Your investment profile, which includes your income, expenses, risk tolerance, and financial objectives, should inform every investment decision. Depending on your ability to pay, you can invest through a Systematic Investment Plan (SIP) or make a lump sum contribution.
Long-term aspirations, like a home, retirement, or a college degree, are funded with the help of long-term investments. Choose a fund that will assist you in increasing your money as a result. The most effective long-term investing options are equity-oriented schemes, which have an equity allocation of more than 65 per cent, with a time horizon of more than ten years.
Here are some of the greatest investment options to park your bonus cash, considering all of these considerations.
Due to their diversification and expert management, equity funds are generally less hazardous than direct market investments.
Invest in ELSS, or Equities-Linked Savings Schemes, if you want to invest in equity funds and save money on taxes for the fiscal year under section 80C. Pure equities funds and equity-linked savings plans provide a deduction under 80C of up to Rs 1.5 lakhs.
Although not the best in producing profits over a lengthy period, liquid funds are among the most practical investing options. But while you choose the finest investment strategy, these funds are the best for keeping your money from being squandered.
Additionally, because there is little exit load, you can move your invested funds’ amount directly to another fund using the liquid funds. This straightforward choice presents you with a wealth of chances for systematic investing when you haven’t decided on your investment strategy; alternatively, if you want to invest your lump sum funds in another long-term investment systematically.
Investments in ULIPs are particularly tax-efficient. In other words, they provide you with several options for equity and debt funds, an 80C deduction, and a tax-free maturity value. You might be able to invest in both debt and liquid funds with ULIP and still receive the same tax advantages.
However, tax advantages are only valid if your annual cost is less than 10 per cent of the insurance sum assured. Therefore, an amount insured of Rs. 1 crore is required if you want to invest Rs. 10 lakh in a ULIP. However, that only applies if you invest Rs 10 lakhs at once.
Liquid Mutual Funds
Liquid funds can be used to build investment programmes comparable to deferred annuity plans, NPSs, and PPFs. You may deduct an additional Rs 50,000 beyond the Rs 1.5 lakh Section 80C cap if you currently have an NPS tier-I account.
Other prominent investments include senior citizen savings plans, which you can give your parents as a gift. Also, remember that every investment option has distinct risk-return levels, appropriate investing periods, and justifications. Therefore, be sure to review each plan to see which one makes the most sense to you.
There are many other kinds of debt funds, but for your concern, we are just accounting for those that invest in corporate bonds or government securities with ratings of AAA and AA.
These funds have a far lower risk profile than equities funds based on the securities they hold. Additionally, you gain from the fund’s diversity of securities. These funds also provide more consistent returns but may be less taxable.
Your gains will receive the indexation benefit after a holding period of 36 months. This could result in much cheaper taxes.
Therefore, if you withdraw your money from a debt fund investment within 36 months, the tax laws consider it a short-term capital gain. Your taxable income for the fiscal year is increased by the short-term capital gains, which are taxed at slab rates.
Large sums of money invested at once can be dangerous and lock up your funds; an early withdrawal might result in exit load fees and penalties. An investor must therefore analyse all the factors before investing.
A systematic transfer plan, or STP, allows an investor to make investments over 12 months in a predictable manner. A fund house enables an investor to participate in STP by allowing them to invest a big payment in one scheme and make regular transfers of a certain amount into a different plan.