“SAVINGS” as in the form of cash or investments is pivotal for the very survival of human beings. It is these savings that have helped to survive the current situation of (COVID-19) pandemic lockdown- the home confining and economic-no income lockdown. It is therefore important that one must save for his future precisely his uncertain future before it’s too late. Savings will help to tackle financial emergencies and uncertainties thereby reducing the financial stress.
There are multiple ways to save. Highlighted below are few such investment options to start saving with.
- Invest In Direct Equity– The COVID-19 have brought heavy corrections in the equity stock markets. The share prices have tumbled making new 52 weeks low and creating an opportunity for the investors to invest in the equities at a cheap price. The markets especially during the pandemic have been very volatile, and therefore the correct investment move would be to invest for a long term in equities. Short term trades & intraday trades might lure with its profits but such profits are not guaranteed while investing in the long term will fetch guaranteed profits. Know now more about investing in stocks on “An Insight Into Indian Stock Markets”.
- Invest In Mutual Funds (MF)– With the hit in the stock markets (due to COVID-19) the mutual funds markets have also taken a toll. Since it is a known fact that the mutual fund money is also invested in the stock markets. The impact on the stock markets will also have a direct impact on the mutual funds and its NAVs (Net Asset Value). Mutual funds allow easy per month investments in the MF by investing small and equal amounts at regular intervals known as SIPs (Systematic Investment Plan). (For detailed information on SIPs refer to our previous blog “Everything You Must Know About SIP”). Although the current mutual fund market is providing low returns or negative returns on the investments, this corrected stock and mutual funds markets has provided an opportunity to buy more units of the stock with the same monthly investments. Investing mutual fund amounts in equity stocks is called Equity Mutual Funds. For those investors who want steady returns, a fixed-income fund is an apt choice, which is known as debt mutual funds. The debt mutual funds are less risky in comparison to equity mutual funds as the money in debt mutual funds is invested in the corporate bonds, government securities, treasury bills, commercial paper and in other money markets.
The mutual fund is managed by a fund manager. Investments in Mutual Funds are largely dependent on the ability of these fund manager‘s to generate the returns. The fund manager may choose to invest the money in the Domestic market (Investing in only Indian stocks companies) or International market (Investing stocks of overseas companies).
- Invest in Real Estate– It simply means purchasing an asset property such as residential property, commercial property, plots etc. Please remember any asset property purchased for the purpose of self-occupancy is not considered as an investment asset. Every second property purchased other than self-occupied property is in real terms considered as an investment asset. Before investing in any real estate it is important that one must study the various property related aspects such as, its location, accessibility, legality and paper approvals, rental income receivable, nearby developments, and future upcoming developments/projects that will appreciate the future value of the property. It is also equally important to ascertain your eligibility before booking or giving a token to the seller/builder of the property. In most of the cases the investor opts for a home loan or a mortgage loan, to bridge the gap between his own contribution and the cost of the property. Calculate loan eligibility with EMI calculator click “https://www.loanfasttrack.com/emi-calculator.html”.
- Savings Accounts- To give a good start, savings can also be started by simply depositing the money in the savings account. The deposited money in the savings account earns interest income to the account holder. For those who wish to maintain easy & quick availability for liquidity and those who wish to make safe investments without taking any risk can choose to accumulate their funds in this savings account. The current scenario of COVID-19 has reduced the savings deposit rates of many banks to 3.5% pa for account balance up-to 1 lakh & 4% pa for savings account balance of above 1 lakh while the SBI had cut the rate on all his savings accounts to 2.75% in April 2020.
- Invest In Bank Deposit– Invest money in bank deposits such as FDs- Fixed Deposits and RDs- Recurring Deposits. Ideal funds laying in the savings account can be utilized to invest in FD or RD which can earn interest income to the account holder. Interest earned can be claimed either on monthly, quarterly, half yearly or yearly basis. Many see this as the safest mode of investments. The interest income earned through the deposits is liable for tax as per the income tax slabs. However, with many banks going bankrupt in the recent past, the security of the depositor’s savings money took a toll and under the DIGC rules (deposit insurance and credit guarantees corporation) the finance minister announced an increment on the insurance amount of the depositors from 1 lakh to maximum up-to Rs 5 lakh per depositor for both his principal & interest amount. However due to the pandemic effect the interest rates on savings & bank deposits have fallen since the RBI cut the policy rates. The current FD rates stand at 3.30%-5% while the recurring rates start with 3%.
- National Pension System (NPS)– The government of India introduced the NPS scheme in January 2004 only for its government employees which later in 2009 was opened up for all citizens of India between the age of 18 & 65 years. This scheme allows all subscribers to contribute to an NPS account till retirement and withdraw the lump-sum income after their retirement. Funds contributed in NPS are invested in a mix of equity, corporate bonds & government bonds. It is an entirely tax free instrument where the entire corpus escapes the tax at maturity and the entire pension withdrawal amount is tax-free. NPS is managed by PFRDA (Pension fund regulatory & development authority) and it offers two types of accounts to its subscribers:
- Tier I- which has restrictions on the withdrawals and on the utilization of the accumulated corpus
- Tier II- it is an investment account wherein the subscribers with pre-existing tier I accounts can deposit and withdraw the money as and when required.
- Invest In Gold– Gold is a precious element which has the appreciating value over the years. The usage of gold ornaments and jewelleries are cherished in the Indian traditions and hence it is seen as a good investing option. There are two ways of owning a gold- gold paper and physical gold. Physical gold implies purchasing the gold jewellery, coins and bars. Gold coins & bars are the most preferred choice to invest as a coin & bar is a form of pure gold. Alternately paper gold means investing in gold exchange traded fund (ETFs) (trading in the NSE & BSE with gold as an underlying asset), sovereign gold bonds (SBs) and additionally in gold mutual funds that further invests in gold ETFs.
- Invest In RBI Saving (Taxable) Bonds– The RBI savings bonds are one of the safest investment options as it is issued by the RBI on behalf of the government of India. The tenure of bonds is for 7 Years and it is issued in the form of demat and is credited to the bond ledger account (BLA) of the investors. It comes with a sovereign guarantee and no risk to the principal amount and is therefore a preferred choice for many investors. The investors receive interest on the bond in two ways- a) on non-cumulative bonds interest is received half-yearly, b) on cumulative bonds interest is received at the time of maturity along-with the principal amount. The investor also gets no tax benefits on these bonds and the interest income earned is also subject to tax as per the investor’s income tax slab rates. These bonds are neither tradable in the secondary markets nor are they transferable. Also the bonds cannot be used as collateral for getting loans from banks & NBFCs. Well, there is no upper limit of investments in these bonds and since they are risk free, they can be a good start to start savings.
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