You work very hard to take home a handsome salary each month. Unfortunately, this salary gets spent real soon. You have learnt to save your money and your wife keeps praising you. She says, we will be rich soon. Sorry to disappoint you. You don't grow rich by saving. You grow rich by investing your hard earned money. You need to think compounding returns. Compounding returns = Return on Return.
In this article, I will tell you the 4 investments a salaried person must have. Want to know more on investment planning? We at IndianMoney.com will make it easy for you. Just give us a missed call on 022 6181 6111 to explore our unique Free Advisory Service. IndianMoney.com is not a seller of any financial products. We only provide FREE financial advice / education to ensure that you are not mis-guided while buying any kind of financial products.
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If you are a salaried person, a good investment is a tool for creating wealth and also gives you money for retirement. Select an investment based on the risk you can bear. Higher the risk, higher the return.
1. Invest in PPF
If you are risk averse, then PPF is an excellent investment. You can open a PPF account at a registered bank or post office, with a minimum amount of just Rs 500 a year. You can make a maximum of 12 instalments in a financial year. PPF has a lock-in of 15 years.
PPF gives you guaranteed returns where interest rates keep changing each quarter. PPF offers an interest of 7.6% for the January-March quarter. PPF is an excellent investment to save tax. It enjoys the EEE benefit. The money you invest enjoys Section 80C deduction up to Rs 1.5 Lakhs a year. The interest and the money at withdrawal is tax-free.
A salaried person must invest in PPF for retirement. PPF forces you to stay invested for 15 years. The tax benefits and high-interest rates give you a good return on investment.
If you want to invest a lump sum, think Fixed Deposits popularly called FDs. Bank FDs offer interest around 6.5-7% a year. Interest earned is taxable. FDs are a safe investment giving you secured returns. Investing in a tax-saver FD (it has a lock-in of 5 years), gives tax benefits up to Rs 1.5 Lakhs a year under Section 80C.
FDs give you secured returns. Tax saver FDs give tax benefits. You can also avail loan against FD. Rate of interest charged is 1-2% above Fixed Deposit interest rates. Loan tenure must not exceed tenure of the FD.
National Pension Scheme or NPS helps you (a salaried employee), save systematically across your working life. It is an excellent investment for retirement. NPS helps you invest in both equity + debt. You can invest in NPS, if you are between 18 to 60 years. An investor in NPS has two choices. The auto choice and the active choice.
In the active choice, you get to decide the investment. You can invest in equity up to a maximum of 50%. The rest of the amount is in Government Securities and Corporate Bonds. If you don't select the active choice, you are under the auto choice. Investment is made in a mix of equity, Corporate bonds and Government Securities, depending on your age.
NPS enjoys tax benefits under Section 80C up to Rs 1.5 Lakhs a year. You get an additional deduction under Section 80CCD(1B) up to Rs 50,000 a year.
NPS is good for retirement. On withdrawal at the age of 60, you have to compulsorily invest 40% of the Corpus (Accumulated Amount) in an annuity plan. Out of the remaining 60%, an amount of 40% is tax free and the remaining 20% is added to taxable salary and taxed as per tax bracket.
The annuity plan gives you pension after retirement.
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4. ELSS is good for the salaried
ELSS is a tax saving mutual fund, which invests most of your money in equities. Invest in ELSS only if you are willing to take risk in investment. ELSS has a compulsory 3-year lock-in. ELSS forces you to stay invested in equities for at least 3 years. This increases the chances of getting good returns from ELSS.
You must invest in ELSS through SIPs. You invest a fixed sum of money, say once each month or quarter, regularly in a mutual fund scheme.
ELSS is very good for the salaried as it gives EEE benefits. You get a tax deduction under Section 80C up to Rs 1.5 Lakhs a year. The returns you get and the money withdrawn after the 3-year lock-in, are tax free.
If you are salaried, make sure you glance through these 4 investments. Be Wise, Get Rich.
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