Select the appropriate investment option to help you maximise your savings.
As the New Year sets in, every investor wishes to improve their investment strategy, focusing on new financial goals and a fresh effort to churn out better return than the previous year. A good investment portfolio requires regular makeover to consistently perform better and achieve goals in the long term to stay upbeat, despite changing market dynamics.
You may already have an investment strategy in place from 2017, but for 2018 you need to analyse it again and make the requisite adjustments to get a high return on investment (ROI), reduce risk and ensure that you do not falter in achieving both short and long-term goals. Depending on your age, risk appetite, investment tenure and return expectation, you can select the appropriate investment option.
To get you rolling, we tell you 5 investment ideas in 2018 and get closer to your financial goal.
Invest in Equity Mutual Fund Through SIP
Investment in Mutual Funds had shown a significant surge in the year 2017 post demonetisation. In 2018, we can expect a sustained growth in investments in financial assets such as mutual funds rather than physical ones such as gold. If you are looking for ROI and are ready to take moderate to high risk, then equity-linked Mutual Fund SIPs are a very good option. At the same time if you are looking to save tax, select an Equity Linked Savings Scheme (ELSS) from among these Mutual Fund schemes.
Time To Buy Real Estate
In 2017, realty investors stayed in a dilemma of whether to invest or not due to the Real Estate Regulatory Authority Act (RERA) and Goods and Services Tax (GST) implementation by the government. In 2018, however, the picture has started getting clearer and the government is mulling more ways to revive growth in the realty market. In fact, with RERA in the picture, you will not face problems like delay in possession, cheating by the developer or false promises. Moreover, real estate rates across the country are down, giving you the opportunity to invest in your dream property.
To add to this interest rates on Home Loans are also inching closer to the 8% mark. This is making 2018 a lucrative year to invest money in the realty market. By investing in the realty market, not only can you earn a steady rental return, but also save tax on your Home Loan.
Invest in Liquid Funds & Balanced Funds
Post continuous fall in interest rate from debt investment instruments, 2018 seems to remain subdued for such investment. Risk-averse investors may find it tough and unappealing to invest in debt instruments. However, liquid funds and short-term debt Mutual Funds may provide the right balance to your portfolio. They are tax-efficient, provide moderate returns, and keep your money safe.
You can play with the investment percentage to take a call on how much you should invest, and for what duration and accordingly select the best suitable debt investment. However, if you’re looking for higher returns than those provided by debt instruments, you may consider a balanced Mutual Fund. They invest in a mix of debt and equity instruments.
Tax Saving Investments
While investing in 2018, you should take care of tax saving instruments. Try to maximize the return by including efficient ones in your portfolio. Under Section 80 (C) of the Income Tax (IT) you can get tax deduction benefit up to Rs 1.5 lakh. But you must use this exemption carefully. Traditional debt-oriented tax saving instruments have lowered in their return in the last few months, so investing in options like ELSS is best not only to save tax but also to maximize ROI.
Based on your financial goal you can also invest in PPF, Tax saving Fixed Deposits and more. But be wary as the interest rates for these schemes have been slashed recently. So your returns may not be that high, even though your investment will be secure. You can also get the additional tax saving benefit of Rs 50,000 under Sec 80CCD(1b) of the IT Act over and above Sec 80 (C) by investing in National Pension Scheme (NPS).
Contingency Liquid Funds
Fixed Deposits have been the most popular form of liquid saving instruments among investors, especially as an emergency fund. But the current market trend shows that interest rates on FD have been hit as they have come down significantly to 6% to 6.5% per annum (pa) on a 1-year term.
The interest rate on savings accounts has also come down to 3% to 5% level. In 2018 if you are looking to secure good returns on your emergency fund, then liquid funds are a good option for you. Liquid funds can deliver a return of around 6% to 7% pa.
With the Lok Sabha elections getting closer, there will be an air of uncertainty towards the end of this year. This may have an impact on the money market. But as a seasoned investor, you must stay disciplined, hedge your risks, and keep investing as per your life goals. Take necessary precautions and don’t be shy about consulting your investment advisor.