Beyond FDs
Fixed Deposits (FDs) have long been a go-to for many, but in today's financial climate, exploring options that potentially yield higher returns is crucial.
The traditional, safe haven of FDs may not be keeping pace with the potential for wealth creation available through alternative investment options. The following options offer a potential avenue to surpass the returns usually associated with FDs.
Five Investment Choices
This article explores five investment choices that could potentially offer better returns than traditional FDs. These options are: Real Estate Investment Trusts (REITs), Public Provident Fund (PPF), Sovereign Gold Bonds (SGBs), Equity Mutual Funds (MFs), and National Pension System (NPS). Each has its unique characteristics, including varying risk profiles, liquidity, and tax implications. When considering these options, investors should carefully assess their financial goals and risk tolerance, and consider speaking to a financial advisor.
REITs: Property Investment
Real Estate Investment Trusts (REITs) offer a way to invest in the real estate market without directly owning property. REITs pool capital from multiple investors to purchase and manage income-generating real estate. They provide investors with exposure to the property market, typically with regular dividend payouts derived from rental income. Investments in REITs generally require research to pick sound REITs. They provide diversification benefits and can be traded on exchanges, offering liquidity.
PPF: Long-Term Savings
The Public Provident Fund (PPF) is a popular long-term investment option in India, known for its tax benefits and relatively safe returns. PPF investments are eligible for tax deductions under Section 80C of the Income Tax Act. The interest earned is tax-free, making it a very tax-efficient investment option. However, PPF has a longer lock-in period, typically 15 years, and liquidity is limited compared to other options. This fund works well for those with a long-term investment horizon seeking stable returns and tax advantages.
SGBs: Gold Investment
Sovereign Gold Bonds (SGBs) are government-backed securities that offer an opportunity to invest in gold without the hassle of physical gold ownership. They are issued by the Reserve Bank of India (RBI) and are usually linked to the price of gold. SGBs earn interest in addition to any capital appreciation linked to gold price movements. They are typically held for a fixed term, often eight years, with an option to exit after the fifth year. This option is popular due to the tax benefits and relatively safe returns.
Equity MFs: Growth Potential
Equity Mutual Funds (MFs) invest in stocks, offering the potential for high returns but also come with a higher risk compared to FDs. These funds are managed by professional fund managers who allocate investments across various companies. The returns depend on the performance of the underlying stocks. They come in various types, such as large-cap, mid-cap, and small-cap funds, each with different risk levels. Equity MFs are suitable for those willing to take on some risk in exchange for potential higher returns over the long term.
NPS: Retirement Planning
The National Pension System (NPS) is a retirement savings scheme designed to provide income after retirement. It allows investors to allocate their contributions to various asset classes, including equity, debt, and government securities. NPS offers tax benefits both during the investment phase and at the time of withdrawal, making it an attractive option for long-term retirement planning. It's suitable for individuals looking to build a corpus for their post-retirement life, with the flexibility to customize their investment strategy based on risk appetite.
