makes it a great tax-saving investment option wherein you can claim a tax deduction of up to Rs. 1.5 Lakhs per year under section 80C. Above all, its tax-free withdrawal on maturity along with the interest makes it the most preferred investment.
If you also wish to open a PPF account and gain the benefits of investing in the Public Provident Fund, you can easily open it at any of the banks or post offices in your locality. And in case you are wondering about the safety of your investment, rest assured that PPF is a government-backed investment option, your investment is considered to be extremely safe and secured.
Bank Fixed Deposit
Bank fixed deposits are considered to be the most preferred and the safest choice of investment amongst the investors having a conservative and highly-conservative risk profile. Investing in a bank fixed deposit gives you the freedom to choose an investment term as per your desire. It can be three months, six months, one year or more.
Though investing in a bank fixed deposit may offer you a few advantages, it also has drawbacks like;
- The interest that you earn from your investment in FD is not tax-free and it is added to your income and taxed as per the slab.
- The returns from FDs do not beat the inflation rate and thus, they may not be sufficient to cover your future expenses.
- Above all, while the investors assume it to be a safe investment, out of your total investment amount in Bank Fixed Deposit, only Rs. Five Lakh is insured by the bank.
So, if you are looking for an investment option that can help you maintain short-term liquidity, you can consider investing in fixed deposits. However, if you are looking for an investment option for long-term wealth creation, FDs may not be the right option for you.
If you are planning to invest in gold, it is recommended that you invest in Gold ETFs, Sovereign Gold Bonds or Gold Funds rather than physical gold or gold jewellery. The basic reason behind not investing in physical gold or gold jewellery is the risk involved in keeping the physical gold safe and it’s making charges that usually range between 6-23% depending on its value and style.
So, whenever you are creating your investment plan, it is recommended to invest at least 10-15% in gold in order to diversify your overall portfolio and protect it from downside risk.
Sukanya Samriddhi Yojana
This plan is exclusively developed to ensure the financial security of the girl child. Right from the day, it was launched, Sukanya Samriddhi Yojana has become immensely popular and has also become one of the best investment plans for the girl child in India. Any parent having a daughter with an age up to 10 years can invest up to Rs. 1,50,000 each year and can get an income tax deduction. Being an investment option backed by the Government of India, Sukanya Samriddhi Yojana offers you safe and assured returns. Currently, this scheme offers you an interest of 7.6% per annum. The investment tenure of this scheme is either 21 years or till the girl gets married. In addition to being a secured investment option for wealth creation, the EEE feature of this scheme can also help you save as per the respective sections of the Income Tax Act.
Tax Saving FD
As the name itself suggests, Tax Saving Fixed Deposit is an exclusive tax saving investment option for investors looking to maximise their tax savings. Having a lock-in period of 5 years, and with a maximum deposit amount of Rs.1.5 lakhs per year, along with helping you get a tax deduction, the tax-saving FDs also helps you to earn interest on your investment as well.
So, if you are an investor with a conservative or a highly conservative risk profile, investing in tax saving FD is definitely a good option for you to save a significant amount of taxes.
Senior Citizen Saving Scheme (SCSS)
SCSS is one-of-the best saving schemes developed to enable senior citizens to secure their retirement period and live an independent life. Moreover, its tax-saving ability also makes it extremely preferable by investors. All investments in SCSS are eligible to get an income tax deduction under 80C on the amount deposited in this account. As an investor, you are allowed to invest a maximum amount of Rs 1.5 lakh per year. Currently, the Senior Citizen Saving Scheme is offering you an interest rate of 7.4% per annum and you can open an SCSS account at any bank or post office.
Along with the much-required life cover, investing in life insurance also helps you save tax. As of now, you can claim a tax exemption on the maturity proceeds under section 10(10D). Moreover, if you are investing in Unit Linked Insurance Plan (ULIP), only the investments having a premium amount of less than Rs.2.5 lakhs can be considered for tax exemption.
Also, you can claim a tax deduction under section 80C on the amount of premium that you pay during the policy period.
Debt Mutual Funds
If you are an investor who is looking for steady returns, investing in debt mutual funds is undoubtedly a good option for you. Compared to equity funds, debt mutual funds are less volatile, which means that the amount of risk involved in investing in debt mutual funds is far less than equity mutual funds.
Debt mutual funds mostly invest in securities like corporate bonds, treasury bills, government securities, commercial paper and money market tools that help in generating low-moderate returns.
Though investing in debt mutual funds is comparatively safer than equity mutual funds, you can not consider it totally risk-free. Investing in debt mutual funds also involves certain levels of risks such as interest rate risk and credit risk.
So, whenever you plan to invest in any option available in the market, it is recommended that you perform in-depth analysis and also consult a financial advisor.
Moderate Or Medium Risk Investments
Moderate Or Medium Risk Investments include investment plans that give you a balanced investment. Along with providing an opportunity to grow and create wealth in the long run, the moderate risk investment plans also help you prevent the impact of market volatility on your investment up to a certain extent. These plans primarily focus on diversifying the investment portfolio by creating a mix of debt and equity securities in order to generate stable returns while keeping the risk to a moderate level.
