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Thursday, May 10, 2018

Investment Plans to Help you Reap High Returns

The term ‘investment’ has received a lot of scepticism from the masses due to the lack of certainty on returns and the risk factors involved. In reality, though, investment is a fairly easy-to-understand subject and you can earn good returns if you choose your investments wisely. You can invest and distribute your money across a variety of investment instruments and gain profits within a span of a few years.

The performance of each investment asset changes every year and its returns never follow a linear graph. But the following investment instruments have been estimated by trade pundits to be more rewarding this year. Let’s have a look at them.

National Pension Scheme

If you want to increase your tax savings this year, NPS will help you get an additional Rs.50,000 tax deduction under Section 80CCD of the Income Tax Act. This deduction will help you increase your returns. Though the returns you gain from NPS will be lower than equity funds, you stand to save more through tax deduction.

After maturity, you’d have to invest up to 40% of the corpus into an annuity for a monthly pension. Withdrawals from this investment is taxable and the monthly pension you’d receive from the annuity will comprise of both the principal amount and interest.

Mutual Funds

A Mutual Fund is a financial product that operates by pooling in money from multiple investors and distributing it across different securities like shares, stocks, and real estate, to bring in dynamic returns. Mutual Funds come with an average return rate of 20-40% and have a floating rate of interest that’s affected by market fluctuations.

Once you complete the maturity, or the lock-in period, you can liquidate your Mutual Fund assets without incurring losses. Mutual Funds, like Equity-Linked Savings Scheme and Rajiv Gandhi Equity Savings Scheme, allow you to claim tax deductions under Section 80C and Section 80CCG of Income Tax Act, 1961.

Fixed Deposit

A Fixed Deposit is one of the most popular forms of investments in the Indian market due to the stability and the guaranteed returns it offers. Depending upon your bank or NBFC and your requirements, you’d come across different types of Fixed Deposits. If you want to go in for a shorter lock-in period, then opting for a short-term Fixed Deposit would be ideal for you.

Short-term FDs often come with lower FD interest rates, than long-term ones. If you withdraw an FD prematurely, you’d either be penalised or a portion of your interest earned will be deducted. With the help of an FD return calculator, you can find out how much you’ll earn from an FD when you break it prematurely. If the projected losses are too high, then it might be wiser to leave it untouched.


Prior to investing in the stock market, it’s advisable to study the market and track the performances of different companies for the last couple of quarters. This would help you classify and calculate the risk involved in the investment you’d make. Investing in stocks will help you earn substantial returns over a long period of time.

You should allocate a ratio of your savings to stocks, in order to diversify your investment portfolio. Buying stocks of a company would let you claim a share in its annual profits and will get you a position on its board of directors (depending upon the percentage of shares you own).

Debt Funds

If you’ve an appetite for risk, then you should go with government-issued securities like gilt funds, monthly income plans, and fixed maturity plans. You can also go with short-term funds like treasury bills that have a maturity of 3-6 months. You can mix your debt fund investments to diversify the maturity of the assets in your portfolio.

Market fluctuations will affect the returns you earn from debt funds, which is why you shouldn’t put all your money in it. Also, they can’t be liquidated before their maturity period, unless you pay a penalty. You’d be taxed at a hefty 20% on the returns you earn after indexation.

Real Estate

If you have a lump sum to invest, then real estate is your best bet. There’s been a significant rise in property appreciation value across all major cities. With financial institutions lowering their interest rates and the real estate showing a buyer's dominance, a property purchase would prove beneficial to your income. Investing in real estate will help you get positive cash flow, tax deductions on the home loan amount, and provide a hedge against inflation. If you’ve previously invested in high-risk assets, this move will help reduce the risk factor of your portfolio.


Equity-linked Savings Scheme and Public Provident Fund will help you save tax under Section 80C. You can invest in ELSS through SIP (Systematic Investment Plan), which would enable you to multiply your savings through elements like compounding and averaging.

Under this scheme, you’d be asked to make systematic payments for a predetermined lock-in peri

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