There’s no denying of the fact that investments are a vital part of financial growth, and for salaried persons, they should make it a ritual to save monthly incomes at an early stage to get compounding benefits.

Since salaried individuals have a fixed monthly income, they have to allocate investments along with their expenses. Around 20-30% of their income gets away in taxes, 25-30% in EMIs, 20-30% for meeting their daily needs and household expenses. Only about 15-25% of their salary gets saved so it becomes extremely important for them to invest the balance amount appropriately to get maximum benefits.

Below we are stating some investments which every salaried person MUST make to have a balanced portfolio.

1. Public provident fund( PPF): PPF is one of the most secure long term investment options in India with attractive interest rates backed by the Government of India. PPF provides better interest rates than Fixed Deposits & Recurring Deposits. PPF is a government-run scheme; thus, the rate of interest is the same in all banks, currently the interest rate is 7.1% whereas FD rates in different private as well as PSU banks is between 5-6%.

On top of that, there are additional benefits of PPF which makes it the most attractive investment. One can get tax benefits on payment and exemption on interest income. PPF comes with a maturity period of 15 years which makes it good for your long term goals like planning children education, marriage etc. We have listed down more benefits of PPF here.

2. Mutual funds (MFs): All of us have some financial goals, both short term and long term. Investing in mutual funds is a smart way to accomplish those financial aims and objectives. Mutual funds are the most popular choice in India as investing in MFs comes at a low cost and has become easier with different technological platforms. Investment can be started through monthly SIP mode starting from as low as ₹ 500. The returns are directly linked to share markets and offer better returns (12-15%) compared to other investments. Also mutual funds do not have a lock in period and thus provide investors with balanced liquidity.

There are different categories of mutual funds with different investment philosophies. To know which mutual fund you should buy, from where to buy, taxation rules and how MFs operates click here.

3. Gold Our years of investing experience tells us, gold is one of the most underrated investments for the current generation and has been one of the best investments by Indian families for past decades. Gold is a tried and tested safest hedge against other forms of investments, its price tends to rise when all other asset classes are falling.

Investment in gold can be done through buying physical gold Gold Deposit Scheme, Gold ETF, Sovereign Gold Bond (SGB) or Gold Mutual Funds. SGB and GDS offer interest rates between 1.5 percent to 2.5 % alongwith capital appreciation. The return on investment of SGB is tax free on completion of tenure.

Investing your money in physical gold isn’t a bad option, as it is highly liquid i.e it can be easily converted into cash, in times of need. This precious metal has been gaining its trajectory ever since and currently trading at 52K, a whopping return of 50% in the last one year that too in the times when all asset classes were hammered due to Coronavirus Pandemic. To know more about investments in gold, click here.

4. Equity shares: Equity Shares/Stocks are a part of ownership where the shareholder is a fragmental owner and holds the right to vote and make capital gains on the sale of shares. Stocks are volatile and their prices fluctuate everyday due to news flows. When a listed company delivers on its plan, the shares price excels, but great rewards come with greater risk. There’s market factor risk, performance risk, liquidity risk, legislative risk and political risk which surrounds equity investments.

Apart from capital gain, investors are also entitled to receive a dividend from the company. These are the two main returns on this investment. Before making an investment in equity shares one needs to assess their risk appetite and accordingly invest.

We provide a simple formula to our clients for equity investments, 100 minus your age should be the % of your total equity exposure (including MF). The younger we are, the more risk we can take. To read how some investors became billionaires through equity investments, click here.

5. Fixed Deposits & Recurring Deposits: Bank FDs and RDs are money invested in a bank for a fixed period of time, ranging from 15 days to Five years and above. FD & RD offers higher interest rates than the normal savings account. FDs can also come to the rescue if you’re facing a financial downfall. Unlike PPF’s there is no lock-in period but the interest will be deducted if there is premature withdrawal.

We suggest this for short-term goals. If you’re not a huge fan of banks, you can also invest in Corporate FDs which provide 1-2% extra interest rate compared to banks. However, investing in a company’s fixed deposit can be risky and therefore you should always look for AAA rated and high quality companies. To know more about FD and its taxation click here.

There are many other investment options which one can make but it entirely depends on their Income, goals, risk profile and other conditions. Our team offers personalized professional financial planning with an aim of building financial literacy and discipline in India.