So, if you are looking to invest in moderate risk investment plans, here are some of the most prominent moderate risk investment plans that you can consider for your investment;
Monthly Income Plans
Monthly Income Plans (MIPs) are basically debt-oriented investments that invest in a mix of equity and debt in the ratio 20:80, 30:70 or any other similar proportions wherein the lower allocation will be for equity eg. equity securities, stocks or shares and the higher allocation will be for debt-based investments like commercial paper, certificate of deposits, government securities, bonds, treasury bills etc.
Though the name of this investment is a ‘monthly income plan’, it does not give you a surety of receiving a monthly income. Basically, while investing, in a monthly income plan, you get an option to select between dividend or growth.
If you select a dividend, you will receive the income in the form of a dividend, but you may not get it every month.
If you choose the growth option, you will get your investment + returns only when you sell your invested units.
Hybrid funds are basically a combination of equity and debt investments that are exclusively designed to meet the requirements of the investor. They help you create a balanced portfolio that offers you regular income along with wealth creation in the long run.
Equity-Oriented Hybrid Funds invest more than 65% of the entire fund value in equity and the rest in debt and money market instruments. The investment in equity is divided across sectors like FMCG, Banking & Finance, Information Technology, Healthcare, Real Estate, Automobile, etc.
In Debt-Oriented Hybrid Funds, the fund manager invests more than 35% of the entire fund value in debt instruments like government securities, debentures, bonds, treasury bills, etc.
If you are looking for a good short term investment, arbitrage funds are a good choice for you as they may help you get good returns along with a significant tax advantage. The taxation of arbitrage funds is just like the equity schemes.
If the investment is held for more than one year, the gains will be taxed as a long term capital gain. If the amount of gains is more than Rs. 1 Lakh per year, it will be taxed at the rate of 10% without the benefit of indexation.
If your investment period is less than a year, you will have to pay a short term capital gains tax of 15%.
Investing in arbitrage funds is considered to be the best way to save tax for investors falling in the higher tax brackets along with achieving their short-term liquidity goals.
National Pension Scheme
The National Pension System (NPS) is a retirement saving plan offered by the Government of India.
The best part about investing in NPS is that it gives you various options to choose where your money further gets invested as per your risk-taking capacity eg. Corporate Bonds, Equity, Alternative Investment Funds (AIF), Government Securities. If you are close to your retirement age and believe in going for a safe investment, you can choose to invest a major part of your investment in government securities and corporate bonds.
If you are young and have a long way to go for your retirement, you can try the option of investing up to 75% of your money in equity as it will help you create a significant amount of wealth in the long run.
Just like the PPF, NPS is also a government-backed retirement savings scheme that can help you get a tax exemption of up to Rs. 2 lakhs. In order to invest in the NPS scheme, you need to be an Indian citizen with an age between 18 – 65. You can start investing in NPS with a minimum amount of Rs.1,000/- per month and it can help you get tax benefits up to Rs. 1,50,000/- along with an additional benefit up to Rs. 50,000.
Moreover, if your employer is also contributing towards your NPS, then you can also claim a tax exemption of up to 10% of your basic salary.
The only drawback of NPS is that you can withdraw only 60% of your investment on retirement. While the rest 40% is required to be utilized in purchasing annuities which will help you to get a monthly pension in order to live an independent retired life. But, the brighter side to it is that 60% of the amount that you can withdraw is tax-free and you will only have to pay tax on the remaining 40%.
High-risk investment plans are the best investment options for investors having a high-risk appetite and who wish to have long-term capital growth. As the investment plans are high-risk, the fluctuations in the investment because of market volatility is also high. This significantly increases the chances of creating an unbelievable amount of wealth in the long run.
So, if you also have a high-risk appetite and looking to invest in high-risk investment, here are a few options which you can consider for your investment;
Stock Market Investment
As they say, higher the risk… higher the returns. And if you too believe in the same approach and are willing to take high risks to get high returns, the stock market is the right place for you to invest.
But, investing in stocks is not as simple as it seems. It’s got a lot more than just buying and selling stocks. Apart from an extremely high-risk appetite, investing in the stock market requires in-depth knowledge about the companies, stock analysis, market behaviour, stable mentality and most importantly, the patience to hold your investments till the right time.
Moreover, you also need the skills to pick the right stocks, decide the right time of your entry and exit along with the knowledge of features like stop-loss, which help you to prevent your investment from going into an extensive loss.
Apart from the riskier part, the best part about investing in the stock market for the long term is that the returns you get are higher than the inflation-adjusted returns of all the other asset classes.
Equity Mutual Funds
As the name itself describes, equity mutual funds are one of the types of mutual funds that particularly invest in equity stocks. As per the current mutual fund regulations and Securities and Exchange Board of India (SEBI), it is important for the investor to hold 65% of the assets in regards to the equity and likewise equity-related tools when investing in any scheme based on equity mutual funds. Based on the fund manager’s choice, equity mutual funds can be managed in both ways, actively as well as passively.
