Best Investment Plans in India

People invest for different reasons, such as seeking financial security or achieving specific investment objectives. The ideal investment strategy should be based on an individual's risk tolerance, investment timeframe, financial aspirations, and cash flow requirements.

In India, investment opportunities can be divided into two main categories: financial and nonfinancial assets. Within financial assets, there are market-linked options such as mutual funds, stocks, and bonds, as well as fixed-income options like fixed deposits, Public Provident Funds, and recurring deposits. Non-financial assets include investments in gold, real estate, and Treasury bills.

It's important to note that returns and risks are positively correlated, meaning higher risk typically leads to higher potential returns. When selecting the best investment plan, it's crucial to align an investor's risk profile with the associated risk of the investment product.

Investing in the right options in India has the potential to not only help you meet your financial goals but also provide financial stability and security in the future. This is why many investors are constantly seeking the best investment plans that cater to their risk tolerance and have the potential to grow their wealth.

Top 10 Investment Plans to Consider in 2023

1. Fixed Deposits

A fixed deposit (FD) is a popular investment option that allows individuals to earn interest on their deposited funds over a predetermined period of time. It offers guaranteed1 returns and is considered a low-risk investment as it is not linked to the market. Both long-term and short-term investors can benefit from FDs to achieve their financial goals. FDs have a minimum investment term of 7 days and a maximum term of 10 years.

How to Invest?
In order to invest in an FD, you must head to the bank of your choosing (or head to the bank’s website) and simply open an FD with the desired amount. If you already have an account at the bank you are considering, you will not need to complete an additional KYC process. However, you will have to submit documents at other banks. These documents include your PAN card, address proof, identity proof, and two photographs.

Investment Amount
The minimum investment required for an FD is ₹5,000, while the maximum amount varies between banks, with some allowing an investment of ₹1 lakh and others permitting up to ₹1.5 lahks.

Points to remember

It's important to keep in mind that, like other investment options, FDs lock in your funds for a specific period, for instance, 10 years. However, this does not mean that you can't access your funds in case of an emergency, as FDs offer easy liquidity. This feature makes FDs a highly desirable investment option.

Interest Rate:

6.20 - 7.5% depending on the bank in question.

2. Gold traded funds (ETFs)

Gold ETFs offer an alternative to physically holding gold, allowing investors to hold their gold investments in a dematerialized form, similar to mutual fund units.

How do you invest?
To invest in gold ETFs, one must have a Demat account, which can be opened with a stock brokerage firm registered with the Securities and Exchange Board of India (SEBI). Those who do not have a Demat account, can invest in gold funds offered by some banks or from various gold ETF funds.

Investment amount
A minimum investment of one unit, equivalent to one gram of pure gold, is recommended. The physical gold is stored in depositories, serving as the underlying asset for the ETF units. Some gold funds have a minimum investment as low as INR 500. There is no limit on the number of gold ETF units that can be purchased.

Points to remember
The value of a gold ETF unit is subject to fluctuations based on the price of gold. Investors can exit a gold ETF at any time, without any lock-in period. As with equity mutual funds, the return on investment for gold ETFs depends on their performance in the market, as they can be traded on stock exchanges.

Tax implications
In terms of taxation, if a gold ETF is sold before 36 months of acquiring it, the investor will be taxed according to their slab. After 36 months, a long-term capital gains tax of 20% plus 4% cess is applicable.

Risk Level
The risk level of investing in gold ETFs is considered to be medium to high.

3. Unit Linked Insurance Plans (ULIPs)

ULIPs offer a unique combination of insurance and investment benefits. The premiums paid are divided between providing insurance coverage and investing in a mix of equity and debt funds.

How to invest
ULIPs can be purchased from any bank or insurance company operating in India, though proof of income may be required for approval.

Investment Amount
The minimum investment amount for ULIPs varies from one financial institution to another, but typically starts at INR 1,500 per month. Investors can take advantage of tax benefits2 by investing up to INR 1.5 lakh per year under Section 80 C.

The maximum investment amount is determined by the policyholder's annual payment capacity. ULIPs also have additional charges for actions such as premium allocation, fund management, partial withdrawals, and more, over and above the annual premium.

Maturity
ULIPs have a lock-in period of 5 years, after which the policyholder can withdraw their funds without penalty and have the option to continue the policy based on its terms. Premium payments can be stopped after 3 years, but funds can only be withdrawn after the maturity period of 5 years. ULIPs are considered long-term investment plans, with an average investment period of 10 years.

