Handling the finances when you have just started your career isn’t much fun but instead, it carries a lot of responsibilities. Managing the finances involves prudent planning and decision making about spending, investing and saving the funds. Going slow and steady about these decisions can help to build wealth in the long run.
If you too are grappling with the decision to invest your money, here are some of the popular investment schemes that you might consider.
- Public Provident Funds: Public Provident is the government-backed investment scheme and one of the ideal choices if you want to invest your money for the long term. You can invest your funds in a PPF scheme for a tenure of 15 years, which can be further extended in the block of 5 years.
Why young professionals must invest in PPF scheme:
- The most significant advantage of investing in a public provident fund scheme is that it is a EEE scheme. You can save the taxes not only on the amount invested, but you can claim for tax deductions on the interest earned and the amount received at the end of the maturity period.
- Also, the rates on PPF are determined by the finance minister every quarter. Recently, the PPF rates were revised on 1st April 2020 and stand at 7.10%. Thus, you can earn guaranteed returns on your investments as they are not subject to market risks.
- Anyone can easily open a PPF account through a bank or post office. Currently, most of the banks provide the facility to deposit the money in your PPF account online without visiting the bank or post office. You need to invest a minimum of Rs. 500 and can invest upto Rs—1,50,000 in a financial year. There are no caps on the amount of funds you can invest in a month. However, to get the maximum returns on your investments you must invest between 1st and 5th of every month as interests are calculated on 5th of every month. Also, if you have huge funds, you can earn the maximum interest by investing a lump-sum amount.
2. Mutual funds: To get the high returns on your investments, you can invest in short-term or long term mutual funds. The advantage of investing in mutual funds is that you can exist from the investment anytime, and there is high liquidity, unlike PPF or fixed deposits. However, the returns on the investments are subject to market risks, which can be reduced by starting your investments with small investments.
3. Fixed deposits: A fixed deposit is another popular investment for investing your funds for the long term. You can invest in a fixed deposit for a tenure of 7 days to 10 years. Fixed deposits help you to get returns at a fixed rate of returns as the rates are determined as per the repo rate of the RBI. To get the tax benefits, you can invest in a tax-saving Fd scheme for a five year period where you can get tax deductions up to Rs. 1,50,000 on your investments.
4. Insurance: As a young professional, you can also take an insurance cover depending on your need. There are different types of insurance such as life insurance, health insurance, travel insurance and vehicle insurance etc. The advantage of taking coverage at a young age is that you can get insurance at low- premiums.
5. Real Estate: Financial planners mostly suggest you invest your funds in a property. Investing the funds in real estate can help you to get high returns.
You can also invest in other schemes such as National Pension Schemes, Equity, bonds etc.
Thus, you must create an investment plan which mixes different investment schemes from most aggressive to safest that can help you reach your personal goals.