What are the different options available for long-term investment in India?

What are the different options available for long-term investment in India?

Generally, investments with a higher risk component with the trade-off of better returns work best within a long term horizon. Here are some investment options that work better in a longer time period:
What are the different options available for long-term investment in India?
What are the different options available for long-term investment in India?
a. Equity mutual funds: When mutual funds invest maximum part of their corpus in the stock market, they are called an equity mutual fund scheme. They have the potential to give very high returns. They carry the principal objective of capital appreciation of the investment over a medium to the long-term investment horizon. Equity funds are high-risk funds as they act as a proxy to share markets.
b. Equity Linked Saving Schemes (ELSS): ELSS is basically a diversified equity mutual fund which gives you the benefit of tax deduction under section 80C of the income tax act. However, it does have a lock-in period is 3 years. Returns from ELSS are tax-free.
c. Equities: Direct investment in equities is not as easy as it requires quite a bit of homework. It will also take some time and effort from your side to understand the dynamics of the stock markets and companies listed on them. Stock investing allows you to take advantage of the power of compounding, which grows your wealth exponentially. Stocks are preferred for higher returns, but it is also important to know the risks attached to it. Investors wanting to invest in stocks should assess themselves on the following parameters-
· In-depth knowledge about the markets.
· Knowledge on how to assess good stocks from bad ones.
· Ability to withstand the volatility associated with this investment.
d. Index funds: As the name suggests, this is a type of fund that invests in the index (Nifty50, Sensex, sectoral indices, etc). Its performance tends to mirror that of the index it is replicating. Index funds are passively managed funds that allow investors to participate intelligently in the stock market. So, if the market is bullish, the fund will do well, but won't do as well as some individual performers (companies or sectors). In bad years, it won't do as bad as some individual stocks. An index fund is the safest option for a retail investor who has little or no knowledge about the stock market.
e. Exchange-traded funds (ETFs): An ETF is a type of fund that owns underlying assets (shares of stock, bonds, oil futures, gold bullion, foreign currency, etc.) and divides ownership of those assets into shares. ETFs price movements mimic the movements of their underlying assets. In essence, they have properties of both stocks and mutual funds.
f. Public Provident Fund (PPF): PPF is one of the most popular long-term investment options in India. Since it’s backed by the Government of India, it is a safe investment with an attractive interest rate. Moreover, it offers tax benefits under Section 80C of the Income Tax Act, and also the interest income is exempted from tax. It comes under the EEE(Exempt-Exempt-Exempt) category. PPF has a maturity period of 15 years. It can be extended within a year of maturity for five years and more.
g. Balanced mutual funds: The objective of these funds is to provide a balanced mixture of safety, income and capital appreciation. The strategy of balanced funds is to invest in a portfolio of both fixed income and equities. The aim of balanced funds is to provide both growth and regular income. They generally have a weight of 40-60% in equity and debt instruments respectively. These funds are also affected as a result of fluctuations in stock markets. However, NAVs of such funds are likely to be less volatile compared to pure equity funds.
h. Real-estate: Real estate is also a great avenue for long-term investment. However, it needs immense planning and huge capital. Investment in real estate is an ideal investment option for those who have huge cash reserves as historical records are encouraging. But you have to be very careful while choosing the right option since this involves huge investment.
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