Investment Mantra


People make investments keeping in mind three objectives: safety, growth and income. A Banker has advised ‘Nabaratna Investment’ platforms to our avid readers. He advises the following nine forms of investments; which should always be there within our gamut of Investments.

With some objective in mind, people start investing. The three main objective of investment is safety, growth and   income. Depending on the life stage and risk appetite, modes of investments are advised by financial planners. However, the following nine forms of investments should always be there within our gamut of Investments.

Fixed Deposit: These are the most liquid and popular investments available with Financial Institutions. These investments can be made from 7 days to 10 years. Any time it can be withdrawn with some penalty in interest. Loans up to 90% of the deposit plus accrued interest can be availed from the issuing financial institutions. The interest earned is subject to TDS. There are different categories of deposits like Multi option Deposit, Flexi Deposit and Recurring Deposits are available with Banks.

Insurance: Insurance is based on principle of transferring risk through sharing. It is the process of avoiding the loss or shifting it to other party. There are mainly two types of Insurance i.e Life Insurance and General Insurance. We must insure our valuables against uncertain loss. The major insurance which must be done by any individual includes Term Insurance, Health Insurance, Motor Vehicle insurance and house insurance.

PPF: Public Provident Fund is an investment with decent returns and income tax benefits. Individuals either in their own or in the name of a minor can open the account at any Branch. Annual deposit is minimum of Rs.500.00 and maximum of Rs.1,50,000. The amount deposited can be either in lump sum or in a maximum of 12 installments per year. Original period is 15 years. Subsequently it can be extended on request for one or more blocks of 5 years each. Loans and withdrawals are also permitted with certain provisions. Income Tax benefits are available in PPF investments and Interest income is totally exempted from Income Tax.

Sukanya Samriddhi Scheme: This scheme is specially designed for savings for education and marriage of the girl child. Such account can be opened either by the natural guardian or legal guardian till the child attains the age of 10.One account can be opened for one girl child. Natural or Legal guardian can open two accounts in the name of two girl children. Third account is also possible in rare case of twin girl as second birth or if first birth itself results in three girl children. Sukanya Samriddhi Account is opened with minimum initial deposit of one thousand rupees and thereafter any amount in multiple of hundred rupees. Minimum deposit in a Financial Year is Rs.250/- and Maximum Rs.150000/-. Deposits can be made into the account for 14 years from the date of its issuance. The Sukanya Samriddhi Account reaches its maturity when the account holder reaches 21 years of age. The deposit is eligible for deduction under section 80C of the Income Tax Act and the withdrawal is exempted from income tax.

Gold: Gold is the most traditional way of investing in our Country. Gold is bought in India over a period of time by families for festivals and gifting purpose during weddings. It serves dual purpose i.e jewellery as well as investment. Gold can be converted to cash in any country and is highly liquid. Gold is also a good security for getting loan in Banks. It is a prudent investment as in economic crisis and inflation there was rise in prices of gold historically. Reduction in supply of Gold due to decrease in Gold mining has also increased value of Gold. Further investment in Gold is not subject to income tax. Hence one should invest 10% to 15% in Gold. Apart from purchasing Gold ornaments & coins, we can also invest in Gold Bonds and Gold ETFs.

National Pension Scheme: National Pension Scheme was introduced by Govt of India to secure financial futures of Individual after retirement. The National Pension Scheme is regulated by PFRDA. This can be availed by any citizen who falls in the age group of 18-60 years. The scheme gives an opportunity to the subscriber to build up his/her pension fund over a long period so that after retirement he/she can draw pension for his sustenance. Investment of up to Rs 50,000 in the National Pension Scheme provides additional tax deduction under Section 80 CCD (1B) of the Income Tax Act. This deduction is in addition to the Rs 1.5 lakh allowed under Section 80C.

 Debt Mutual Fund: This type of Mutual Fund provides steady returns to investors. A major part of investments in these scheme are on debentures, Government Securities and other debt instruments. They primarily invest in Government and corporate debt. This is a low risk low return investment avenue particularly for risk averse investors looking for a steady income. Some examples of such funds are Gilt funds, Income Funds, Fixed Maturity Plan, Money market/Liquid funds etc. Such schemes are market driven and many times they provide higher returns than Fixed deposit in a Bank.

Equity Mutual Fund: Equity funds are most popular mutual funds amongst retail investors. These are high risk investments in short run but result in capital appreciation in long period. Investors who are in their prime earning stage and looking for long term benefits can ideally invest in Equity schemes. Sectoral Funds, Equity linked saving schemes, Large cap, Small cap & Midcap funds, Arbitrage funds are some example of Equity schemes.

International Mutual Fund: International Mutual Funds invest in countries and firms other   than where they reside. These are also called overseas and foreign funds. Investors who are ready to diversify to different markets, sectors, countries usually invest in these schemes. These are high risk instruments with high return in longer period. Since economic cycles in different countries are different, there is possibility of better returns with minimal loss in these funds. After knowing global market situation, one can invest 10 to 15% of Mutual Fund investments in Foreign Funds.

Before investing in any mutual fund, please go through offer documents carefully.

Increase savings habit and keep investing for the desired goal.