Where should I invest?
The financial instrument in which you invest depends on your investment horizon and risk appetite. If you have short term or medium-term goals, invest in relatively safer instruments. Invest in bank deposits or liquid funds for short term goals and debt schemes for medium-term schemes. Invest in equity for only long terms goals which are more than 3 years.
Short-term investment options:
Fixed deposits are the safest investment avenue, unfortunately most Indians invest in them for the long term. Use fixed deposits to keep money as contingency funds required in the next few months to a year.
Company fixed deposits are a little more risky than normal fixed deposits but come with a higher return as well. Invest in fixed deposits of companies with high ratings. Don’t invest all your money in one company, spread it across a few companies.
Short-term debt schemes:
Debt schemes are ideal for investing for the short-term or parking money for contingency requirements. You can invest in liquid funds, ultra-short-term funds, short-term funds.
Long-term investment options:
Long-term debt schemes:
You can invest in debt schemes if you have an investment horizon of more than 3 years. Long-term debt schemes are taxed at 20% with indexation benefits.
Equity mutual funds:
If you have an investment horizon of 5 years or more you should invest in equity mutual funds through SIP. You can also invest in balanced equity funds which invest 65% in equity and balance 35% in debt to offer some safety. If you are looking for tax benefits under section 80C you can invest in Equity linked saving scheme (ELSS).
Investing directly in stocks can be very rewarding but carries with it some risk as well. Invest directly in stock market if you have the required skill set and knowledge about the working of the market.
Tax saving options:
Public provident funds (PPF):
Ideal investment option for conservative investors. Interest earned on PPF are also tax free and contributions made to PPF qualify for tax deductions under section 80C.
Equity linked saving scheme:
They qualify for tax deductions under section 80C and have a minimum lock in period of 3 years. This has become the most popular tax saving scheme in recent times.