Best Investment Options for Salaried Persons

During the early stages of your life, you can make some of the wisest investment choices and build savings funds for the future.  Investing early in life for the future will make sure that over time your wealth expands and gives you stability in the years to come. Depending on the risk appetite, there are various investment choices available for salaried people.

Best Investment Options for Salaried Persons

The best investment option for a salaried individual would largely depend on 4 factors — risk appetite, liquidity, tax slab, and time horizon. An investor may also choose several investment options with different time horizons targeted at various financial objectives. Some of the best investment options for salaried people are

1. Equity Mutual Fund

Equity mutual funds must contribute at least 65% of their corpus in stocks/shares. These funds enable investors to profit from the high potential for growth of equities without the necessary expertise or time to invest in stocks. Equity funds have the shortest lock-in period (3 years) of all options and qualify under section 80C of the IT Act for a tax deduction.

2. Debt Mutual Fund

They invest in ‘fixed income instruments’ including corporate bonds, corporate debt, money market instruments, and government securities. Though debt funds are vulnerable to limited risk, they are less volatile than stocks and generate higher returns than bank fixed deposits.

3. Unit Linked Insurance Plan (ULIP)

ULIP blends ‘life insurance and market-related investment’. A part of the premium is to insure your life and the rest is invested in stocks, shares, markets, etc. ULIPs have a 5-year lock-in period and are entitled to tax deduction under Section 80C. Insurers also offer different fund options to accommodate different risk choices. 

4. Fixed Deposits

FDs assure income from interest and repayment of principal at deposited rates, irrespective of any adjustment in the bank rate of the deposit. Investments into tax-saving FDs can save taxes under Section 80C. The interest gained is however taxable according to the depositor's tax slab. Tax savings FDs have a 5-year lock-in period.

5. Public Provident Fund

PPF is the safest investment among all investment options because of the government's sovereign guarantee. The investment in PPF under Section 80C is eligible for a tax deduction. PPF currently provides 8% annual compounded returns with a lock-in term of 15 years. You can also extend the investment period after 15 years for another 5 years

6. National Savings Certificate (NSC)

The NSC is a fixed-income investment scheme with a lock-in term of five years, providing an annual compounding interest rate of 8 per cent. The NSC rates of interest are reviewed quarterly. You can claim tax deduction under Section 80C up to INR 1.5 lakhs

7. National Pension System (NPS)

It is a "retirement planning" market-linked product. Salaried investors not falling under the corporate or government model can invest. The investments stay locked in until you attain the age of 60, which could be extended up to 70 years. A minimum of 40 per cent of the accumulated corpus must be invested to receive an annuity while the balance tax-exempt amount, at maturity, can be withdrawn. Salaried investors can claim tax deduction under Section 80C for up to INR 1.5 lakh, and an additional deduction under Section 80 CC of up to INR 50,000 can be claimed

Conclusion

Salaried people may not usually invest in the future. However, this is the age when salaried people must make prudent investment decisions and secure their future financially.
Investing early in life can guarantee money/wealth grows with time and offers security when time comes. A myriad of investment options is available for salaried people to choose from, depending on their risk appetite.

You may also like to read: How to Save Tax Under Section 80C of Income Tax Act?