Types of Investment in India

4. Real Estate

Investing in real estate involves purchasing residential or commercial properties to allow your capital to appreciate or to generate regular rental income. With such investment types, you get to enjoy a steady stream of income in the form of rent. Another strategy is to purchase real estate units, hold them, and then sell them at a later point in time for a higher price, thus earning a significant return on your initial investment. 

Investment in Real Estate Tips

• If you are looking to score a higher rate of appreciation, make simple improvements and upgrades to your real estate investment. This can go a long way in increasing the market value of your property
• Understand the additional costs you may have to incur on your real estate purchase. These may include annual maintenance and upkeep outgo, taxation, utility expenses and more
  

5. Fixed Deposits (FD)

Fixed Deposits, which are offered by banks and non-banking financial organisations (NBFCs), are an excellent option to grow your funds while maintaining the highest level of safety. Among the different types of investments in India, this remain a popular choice since it allows you to deposit a lump sum cash with your lender and choose a tenor that suits your needs. Following the conclusion of the pre-determined tenor, your deposit begins collecting interest at the interest rate you locked in for the duration of your deposit.

Investment tips for Fixed Deposits

• Premature withdrawals from your FDs will incur a penalty. Hence, it is advisable to choose a suitable deposit tenure after keenly evaluating your future financial goals
• While FDs are generally assumed to be risk-free types of investments in certain circumstances, they carry with them an amount of risk.  In the event that a bank fails financially, you are insured an amount of Rs.5 lakh per bank per depositor. By splitting your investment across different banks, you can effectively safeguard a good chunk of your finances
  

6. Mutual Funds

Mutual funds (MFs) invest in market-linked instruments such as stocks, bonds, or a mix of both equity and debt instruments. The different types of investors in India can choose between equity funds, debt funds, and balanced funds depending on your financial goals and requirements. Furthermore, you can also invest small amounts periodically in MFs using a Systematic Investment Plan (SIP).

Investment tips for Mutual Funds

• Review your risk preferences before choosing from the different types of investment options. Invest in equity mutual funds if you have a higher risk appetite; for conservative investors, debt schemes are ideal. The options exist to suit the preferences of varying types of investors in India.
• Understand the prevalent taxation system before investing. You can invest in tax-saving mutual funds such as the ELSS (Equity Linked Savings Scheme) to help maximize your returns
  
• Understand the various charges you may incur while choosing different funds in these investment types. This is commonly known as the expense ratio.
  

7. Public Provident Fund (PPF)

Considered to be one of the safest option among the different types of investment in India, Public Provident Fund (PPF) is an instrument backed by the government. You can invest in PPF by opening an account with any bank or post office. While opening the account, the minimum investment amount is as low as Rs.100 in some of the banks (can vary for every bank). Thereafter, the annual limits for PPF deposits range from a minimum of Rs.500 to a maximum of Rs.1.5 lakh. These investment types come with a lock-in period of 15 years and are eligible for tax deductions under section 80C of the Income Tax Act, 1961.

Investment Tips for PPF

• PPF interest is calculated on the basis of the minimum balance in one’s PPF account between the 5th of the month and the month end. Thus, you should make it a practice to invest before the 5th of every month
• Investing in a PPF through a bank that provides the facility of online transfers is a must. This spells convenience and efficiency for investors and helps facilitate regular contributions.
  

8. National Pension System (NPS)

• You can choose from two different types of investment choices i.e. active choice or auto choice. In an auto choice investment, the proportion of investment in different asset classes is predetermined. In active choice, you can determine the asset allocation, as per your preferences. If you are financially adept, you can go for the active choice types of investment options. If one doesn’t possess the required financial literacy, auto choice would prove ideal.

9. Unit Linked Insurance Plans (ULIP)

Unit Linked Insurance Plans (ULIPs) are among types of investments in India that come with tax benefits as well. It is an instrument that offers you the advantage of investment combined with insurance. The premium you pay to remain invested is divided into two portions. One part goes towards providing you a protective life cover, while the other is invested in market-linked instruments or funds. ULIPs also provide deductions under Income Tax Act 1961 as per prevailing tax laws, since the premium paid is deductible, and the maturity benefits and long-term capital gains are tax-free.

Investment Tips for ULIPs

• Make note of the charges you may incur upon investing in these types of investment. These may include premium allocation charges, administrative charges, fund management charges, mortality charges and more. Invest in a ULIP from an insurer provider that levies a minimum amount of charges
• Opt for a ULIP that provides an optimum amount of flexibility. You should pick a plan that offers flexibility in terms of premium payments, customizable plans with different fund options. To cater to the needs of different types of investors in India, ULIPs allow the ability to easily redirect your premiums and switch funds, according to market movements and evolving risk appetite.
  
• ULIPs are investment types that offer flexibility to opt for an asset allocation strategy depending on the risk appetite and goal in mind. Policyholder can opt for a fixed proportion to be maintained in equity and debt throughout the policy term.   

10. Senior Citizens’ Savings Scheme

SSenior Citizens’ Savings Scheme (SCSS) is one of the types of investments backed by the Government of India. Indian residents over 60 years of age can open an SCSS account and invest in this scheme for a block of 5 years. Thereafter, the investment can be extended by another 3 years, if needed. You can deposit up to Rs.15 lakh in your SCSS account in multiples of Rs.1,000 only. Deposits up to Rs.1 lakh can be made in cash. However, deposits over Rs.1 lakh need to be made using a demand draft or cheque. Investments in SCSS also qualify for deduction under section 80C, up to a limit of Rs.1.5 lakh.

Investment Tips for SCSS

• While investors do have the option of premature withdrawal, they must bear in mind that a penalty charge ranging from 1-1.5% of the deposit will be levied
• While the SCSS provides a high rate of interest as compared to other fixed income instruments, this interest rate may be subject to change based on a quarterly review. Investors must keep track of this rate of interest.