5 Best Investment Options For A Salaried Person

By Adhil Shetty | March 12, 2018

When it comes to investing money in different types of asset classes, the choice of a salaried individual often varies from a self-employed or businessman.

5 Best Investment Options For A Salaried Person

Salaried individuals have fixed monthly income unlike a self-employed or businessman, which means that they have to manage investment and expenses within a stipulated income. They cannot change the lifestyle due to income constraints. Therefore, salaried people need to consider time, risk, income growth and return expectation while determining the best investment option for them.

Below is the list of 5 best investment options for salaried individuals who have just begin their career.

Systematic Investment In Equity Oriented Product

A young earner has fewer responsibilities in the beginning of a career and his/her potential to take risk is high. Therefore, they can consider investing in an equity-oriented product. Within equity class, the investment should be done in a systematic way, i.e. instead of putting the money once in a year or so, it should be invested in instalments every month. You can invest in the Mutual Fund SIP if you are not comfortable with a direct investment in the stock market. Within equity mutual fund scheme, you should diversify investment as per risk and return expectation and in sync with your financial goal.

For example, for medium-term investments, you can select a large-cap equity fund for getting a high return at moderate to high risk. And similarly, for the long term, you can invest in a mid-cap fund for high risk and high return option. Equity investment through SIP mode reduces the risk in the long term and if you have diversified the investment, then it further curtails the volatility risk.

Invest In Recurring Or Fixed Deposit

A Fixed Deposit is considered as the safest form of investment as the return is guaranteed after the tenure is over. It not only cultivates a habit of saving, but fixed deposits offer higher interest rates than a normal Savings Account. Another advantage of a fixed deposit is that it can come to your rescue when you are facing a huge cash crunch. Salaried individuals should also use the Recurring Deposit option to create a contingency fund and ensure sufficient liquidity for distressed situations.

PPF For Long-Term Financial Goal

Public Provident Fund (PPF) is one of the safest investment options, but at the same time, it comes with a lock-in period of 15 years. Putting money in PPF can help the salaried individuals to ensure that they can’t use that fund for short-term needs. PPF investment can be useful to meet the long-term requirements such as marriage, child education or buying a home, etc. The present interest rate on PPF is 7.6% which is a tax-free return. PPF also helps the salaried individual to reduce the tax liability by getting a deduction U/s 80 (C).

Invest In NPS For Retirement Planning

It is important that you start planning for your retirement from the beginning of your career. A salaried individual can get tax benefits and a moderate return while investing in the NPS. Investment in NPS is meant for the long term. Investment in NPS must be done in sync with the financial objective and after discounting any other retirement focused you already have. Apart from achieving the retirement goal, you also get the tax deduction benefit by investing in NPS under Section 80C.

Invest In Gold

Gold is believed to be one of the safest hedges against inflation. Salaried individual’s requirement for gold increases as they progress in the career and life. Instead of buying physical gold, a salaried person should accumulate the yellow metal by investing money in Sovereign Gold Bond (SGB) in a regular interval and get the benefit of interest income at 2.5% p.a. and also get the capital appreciation benefit in the long term. The redemption of SGB investment on completion of tenure is tax-free. So, by investing in SGB, a salaried person gets benefits like capital appreciation, interest income and tax benefit on redemption.

Salaried investors should make investments a habit. They should not wait for a sufficient income to start investing, but instead, start investing with whatever income they get. You can also seek a financial advisor’s help in deciding about your investments according to your income.

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Adhil Shetty

About Adhil Shetty

Adhil Shetty is the Founder and serves as the Chief Executive Officer of BankBazaar.com. Adhil has a Master’s degree in International Relations with a specialization in International Finance and Business from Columbia University in the City of New York, and a Bachelor’s degree in Engineering from the College of Engineering Guindy, Anna University. Adhil is an expert in Personal Finance (Car loan/Home loan and personal loan) and he majorly consults on investment and spends rationalization for the Indian loan borrowers. His guidance is number based with real time interest rate calculations and hence useful for consumer’s real time query.

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