In actively managed funds, the fund manager’s expertise plays an extremely important role in generating the returns.
The equity schemes are either divided on the basis of the investment areas selected by the fund manager, or on the basis of capitalization of the market. Furthermore, they can also be divided on the basis of the stocks that they invest in, whether they invest in stocks of Indian companies or they invest in stocks of international companies.
Equity Linked Savings Scheme (ELSS)
Investing in Equity Linked Savings Scheme (ELSS) will enable you to get a tax deduction of up to Rs 1.5 lakh under Section 80C. Moreover, the returns that you get in ELSS are also non-taxable if the amount of return is up to Rs 1 lakh per year. Compared to most of the tax-saving investment options, ELSS offers you the shortest lock-in period of 3 years only.
Unit Linked Plan
Unit Linked Plan of ULIP, is a unique kind of investment plan that offers you a combination of insurance and investment in return for the premium that you can pay monthly or annually.
The premium that you pay for your investment in ULIP, is usually divided into two parts. One part is utilised as the insurance premium and the other part is invested in the market.
Each plan invests in a different fund according to your requirement and risk appetite. In return for your investment in a particular plan, you get a particular number of units of the fund.
As a part of your investment is invested in the market, you must only invest in ULIP if you are willing to take a higher amount of risk. Moreover, investing in ULIP is also more expensive than the other plans as it involves extra charges like fund management charges, allocation charges, etc.
Now that you’ve got your wealth creation and tax-saving goals covered, it’s time to get to the most important part of financial planning which will help you secure the most important stage of your life i.e. retirement.
So, let’s secure your retirement using the Best Ways To Do Your Retirement Planning and add ‘happy’ to your retirement by turning your retired years into the golden years of your life.
Apart from the tried, tested and trusted ways to plan your desired retirement life like National Pension Scheme, Pension Funds, Public Provident Funds and Mutual Funds, here are a few more ways to effectively plan your retirement.
Annuity Pension Plan
Basically, an annuity is an insurance product that gives you income and it is considered to be one of the most important parts of your retirement planning. Investing in an annuity requires you to make an investment that will be used to fund your retirement in the future.
There are various types of annuity pension plans and you can choose the one that matches your requirements.
While investing in a deferred annuity, you are required to pay the premiums for the decided term of the policy. Once the term is over, you will start receiving the respective pension amount at the respective intervals.
You can either make a lump-sum investment in a deferred annuity or invest via regular contributions. Moreover, your entire investment amount in a deferred annuity can help you claim a tax deduction.
The immediate annuity requires you to deposit a lump-sum amount and once you make the required deposit, you will immediately start receiving your respective pension.
With & Without Cover Pension Plan
Investing in a ‘with cover’ pension plan will give you a life cover wherein a lump sum amount is paid to your family in the event of your death.
And as the name suggests, the ‘without cover’ pension plan does not get any life cover and in the event of your death, only the amount built till the date is paid to your dependents.
Note. Generally, the deferred annuity pension plans are ‘with cover’ and immediate annuity pension plans are ‘without cover’.
Investing in an annuity certain helps you to receive the annuity amount for a specific period after the investment. In case of your death before the final date of the annuity payment, your beneficiary receives the remaining amount.
Guaranteed Period Annuity
If you wish to receive the annuity for a certain period regardless of your survival, you can invest in the guaranteed period annuity.
Investing in a life annuity will help you receive the pension till your death. If you select the option ‘with spouse’, then your spouse will receive the pension.
Pradhan Mantri Vaya Vandan Yojana
The Pradhan Mantri Vaya Vandan Yojana has been specifically designed for the senior citizens who are 60 years of age and above as that they can be provided with an assured return every year of 7.4%. This scheme provides the income of pension, which is payable easily on an annual, half-annually, quarterly, and monthly as opted. The maximum amount of the pension is Rs 9,250 and the minimum amount is Rs 1,000 each month.
The amount that can be invested in the scheme can go up to a maximum of Rs 15 lakh and the period of the scheme are 10 years. The invested sum is payable to the senior citizen at the time of maturity, however, in case, the senior citizen passes away, the sum will be paid to the beneficiary/ nominee. This scheme is accessible until 2023, March 31.
Atal Pension Yojana
The Atal Pension Yojana was launched by the Government under the Social Security Schemes in May’15. It can be availed by all citizens between 18 to 40 years of age. The scheme provides a minimum guaranteed pension in the range of Rs. 1000 to Rs. 5000 from age 60 onwards and for which the contribution amount is very reasonable. The scheme also offers the unique triple benefit of pension for the spouse after the subscriber and corpus for nominee after both subscriber and spouse.
Any investment option you choose should grow your wealth to fulfil all your goals and dreams. However, it requires you to be prudent while choosing an investment option. Ideally, it would be best if you choose an investment plan that will match your objectives, tenure and understanding of risk.
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