Today most of the investors in India prefer to park their investments in such a way that their investment will fetch them decent returns within a short period with minimized risk. This is the reason why most of them look out for top investment plans which helps them to double their returns within a few months or even years (medium term) with a little or negligible risk factor.
But in reality, there are no such investments which provides the investor with higher returns with low risk as risk and return factors are directly related (higher the risk, higher the returns; lower the risk, lower the returns).
Most of the middle-income group investors will be looking out for an investment plan which will give them some decent returns over some period. As most of the working class people give importance to savings, they prefer those kinds of investments which are risk-averse yet gives good returns. So here is the list of 5 best investment plans in India for those, who are looking investing Rs 1,00,000 – Rs 2,00,000.
1. Public Provident Fund
The Public Provident Fund or PPF is a kind of investment tool which helps individuals to save their hard-earned money for over 15 years. It is one of the long term investment options which helps investors to claim tax rebate under Section 80C of the Income Tax Act 1961. Apart from that it has zero risks, returns are guaranteed and the invested amount fetches an attractive interest rate of 7.9% per annum and it is compounded on an annual basis. The interest will be paid on March 31st and rates will be revised by the Finance Ministry every year.
People can either invest monthly, quarterly, half-yearly or every year for 15 years. The PPF account can either be opened in any of the banks or at any of the Post Offices in India. Investment is backed by the Indian government and hence it offers guaranteed risk-free returns.
The minimum amount of investment is Rs 100 and the maximum limit is Rs 1,50,000 per annum anything above Rs 1.5 lakh will not earn interest and will not be eligible for tax savings purpose.
For Example: If an investor parks Rs 1.5 lakh yearly into PPF account and at the end of 15 years, he/she will get a maturity amount of Rs 43,60,517 (Rs 22,50,000 amount deposited + Rs 21,10,517 interest earned) calculated at current interest rate of 7.9% per annum.
2. National Savings Certificates (VIII Issue) Account
The National Savings Certificates or NSC is another investment option with guaranteed returns with a minimum risk factor. Issued by the India Post at all the post offices in India, the financial instrument carries an interest rate of 7.9% compounded annually but paid at the time of maturity. The tenure of NSC is 5 years.
These deposits qualify for tax rebate under Section 80C of the Income Tax Act. The minimum investment amount is Rs 100 and there is no maximum limit on the investment.
The NSC account can be either a single account or a joint account and any minor who is aged above 10 years can open an account.
For Example, A one-time investment of Rs 1,50,000 in NSC will earn Rs 2,19,381 as maturity amount with an interest amount of Rs 69,380 at an existing 7.9% interest.
3. Fixed Deposits in Banks
Lauded as one of the best forms of investments in India, the fixed deposits in a bank will promise a risk-free return. Though the interest rates of FDs has come down drastically over the last few years, millions of investors in India still prefer this as it is touted as one of the safest forms of investment which also comes with a list of benefits.
Its liquidity factor, tenure (7 days – 10 years), availability of loan facility and assured returns makes it one of the popular form of investment in India.
The IDFC First Bank offers the highest interest rate of 7.50% per annum for those who deposit their funds for 500 days and in case of senior citizens, get an additional spread of 0.50% over the existing interest rate.
For Example: On investing Rs 2,00,000 for 500 days, depositors will get a return of Rs 2,15,427 with Rs 15,427 interest amount earned on quarterly compounding.
4. Mutual Funds
Over the last few years, the mutual funds have evolved and has become of one of the household names in India when it comes to investment. As the name suggests, the mutual fund is the collection of funds from investors who share similar financial goals and investing the same in a portfolio of diversified asset classes with a clear and defined investment objective.
The risk factor associated with mutual funds varies based on the investment option, higher the risk, higher will be the return and vice-versa is the general mantra of mutual funds. Most of the mutual fund schemes are divided based on the investing style, asset class, objectives and so on.
The investor has to determine the optimum asset allocation amongst the various asset classes be it shares, bonds, gold, real estate and so on. The key for fetching good returns in case of mutual funds is to go for long term investment as a study conducted by Fidelity Investments shows that the investor accounts had the best returns if invested for a long duration.
Please Note: Returns of investment from mutual funds will be based on market performance.
For Example: If an investor decides to invest in Systematic Investment Plan (SIP) with an investment amount of Rs 2,000 per month for about 10 years. He or she can assume an expected annual returns of around 10 – 12% over a longer period. (Note, this is a conservative assumption and is based on historical returns.)
5. National Savings Time Deposit Account
Offered by the India Post, the National Savings Time Deposit Account is another form of best-suited investment option for saving Rs 1 – 2 lakhs. The interest amount on this account is payable annually but is calculated quarterly. The minimum amount of investment is Rs 1000 and no maximum limit set. The investment for 5 years in this account provides investors with a rebate under Section 80C of the Income Tax Act 1961.
The interest rates offered varies on the tenure of the deposit which ranges between 1 – 5 years.
The unique feature of this account is any number of accounts can be opened in any post office and even a single account can be converted into a joint account and vice-versa. The account can even be transferred from one post office to another.
The lock-in period is 6 months after this, premature en-cashment is allowed.