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Where Should You Put Your Money For The Best Returns

Updated On Mar 14, 2022

Money that is considered savings is often put into an interest-earning account where the risk of losing your deposit is very low. Although you may be able to reap larger returns with higher-risk investments such as stocks, the idea behind savings is to allow the money to grow slowly with little or no associated risk. Online banking has expanded the variety and accessibility of savings accounts.

If you're not earning any interest on your savings, your savings will be worth less over time due to inflation. Here are some of the different types of accounts so you can make the most of your savings.

Best Options for Investment

The best options for investment would depend on the duration of your financial objectives. A long term period would be more than 10 years and a short term period would be less than three years. Here are the best options for both, long-term and short-term horizons:

1. Mutual Funds

When it comes to long term wealth creation to achieve financial objectives like retirement or buying a home, equity mutual funds are the best options amongst the others. The reason being the best performing mutual funds in the equity category have generated annualised returns of approximately 20% in the last 10 years and Rs. 1 lac invested by retail investors has now become Rs. 6 lacs. However, to maximise the potential of mutual funds, it is advisable to either go online and select the right mutual fund based on past performances or take the assistance of an independent financial consultant.

You must also analyse your risk appetite as there are various types of mutual funds based on risk such as large cap funds, mid cap funds, and small cap funds. There are thematic funds like pharma funds. Small cap funds are riskier than mid cap funds and so on. Even after the re-introduction of long term capital gains tax for equity, these are still more tax efficient and provide better returns than other asset classes. Certain mutual funds like Equity Linked Savings Scheme also give you tax benefits under section 80C.

2. Real Estate

What makes this asset class attractive is the correction in prices over time. This would be a good long-term investment option. Regulatory Body like the Real Estate Regulatory Authority (RERA) have ensured greater safety and transparency for buyers. Fraudulent operators are fewer in number today. Real estate is growing again thanks to rapid urbanisation, greater consumerism, and easier access to home financing options. The affordable housing segment has the potential for high returns in the long term. There are a lot of tax benefits if you take home loans under Section 80C and Section 24 of the Income Tax Act, 1961.

3. Stock Market

If you have a clear understanding of stocks, then they are the best way to generate good returns. You need to identify stocks which are trading at a price which is lower than its actual value. Then you should buy small quantities of such stocks and create wealth over the long term.

4. NPS

This government-sponsored scheme ensures a minimum pension for the subscriber. There are benefits up to Rs. 1.5 lacs per year and an additional Rs. 50,000 under section 80CCD (1B). There are different investment options here and in order to get good returns you can choose the aggressive option where 50% is invested in equity, 30% in corporate bonds, and 20% in gilt funds.

5. PPF

A PPF or a Public Provident fund account is backed by the Government of India and can be purchased at post offices and banks. It has a 15-year tenure, though you can make withdrawals from the 7th year onwards. The principal invested, the interest, and maturity amount are all tax free. The rate of interest is revised every quarter and is based on government bond yields.

6. Initial Public Offering

When a company offers its shares to the public for the first time, it is known as an IPO. It is important to understand the fundamentals and future prospects of the company before investing in it. Investors in IPOs of strong companies like Infosys have multiplied their initial investment several times.

7. Systematic Investment Plans

Systematic investment plans are a facility offered by mutual funds that allow individuals who cannot invest a huge lump sum in one go to invest small amounts on a daily, weekly, or monthly basis. This allows them to participate in the wealth creation process in the long term by investing in equity markets. You can start with as low as Rs. 500 per month and increase your monthly contribution when your salary goes up. This investment type gives you the benefit of rupee cost averaging (lowering your average purchase price).


As you get closer to your financial goals, owning bonds that match up with your timeline will protect assets you'll be counting on in the short term.

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.

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