Partial withdrawals before maturity may result in a reduction of potential returns.

Return on Investment
The expected annual rate of return can be calculated using the ULIP NAV formula: NAV = (Value of current assets + value of investments) – (value of current liabilities and provisions) / Total number of outstanding units on a specific date. The rate of return at maturity or end of the policy period is calculated using compounding, it is recommended to contact your financial services provider for accurate information.

Tax Implications
ULIPs fall under the EEE category of Section 10 (10D)3, meaning they are exempt from taxes on the investment, proceeds, and withdrawal after the lock-in period of 5 years.

Risk Level
The risk level of ULIPs is generally medium to high.

4. Equity Mutual Funds

Equity mutual funds are investment vehicles that bring together money from various investors and use it to buy stocks with the aim of generating returns.

How to invest?
Investing in equity mutual funds is possible through SEBI-authorized intermediaries, such as individuals, agencies, and stock brokerage firms, both online and offline.

Investment Amount
The minimum investment required for most equity mutual funds is INR 1,000, while there is no limit on the maximum amount that can be invested. To invest in equity mutual funds, you need to have a Demat account and a trading account. There are eight main types of equity mutual funds for investors to choose from. Additionally, investors can also opt for growth funds under equity mutual funds, which can be invested in without opening a Demat account.

Maturity
Investors have the option to redeem their investments in open-ended equity mutual funds at any time. For equity-linked savings schemes under the equity mutual fund umbrella, a lock-in period of three years from the date of investment applies.

Return on Investment
Equity mutual funds are known for offering the highest returns among other types of mutual funds. For instance, some equity mutual funds have recorded 5-year annualized returns of up to 35%, and even as high as 117% in a year of historic highs in 2021. The returns are dependent on market fluctuations and the overall economic situation.

Tax implications
Short-term capital gains are taxed at 15% plus a 4% cess. Long-term capital gains up to INR 1 lakh in a financial year are tax-free. For long-term capital gains exceeding INR 1 lakh, the tax is levied at 10% plus a 4% cess.

Risk Level
The risk level of equity mutual funds is generally medium to high

5. Sovereign Gold Bond (SGB)

SGBs are government securities offered by the Reserve Bank of India (RBI) and are denominated in units of gold, with each unit representing the value of one gram of pure gold. To invest, a minimum of 1 gram is required.

How to invest?
The central government announces the dates of SGB auctions and they are issued by the RBI several times a year. A PAN card is mandatory to purchase SGBs. They can be bought from banks, post offices, and stock brokerage firms through both online and offline channels.

Investment Amount
The value of each bond unit is equivalent to one gram of pure gold and is determined by the average closing price of gold over the previous three business days. Individuals can purchase a maximum of 4 kgs and trusts can purchase up to 20 kgs of SGBs. Currently, a discount of INR 50 per gram is available for purchases made online.

Return on Investment
SGBs offer a twice-a-year interest payment of 2.5%.

Maturity
The bond has a maturity period of eight years, and early redemption is possible after five years.

Taxation
The interest payments are taxed based on the investor's tax bracket, while any gains made at maturity are exempt from taxes.

Risk Level
The risk level of SGBs is considered to be low to medium.

6. National Pension Scheme (NPS)

The National Pension Scheme (NPS) is a government-monitored pension fund that provides an opportunity for individuals to build a solid retirement fund by investing their savings in a diversified portfolio including government bonds, corporate debentures, and shares. The accumulated pension wealth from these investments can be used to purchase a life annuity and a portion can be withdrawn at the end of the scheme cycle.

There are two types of NPS accounts: Tier I NPS Account and Tier II NPS Account.

Features of Tier I NPS Account:

Eligibility
Indian citizens between the ages of 18 and 65 can participate in this scheme. An NPS Tier I account can be opened by visiting an authorized bank or a point of presence (POP) appointed by the Pension Fund Regulatory and Development Authority (PFRDA), or by using the eNPS web portal. Once the account is opened, the individual will receive a 12-digit number, and a permanent retirement account will be created.

Investment Amount
The minimum amount required to open an NPS Tier I account is INR 500. In order to keep the account active, a minimum contribution of INR 1,000 must be made each financial year, with no upper limit on the amount that can be invested. However, the invested amount cannot be withdrawn until the individual reaches the age of 60.

