6 Best Fixed Investment plans for young adults for safe future in India
Covid-19 Pandemic has taught many lessons to all of us. Our elders have always advised all of us to avoid loans and make savings for the future. These lessons have proved true in pandemic crisis. It is very important for every young person to plan for the future from the very beginning of his/her career. A better future can be planned only on the basis of savings made in fixed-income investments as fixed-income investments assure stability and liquidity even in times of economic crisis. That’s why investing in fixed income investments is important even when you are investing in equity or mutual funds.
But generally, it is difficult to identify and choose correct fixed-income investment options which fulfill the aspirations of young investors. In this article, we have picked 7 best-fixed investment plans and made an analysis of those plans for our young readers.
(1) Public Provident Fund
PPF is one of the most popular fixed-income investment options for retirement planning. One of the best things about PPF is that it is a government-sponsored investment scheme and thus, it is 100% risk-free. The rate of interest on PPF deposits is notified by the Central Government and at present, the rate is 7.1% p.a. which is quite lucrative when compared to interest rates on fixed deposits. Interest income on PPF deposits is tax-free which makes it more attractive.
The duration of the PPF account is 15 years which can be further extended for the block of 5 years. You can make a deposit of up to Rs. 150,000 every year in PPF account. Further, investments made in the PPF account are eligible for tax deduction under section 80C of the Income Tax Act.
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You can also invest in various post office saving schemes where you will get assured fixed returns with 100% investment safety. Some of those schemes are as below:
(2) Post Office Monthly Income Schemes (MIS):
Investment in Post Office MIS can be made in multiples of Rs. 1000 and a maximum investment of Rs. 4,50,000 can be made in a single account and Rs. 9 Lakhs in a joint account. From 01st April 2020, the interest rate notified for MIS is 6.6% per annum where interest is payable to the depositor on a monthly basis. But, tax deduction under section 80C will not be available for post office MIS deposits and interest thereon.
(3) National Saving Certificates (NSC):
There is no maximum limit of investment in NSC. You can invest a minimum of Rs. 1000 and thereafter any amount in multiples of Rs. 100. From 01st April 2020, an interest rate of 6.8% has been notified compounded annually but payable at the time of maturity.
Investments in NSC up to Rs. 1,50,000 are eligible for deduction under section 80C of the Income Tax Act. Further, interest earned on NSCs is also eligible under section 80C.
Besides, PPF and post office saving schemes, there are a few other options available for you to earn a fixed income.
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(4) Fixed Deposits:
Fixed deposits are one of the most popular fixed-income investment options for you. It is the most liquid among all the options discussed till now in this article. Fixed deposits can be opened in any bank of your choice and can be redeemed as and when you are in need of the funds. Though you can invest in corporate fixed deposits also, the fixed deposits in scheduled commercial banks are treated as the safest option.
The interest rate on fixed deposits varies from bank to bank and keeps changing. Presently, some small finance banks are offering lucrative interest rates up to 8% p.a. but the investor should assess credit risk while making such investments. Moreover, if you also want to get tax benefits, you may invest in 5 years of tax-saving fixed deposits opened with your bank and get a deduction under section 80C up to Rs. 1,50,000.
(5) Debt Mutual Funds:
Debt Mutual Funds are also considered as one of the most lucrative fixed-income investment options for young investors. Debt Mutual Funds invest in fixed income securities like treasury bills, corporate bonds, etc. Income earned on such investments is distributed amongst unitholders. Investment in Debt Mutual Funds cannot be said to be 100% safe as it may carry default risk in the case of corporate bonds.
However, the risk factor reduces as the mutual funds generally diversify their portfolio which spreads the entire risk over the portfolio and thus assures goods return with lesser risk. No deduction is available under Income Tax on investments made in debt mutual funds.
(6) Sukanya Samriddhi Yojana:
Sukanya Samriddhi Yojana is a Government of India initiative inspired by the goal of female children's education. You can open an SSY account till your daughter attains the age of 10. Deposits in the SSY account could be made up to 15 years from the date of opening of the account. Withdrawals from the account are permissible after the girl child attains the age of 18 years.
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The investment made in the SSY account is eligible under section 80C of the Income Tax Act. You can make a maximum investment up to Rs. 1,50,000 every year in the SSY account. The interest rate on the SSY accounts varies. At present, the interest rate notified on the SSY account is 6.8% p.a.
We have discussed 6 best-fixed income investment options above in this article. But as you can see that all the fixed income investments as discussed above carry an interest rate of 6%-7% which will also be subjected to the inflation effect. Hence, it is important for every young investor to blend his/her investment portfolio with a mix of fixed investment with equity & equity-based mutual funds. This will ensure a balanced return over the period of time with balanced credit risk and liquidity. Before, making an investment in any investment options, you must also check tax benefits available against those options along with the lock-in period of the same.
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Disclaimer: The article is not intended to induce any investment in any investment scheme and is merely for educational purposes. Readers are requested to act diligently before making any investment and read all the documents related to the investment scheme carefully before making any investments.
