Let’s give you a quick overview of the various savings options you have, to salt away your money. Worried about financial risks? Don’t be. This guide will help everyone, from the risk-averse investor, to the more adventurous sort.
Let’s begin with small savings schemes. Well, they are not really ‘small’ if you read about how they work. Rest assured, they are safe and secure investment instruments.
- Public Provident Fund
Investments in the Public Provident Fund give you maximum security for your capital. If you are prepared to stay invested for a period of 15 years, open a PPF account and make regular deposits. Now you can withdraw from your PPF after five years under special circumstances.
- National Savings Certificates
National Savings Certificates give you both tax savings and assured returns. National Savings Certificates are available at Post Offices and are available in two deposit tenures. You can choose to invest money for 5 years or 10 years.
Investments in National Savings Certificates are done in lump sum deposits. Each deposit will be accepted and a new certificate will be issued to you.
- Post Office Savings Schemes
You can choose to invest in savings schemes offered at your local post office. At the Post Office, you can open Recurring Deposits and Term Deposits.
One important advantage of Post Office savings schemes is that these investments are more secure compared to bank investments because the Post Office is managed by the government.
- Savings Accounts
Banks offer various types of Savings Accounts for deposits based on their needs. You can choose from Women’s Savings Account, NRI Accounts, Privilege Accounts and many more. You can even choose to open Minor Savings Accounts for your children. But note that these might not beat inflation in the long run.
- Recurring Deposits
Investment in a Recurring Deposit is a good idea if you want to save up a lump sum amount over a certain period of time. Make regular deposits for a fixed tenure and you can get a maturity amount at the end of the term. Recurring Deposits can be opened for a minimum term of 12 months.
Additional Reading: Top 10 Recurring Deposits For 2016
- Fixed Deposits
A Fixed Deposit is another highly safe investment instrument if you’re looking for traditional savings avenues.
- Many names, one deposit
Fixed Deposits are also called Term Deposits because they are invested for a fixed term or tenure. There are also Special Term Deposits.
What’s special, you ask? Special Term Deposits have special term periods like 333 days or 555 days. With a Special Term Deposit, you get a better interest rate which would be higher than regular FDs.
What’s the difference? A Term Deposit (also called a TD) is an FD where you choose the term. In case of both TD and special deposit, you can choose to get paid interest on a monthly, quarterly, half yearly or annual basis.
- How to choose?
It’s simple. If you want a regular interest income, a Term Deposit is your best bet. But if you prefer to see your money grow, a Special Term Deposit would be a better bet.
- Liquid Funds
Liquid Funds are also very safe. Risk-averse investors can invest in this funds without worrying too much.
Liquid Funds are those funds that invest in money-market instruments. You have the flexibility to remain invested in a Liquid Fund for as little as a day or as much as 90 days or even more. You get assured returns and your money is accessible whenever you need it.
- Debt Funds
Debt Funds invest in a mix of Government securities and corporate securities. Based on the tenure of investment in Debt Funds, you can get low to moderate returns. With investments in Debt Funds, you can be assured of the safety of your capital.
Now we’ll go on to tell you about investments that are considerably high risk. These instruments will give you high returns but are volatile.
- Equity Diversified Funds
Equity Diversified Funds invest across industries or sectors and market capitalisations. These instruments largely invest in large-cap stocks and mid-cap stocks, making Equity Diversified Funds less volatile when compared to other equity funds.
You can further diversify your risks by choosing to invest in Mutual Funds through Systematic Investment Plans (SIPs).
Investments in gold are also considerably risky because you are investing in a single commodity. The government has introduced the Sovereign Gold Bond Scheme to allow investors in the yellow metal to reduce investments in physical gold. With the Gold Bond Scheme, you don’t need to worry about safeguarding your gold because your investment is recorded in paper form.
Additional Reading: Prime Minister’s Gold Schemes
- Sectoral Funds
These are funds that invest in specific sectors. For instance, some funds will invest solely in the banking sector or in the IT sector. Be careful with investments in Sectoral Funds because these instruments are highly risky. It is important to have a good level of knowledge about the sector before investing in Sectoral Funds.
Unit Linked Insurance Plans
A Unit Linked Insurance Plan is an insurance plan which provides you life cover as well as an investment option. A part of the premium that you pay goes towards mortality charges, as in regular Life Insurance policies. The remaining amount of the premium is invested for the insured person by the insurance company.
With investments in ULIPs you should first consider the various associated charges. Investments in ULIPs are rather risky because like Mutual Funds, they invest in both stocks debt instruments. The only difference between Mutual Funds and Unit Linked Insurance Plans is that ULIPs offer the investor Life Insurance cover.
Investing in Real Estate is considered to be a lucrative investment option. The secret behind successful investments in property is to buy property at a low price and sell at a higher price.
Real Estate investments are more profitable if you remain invested for a long time.
Additional Reading: Why An Under Construction Property Is A Good Investment
Investing in the stock market is an extremely bold step to take. It is best to invest in stocks if you have sufficient knowledge and a knack for timing the market.
A more convenient option would be to make your foray into investing in stocks through Mutual Funds, where an expert picks the stocks you should consider investing in.
Now that you have all the information at your fingertips, choose the perfect investment option that is suitable for you.
Additional Reading: Best Investments For The Next 10 Years