Wondering where and how to invest money in India? We list 12 of the best investment options to help Indian women save tax and plan for the future.
While Indian women are pursuing high powered careers and becoming an inherent and valuable part of the workforce few of them are aware of how to become financially secure for the long term, other than earning a six-figure salary.
According to an ETMONEY report, Indian women investors are smart, savvy, and determined when it comes to investing their hard-earned money.
There are several investment options and plans in India that offer long-term benefits to working women. However, it is important to know how and where to invest money in India before you actually invest your hard-earned funds.
Investment can be best defined as, “The purchase of a financial product or any other item of value with an expectation of favourable returns in the future.”
This ‘financial product’ can be in the form of an immovable asset (a real estate property or a piece of land), stocks, bonds, fixed deposits in banks and mutual funds.
Some investment options, like stocks or mutual funds, are primarily for the purpose of creating and increasing liquid cash reserves, whereas Bank FDs, Employee Provident Fund (EPF), and Public Provident Fund (PPF) preserve invested money, drawing interest over the years.
Some investment options can also be used to generate a monthly income, as the interest amount on the principal. On the other hand, immovable assets, like real estate or land, add security which increases over the years.
Although most working women in India invest money to avail tax benefits, it is always advisable to find the best investment options that maximise tax savings, minimise risk and offer a low cost of investment with substantial returns.
In this guide to investing for beginners for Indian women investors, you’ll learn how to invest money wisely so you can achieve financial independence.
12 Of The Best Investment Options For Indian Women
Wondering where and how to invest money in India? In this article, we list 12 of the best investment options to help Indian women save taxes and plan for the future.
Preserving Cash Reserves
1. Public Provident Fund
The PPF scheme is available both in banks and post offices. It is undoubtedly regarded as one of the best investment plans in India and is valid for a period of 15 years. It attracts an annual interest of 8%.
The range of annual investment varies from a minimum of INR 500 to a maximum of INR 70,000 annually. You can start withdrawing the money from the 7th year and enjoy the tax benefits on withdrawals.
- The Advantages of PPF
Whether you’re a homemaker or a professional, the PPF facility is available to all. A regular input per annum will not only attract the interest amount but also build a large saving in a period of 15 years.
2. Employee’s Provident Fund
The EPF is considered as one of the best investment options for a salaried person to avail of tax benefits as well as accumulate tax-free savings.
In India, an employee is required to contribute 12% of her basic salary into her EPF account every month as mandatory. The employer then contributes the same amount towards the EPF account of the employee.
The contributions of the employee towards her EPF account is exempt from tax, under Section 80C of the Income Tax Act 1961, up to INR 1,50,000 annually (but not the employer’s share).
The interest of both the employer and employee’s share get tax benefits. Currently, the interest rate of EPF stands at 8.55%.
- Advantages of the EPF
The tax benefit that one gets by saving a substantial amount of one’s basic pay in the EPF account is one of the best advantages of the scheme.
In addition, the Employee’s Pension Scheme 1995 ensures a life-long pension for a retired individual, as a result of 10 years of contributory membership.
3. Kisan Vikas Patra
The Kisan Vikas Patra is yet another systematic investment plan in India available in the form of a certificate at the post offices. It offers an annual interest of 8% and is valid for a period of 8 years and 7 months.
As the maturity value doubles the principal amount, it is regarded as one of the best short-term investments in India. You can invest any amount of money up to individual discretion with no specified limit.
- Advantages of Kisan Vikas Patra
You need to invest your money in this scheme once and not every year, as is pertinent to the PPF facility. The returns are high, guaranteed and risk-free.
Moreover, these returns are assured in a specified time frame, which makes this scheme very attractive, and a viable investment option for women.
4. National Savings Certificate
One of the most efficient schemes for a safe investment with high returns in India is the NSC or the National Savings Certificate, which is available in post offices.
With a lucrative interest rate of 8%, you can invest any amount of money, but you cannot withdraw it before the maturity date, except under special circumstances, like the death of the certificate holder or joint holders, court orders, or forfeiture by an authorised Government officer.
- Advantages of NSC
This scheme is ideal for working women and individuals, who wish to diversify their cash reserves.
Since there are no withdrawal options available, this preserves your liquid cash for a specified period, earning an interest regularly, thereby building a kitty.
5. Post-Office Time Deposit Scheme
One of the most beneficial saving schemes in India, you can decide on the period of investment, which ranges from 1 to 5 years.
The interest rate will, however, depend on the time frame, and will be calculated quarterly but payable annually.