Return on Investment
Returns are based on the net asset value declared by various pension funds, and are not predetermined. The returns will depend on how the investment has performed over the years.

Maturity
Upon reaching the age of 60, an individual can withdraw a maximum of 60% of their total balance. The remaining 40% must be used to purchase a pension plan of their choice.

Taxation
Investment of up to INR 2 lakh per annum is exempt from tax under Section 80C and Section 80CCD. Returns earned from the NPS Tier I account are also exempt from tax.

Features of Tier II NPS Account:

Eligibility
This is a voluntary account that can only be opened by individuals who already have an NPS Tier I account. An NPS Tier II account can be opened at any authorized bank or POP appointed by the PFRDA, or online through the eNPS portal.

Investment Amount
The minimum investment required to open a Tier II NPS account is INR 1,000. There is no annual contribution requirement like in the case of a Tier I NPS account, and there is no limit on how much can be invested. Each year, individual decides how much of their money they want to invest in the four available asset classes: government bonds, corporate bonds, equities, and alternative assets. The investment does not have a lock-in period.

Return on Investment
The return on investment is not predetermined and depends on the net asset value declared by pension funds in each investment cycle.

Maturity
Upon reaching the age of 60, an individual can withdraw a maximum of 60% of the total corpus. The remaining 40% must be used to purchase a pension plan of their choice.

Taxation
There are no tax benefits2 associated with the Tier II NPS account, and income from it is taxed as per the individual's tax slab. Only government employees are eligible for tax benefits2 if they keep their investments locked for three years.

Risk Level
The risk level of this investment option is considered to be low

7. Gold Bonds

The Indian government has allowed individual investors to directly purchase government bonds, which were previously only accessible through gilt mutual funds, to boost domestic involvement in the sovereign bond market.

Eligibility

The government announces the bond offerings ahead of the auction date. Both state and central governments issue these bonds, with the bonds issued by the states referred to as State Development Loans and the bonds issued by the central government referred to as G-Secs or government bonds. To invest in these bonds, you must have a bank account and can hold the bonds in a Demat account.

How to invest?

The price of the bond is announced at the time of the bond offering by the government. The easiest way to invest in G-Secs is through the e-Kuber app, which is the preferred application of the central banking authority, the Reserve Bank of India.

You can also participate in the bond offerings through a commercial bank listed by the government for that purpose or a primary dealer, for which you will need to open a securities account.

Another option is to purchase government bonds through stock exchanges, such as NCB-GSec, which is the Bombay Stock Exchange's online platform, or the NSE goBID mobile application offered by the National Stock Exchange. Additionally, you can invest in government securities mutual funds, which invest in government bonds.

Return on Investment

Most government bonds are fixed-rate bonds, which means the interest rate is fixed for the entire term of the bond until maturity. The coupon rate, determined at the time of purchase, determines the half-yearly interest received during the bond's holding period. Capital gains or losses may occur when the bond is sold or matures, as well as income from reinvestment of interest payments (interest-on-interest).

Maturity

The maturity period of a government bond can range from one year or more, depending on the offering.

Taxation

Taxes will be imposed based on the investor's income bracket for the income generated from the interest received from these bonds. Any increase in the bond's value will also be considered as capital gains and taxed accordingly.

Risk Level

The risk level of this investment is generally considered to be low to nil.

8. Post office monthly income scheme

The Post Office Monthly Income Scheme is a favoured investment option among Indian households, particularly among passive income earners and housewives seeking to earn returns.

How to invest?

Individuals have the option to open a single account, a joint account with up to three adults, under the name of a guardian or parent of a minor and/or of a person of unsound mind, or under the name of a minor over 10 years old through the Indian postal service. Investment Requirements

Investment amount

A minimum investment of INR 1,000 is necessary to open an account, with a maximum balance limit of INR 4.50 lakh for single accounts and INR 9 lakh for joint accounts.

Maturity

The account can be closed after five years from the date of opening, however, premature closure before one year is not allowed. A 2% deduction from the principal amount will be applied if the account is closed between one year and three years, and a 1% deduction if closed between three and five years. In the event of the depositor's death before the maturity period, the nominee can file a claim.

Returns

The scheme provides an interest rate of 6.60% per annum, paid monthly. The interest earned can be automatically credited to the depositor's savings account or through electronic clearance service.

