The definition for what the ‘best’ investment is, could be a cause for debate as the parameters for deciding this might differ from one person to another. However, one can safely say that any investment that gives you stable returns which beat inflation over the long term, could be considered to be the best. Given that interest rates in the country are dwindling, where could you possibly find investments which meet this criteria? Don’t fret! We will tell you which investments you can bet on and how to make the most of them.
Mutual Funds – Equity Mutual Funds are perhaps the best of investments that are least affected by inflation. The top 10 equity funds have returned an average of 22% per annum over the last 5 years. And, don’t think that you get only returns, you get tax savings too from some of these funds! Consider this: Birla SunLife Tax Relief Fund, an Equity Linked Savings Scheme (ELSS) fund, has given a return of 25.8% per annum since its launch in 1996. When you consider 3 year returns too, the fund seems to have exceeded expectations. The 3 year return stands at 21.95% per annum. Essentially, long term investment in the fund seems to give better returns when compared to investing for the short term. This is precisely why Mutual Funds might be the perfect investment for the next 10 years, especially if you are in your 20s and 30s.
Real Estate – Often considered a risky investment, this might be the most coveted asset cum investment, for anyone and everyone. The Indian real estate industry has seen major growth in the last decade and affordable housing has mushroomed all over the country, making it easy to buy this asset. You also get tax benefits when you buy / invest in this one, if you take a loan, that is. What else do you need? Maybe returns? You get that too, if you remain invested for the long term (read 5 years or more). If you look at the National Housing Bank’s Residex Index, the average return for the top 5 cities in the country has been 16% CAGR (Compunded Annual Growth Rate). The Indian average stands at 15% CAGR, which definitely beats inflation. And this might be the right time for investing in residential real estate. “Trends are beginning to change basis expectations of a good monsoon, revival in the economy, reducing inflation and the fact that residential prices have bottomed out. Also, the improving regulatory environment in the real estate sector, coupled with progressive Government schemes like Smart Cities, AMRUT and ‘Housing for All by 2022’, are beginning to have a positive influence. Additionally, factoring in banks’ passing on of interest rate cut benefits to the ultimate consumers, the residential sector is all set for rebooted growth” says Ashwinder Raj Singh, CEO – Residential Services, JLL India. Go for that Home Loan but compare across lenders for the best interest rates. Also, do that due diligence before choosing a property and stay invested for the long term to grab those capital gains.
Gold – We Indians have always been mad about gold. We don’t need an occasion to buy gold and we don’t hesitate to splurge on it when an occasion arises. And, gold has always provided that much needed hedge against inflation. However, in the recent past gold has been going haywire. The Gold bull-run stopped in 2013 and the gold rate has been highly volatile since then. But demand for gold hasn’t waned. Globally, demand for gold has touched the 1,290 tonnes mark. This data is for the first quarter of 2016. This figure denotes a 21% rise in gold demand year-on-year. While demand is rising, supply seems to be more or less the same. This is the reason why gold prices have been going up in the recent past. Gold is an exhaustible precious metal and mining is not an easy process. If gold supplies fall in the coming years, gold would only become more precious. This is why investing in gold for the long term might be a wise thing to do. But, remember that gold purchased as jewellery is not a great investment as it comes with making and other wastage charges and has a lower resale value. Gold coins and bars are the smart way. An even smarter way is to invest in gold Exchange Traded Funds (ETF).
PPF – Pubic Provident Fund, the popular PPF, is considered a safe long term investment as it is backed by the Indian Government. The best part? It is fully exempt from tax. The minimum amount needed to invest in PPF is Rs.500. The current interest rate is 8.1% per annum. After the 3rd year you can take a loan against your PPF and partial withdrawal is allowed from the 7th year. Consider this: If you invest Rs.50,000 in the PPF for the next 15 years, you will receive Rs.15,58,634 at maturity if the interest rate remains at 8.1%. If you use your bank account to invest in PPF, you can transfer funds online from the savings account to the PPF account. You can also view the account statement online, just like your savings bank account. When investing in PPF make it goal based so that you are not tempted to stop investing many years down the line. Typically people use PPF for goals such as their kid’s education or retirement.
Whichever investment you choose, ensure that you stick to it till you reap the right returns. Compounding works and you will know its benefits only after many years of staying invested.