We always hear that we need to diversify our investments so that we achieve a balance between security and returns that beats inflation.
“Don’t put all your eggs in one basket” – Warren Buffet
But what are the options available for a diversified investment portfolio and what is the balanced mix?
Let’s have an introduction to the best investment options available
This is a category of market linked investments, an aggressive investment option that is suitable for wealth creation and getting returns that beats inflation over a long term investment period. Introduction of SIP further increased the opportunity to reap the benefits from Mutual funds.
Equity Linked Savings Schemes (ELSS) in mutual funds, apart from wealth creation, gives you tax benefit under sec 80C with a lock-in period of 3 years (which is the minimum among all tax savings instruments)
Public Provident Fund (PPF)
This is an investment option, for the conservative investors, that gives assured return with a long term investment period of 15 years. This is scheme ran by the Govt.of India. Tax benefit under sec 80c.
Voluntary Provident Fund (VPF)
This is another option for the conservative investors wherein he can contribute to his existing EPF account a maximum amount that equals to his basic plus DA. The interest rate is same as EPF.
National Pension Scheme (NPS)
This is an investment option which is market linked, with long term investment period (till retirement), suitable for pension planning as well as wealth creation. It also gives an opportunity to take tax benefit of 50,000 in addition to 1.5 lakh under sec 80C.
National Savings Certificate (NSC)
This is an option suitable for the conservative investor, that we can start through the post office, with guaranteed returns (currently 7.9%) and with an investment period of 5 years. Tax benefit under 80c. The interest earned on the 5th year is taxable as it is not reinvested.
Investment options aimed at specific group
Sukanya Samriddhi Yojana (SSY)
This is an investment option available only for parents having girl child (the maximum allowable age of girl child at the time of starting is 10 years and the tenure of investment is till the girl child turns 18) and suitable for long term wealth creation for girl child’s higher education and marriage planning.
Senior Citizens Savings Scheme (SCSS)
This scheme is exclusively for senior citizens (aged 60 years and more). Current interest rate is 8.4%(simple interest). This scheme provides income by giving out the interest on a quarterly basis and the principle amount is given back at maturity after 5 years. Tax benefit under sec 80c. Interest amount received is taxable.
The best and the balanced mix depends on various factors together with the type, need and appetite of the investor.
Consult your Financial Advisor for your best investment portfolio.