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Best Investment Options for Low-Income Individuals

Best Investment Options

To create a strong financial backup, it is very important to make a smart investment planning and invest your hard-earned money in the right financial instrument. Irrespective of whether you earn a low income or higher income, it is imperative to make an investment to multiply the savings in the long-term and create a strong financial cushion for the future. Even though not every investment options guarantee substantial returns, but if you make the right investment choice and stay invested for a longer tenure then you can gain profitable returns in investment over the long-term period.

So, to help you know more about some of the safest investment options to increase your income, here we have discussed the best investment options to invest in 2020.

Fixed Deposits

The fixed deposits are considered as one of the safest options of investment available in the market. Fixed deposits schemes guarantee interest income and repayment of the principal amount at booked rates. You can open a fixed deposit account in banks or post-office. The maturity period of fixed deposits ranges from 15 days-5 years & above. With an interest rate ranging from 3%-7.7%, it provides an opportunity to earn a stable and guaranteed return on investment. Whether you want to invest in the short-term or the long-term, the FD scheme is a lucrative investment option, which provides an assured investment return.

Systematic Investment Plan

For low-income salaried individuals investing in mutual funds can be risky if you don’t have a better understanding of the market. However, through the Systematic Investment Plan (SIP) you can consider investing in the equity-oriented market. Through SIP you can invest regularly a pre-fixed amount of money in the mutual fund scheme of your choice. The systematic investment plan allows you to start investing in an equity-oriented market with a minimum investment of Rs.500 and there is no upper limit on the maximum investment.

Not only this, but the SIP also offers the benefit of rupee cost average and power of compounding. As a lucrative investment option, the SIP helps to create wealth in the long-term and gain profitable investment returns regardless of the market conditions.

Recurring Deposits

This is a savings plus investment option for individuals, who want to make regular savings for a specific period of time and gain a higher rate of interest. In a recurring deposit scheme, a fixed amount of money is deducted from the current account or the savings account of the investor, and at the end of the maturity period, the accumulated fund is paid back along with the accrued interest. You can open a recurring deposit account at any bank by making a minimum investment of Rs.500- Rs.1000. In the public sector bank, you can open the RD account with a minimum investment of Rs.100. RS account can also be opened at post-office. The interest rate of RD schemes varies from bank to bank and ranges from 7%- 9.2% per annum. The tenure of recurring deposit schemes ranges from a minimum of 7 days to- maximum of 10 years.

Public Porvident Fund

This is one of the most popular investment options available in the market. As the maximum term period of PPF is 15 years, the effect of compounding tax-free interest is very high, specifically in the later years. Moreover, as a government-backed investment instrument, it is one of the safest investment options available in the market, which offers an attractive rate of interest. You can start investing in PPF with a minimum amount of Rs.500 and can invest up to Rs.1.5 lakh in a financial year. Moreover, along with the benefit of long-term wealth creation and investment returns, another major benefit offered by PPF is tax exemption.

The PPF offers tax benefit under exempt, exempt& exempt rule i.e. the investment made in PPF account up to the maximum limit of Rs.1.5 lakh is tax exempted U/S 80C of the IT Act, the interest earned on the invested amount is tax also tax-free and the there is no tax applicable on the amount received on the maturity of the account. The current interest rate applicable to the PPF investment is 7.9%.

National Pension Scheme

If you want to create a retirement fund right from now then the National Pension Scheme is a great investment option for you. The National Pension Scheme India is a long-term retirement investment plan initiated by the government of India to financially secure the life of the individuals after retirement. The NPS scheme is regulated by the Pension Fund Regulatory and Development Authority of India (PFRDA). Any Indian residents can open the NPS scheme with a minimum investment of Rs.500 for the Tier-I account and Rs.250. for Tier.II account and can invest up to a maximum Rs.6000 in a financial year. The current interest rate applicable to the NPS scheme is 8%-10% per annum. As a risk-free option of investment, NPS offers a guaranteed regular return on investment.

The Bottom Line!

Some of these investment options are fixed income, while others are market-linked investment instruments. Whether it is a market-linked investment instrument or a fixed-income investment option both play an important role in the process of wealth creation. On one hand, a market-linked investment instrument comes with high risk but offers potentially higher returns, whereas, on the other hand, the fixed income instruments help to accumulate funds over the long-term to achieve the desired goal. To achieve the ultimate financial objective of life, it is important that you make the best use of both the worlds. You can choose to invest in any of these investment options as per your risk appetite, time horizon, and tax-saving objective.

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