Taxation

Interest earned on the deposit is taxable.

Risk Level

The risk level of this investment is generally considered to be low to nil.

9. Public Provident Fund (PPF)

The Public Provident Fund (PPF) is a low-risk, government-backed investment option that offers guaranteed1 returns.

How to invest?
The PPF is widely available at Indian banks and post offices. Note that only one account is allowed per person. There are no age limit restrictions and minors' accounts are managed by their guardians until they reach 18 years of age.

Investment Requirements
A minimum investment of INR 500 per year is required. The maximum investment limit is INR 1.5 lakh per year. Investors can make deposits between one to twelve times during a financial year.

Returns
The current interest rate is 7.10% per annum. However, it is important to understand that PPF interest rates are subject to change every quarter and typically fluctuate between 0.25% and 0.75%.

Maturity
PPF funds mature after a 15-year period, however, partial withdrawals are permitted after five years of account opening.

Taxation
PPF investments and interest earned are tax-free.

Risk Level
The risk level of this investment is generally considered to be low to nil.

10. National Savings Certificate (NSC)

The National Savings Certificate (NSC), a government-supported fixed income scheme, is perceived as a low-risk investment opportunity.

How to invest?
The certificate can be easily obtained at various public and private banks in India, as well as all post offices.

Investment Amount
A minimum investment of INR 1,000 is required. Investors can choose to make deposits in multiples of 100 in 12 installments in a single financial year or in a lump sum. There is no upper limit on the amount that can be invested.

Returns
The interest rate compounds annually and is determined by the Ministry of Finance on a quarterly basis. It is important to remember that the interest is paid out at the end of the maturity period.

Maturity
The NSC has a 5-year lock-in period. Do note that premature withdrawal is allowed in exceptional cases, such as the death of the certificate holder.

Taxation
Investments up to INR 1.5 lakh per annum are tax-exempt under Section 80C of the Income Tax Act. Interest earned annually is considered reinvestment and is not taxed, but the final interest payment will be taxed according to the investor's regular tax bracket.

Risk Level
The risk level of this investment is generally considered to be low to nil.

How to choose the right investment options?

Choosing the right investment option in India depends on several factors, including your financial goals, risk tolerance, and time horizon. Here are some steps to help you make the right investment decision:

1. Assess your financial goals:

Determine what you want to achieve through investing, whether it is to save for a specific goal such as retirement or buying a home, or growing your wealth over time

2. Evaluate your risk tolerance:

Consider how much risk you are willing to take to achieve your financial goals. Some investments carry higher risks but offer higher returns, while others are more conservative with lower returns.

3. Determine your time horizon:

Consider how long you are willing to invest. Some investments have a short-term focus, while others are meant to be held for the long term.

4. Consider your investment style:

Think about whether you want to be actively involved in your investments, or prefer to have a more hands-off approach.

5. Research your options:

Take the time to research the various investment options available in India, including equity, bonds, mutual funds, real estate, gold, and more

6. Consider the fees and taxes:

Consider the fees associated with the investment option, as well as the tax implications.

7. Seek professional advice:

Consult a financial advisor or investment professional to help you make an informed investment decision.

8. Diversify your investments:

Don’t put all your eggs in one basket. Spread your investments across different asset classes and investment types to reduce your overall risk.

9. Monitor your investments regularly:

Regularly review your investments to ensure they are meeting your financial goals and to make any necessary adjustments.

10. Stay disciplined:

Stick to your investment strategy and avoid making impulsive decisions based on short-term market fluctuations.

Remember, the right investment option for you may not be the right one for someone else. By considering your individual financial goals, risk tolerance, and time horizon, you can make an informed investment decision that is right for you.

Final Thoughts

In conclusion, these 10 best investment options in India in 2023 provide a wide range of opportunities for individuals to grow their wealth and achieve financial stability. Whether you are looking for a low-risk investment or something that provides higher returns, the options discussed in this article have something for everyone. The key is to understand your financial goals, risk tolerance, and the terms and conditions of each investment option before making a decision. With a well-informed approach, you can make smart investment choices that align with your financial goals and help you build a bright financial future.

https://economictimes.indiatimes.com/wealth/invest/latest-banks-fd-interest-rates/articleshow/96965725.cms⁴ https://www.forbes.com/advisor/in/investing/best-investment-options-in-india/⁵