- Advantages of Post-Office Time Deposit Scheme
This scheme is considered eligible for child investment plans in the post office, where a single mother can invest a substantial amount of money for child education and healthcare.
Just like the KVP and NSC, this investment is also a one-time investment, where the principal amount will attract interest depending on the chosen time frame. Since there are no withdrawals allowed, this account holds and builds a savings kitty.
6. Bank Fixed Deposits
FDs are available with the public and private sector banks, where the investor can choose the period of investment. They attract an interest rate of 9 to 11%, depending on the time period and the institution in which you have created the FD.
There is no maximum limit on investment. Further, FDs can be broken and the amount withdrawn before the maturity date.
- Advantages of FDs
FDs act as emergency money, as they earn high interest. They can be broken in the middle of the term, as and when the money is required, or it can be carried to a full term.
However, if broken mid-term, it will affect the interest earned on the principal amount. You can create multiple FDs for different purposes, which makes this scheme a high-return investment option in India.
7. Post-Office Monthly Income Scheme
Also known as the Post-Office Fixed Deposit, this monthly investment plan is valid for a period of 6 years.
It attracts a 10% bonus on the principal amount along with monthly interest. You can invest up to INR 3,00,000 if you are a single investor and INR 6,00,000 if you invest jointly.
- Advantages of Post Office Monthly Income Scheme
Retired women or homemakers can benefit from this investment scheme. Even single women living alone or old ladies can gain financial freedom by utilising this safe investment option in India..
If you’re planning to create wealth by investing over a considerable period of time, you can try the following investment avenues in India:
Stocks are short term investments with high returns, where the investor is eligible for the dividends declared by the companies and also gets an opportunity to trade in Initial Public Offerings (IPOs).
- Advantages of Investing in Stocks
Stock investments give the highest returns in a very short time. They also give the investor complete control and freedom over her finance. However, dealing in stocks is also the riskiest investment option.
If you have in-depth knowledge of the functions of the stock market, constant vigilance on the behaviour of the market, awareness of the financial world and the past, present and future actions and plans of various companies then this is a good option for you.
It is always better to trade in stocks through a stockbroker instead of self-trading. Stockbrokers are in close touch with the market, its ups and downs, and the performance parameters of different companies, which make them efficient advisors in guiding you on making stock investments.
9. Mutual Funds
Mutual Funds are long term investment options in India where the investment amount is managed by fund experts. These are much lower risk funds that are designed to steadily, but slowly, build value over time.
You can earn substantial wealth over a period of time through a SIP, which minimises loss and maximise returns on investment.
What is a SIP? A Systematic Investment Plan (SIP) is an investment vehicle offered by mutual funds to investors, allowing them to invest small amounts weekly, monthly or quarterly, instead of lump sums.
- Advantages of Mutual Funds
Mutual Funds are a good alternative to self-trading. There are a variety of Mutual Funds in the market, offered by Banks and Financial Institutions like HDFC Bank, Franklin Templeton, Reliance, Prudential ICICI Asset Management Co.
Investors can choose a product suitable to their requirements and can either invest a lump sum or choose a SIP wherein a specific amount is injected into the fund every month. The benefit of the SIP way of investment is to prevent huge losses.
- Disadvantages of Mutual Funds
Some of the disadvantages of investing in mutual funds include high fees, tax inefficiency, poor trade execution, and the potential for management abuses. Mutual funds are also taxed now, with a 10% capital gains tax.
LONG TERM INVESTMENTS
When you’re planning to invest for the long term, one of the best investment options is in real estate properties or gold, the advantages of which are explained below.
10. Real Estate
Investing in real estate is a lucrative affair if you can afford it. However, home loans are easily available from both, public sector banks and private sector banks.
Home loans make it easier for women to purchase real estate properties and then repay the loan over a period of 10 to 20 years with interest.
Although real estate investment is expensive, it is regarded as one of the best investment plans with high returns.
The house you buy can either be rented to individuals or to a company, so it can pay for itself and provide you with a regular monthly income.
Banks and branded jewellers sell certified gold coins in different denominations like 5 grams, 10 grams, 20 grams. Although gold prices are volatile, they can be considered a safe investment in the long term.
Women can invest as little as a 5-gram gold coin every year and build up a kitty of around 50 grams in 10 years and 100 grams in 20 years. You can later exchange these gold coins for either cash or jewellery for weddings and other special occasions.
Learn the benefits of investing in gold, how to invest in gold and how to buy gold online in India in this gold investment article.
According to this report, the Reserve Bank of India (RBI) prohibited the use of the banking system for crypto-related payments in early 2018, but this was struck down by the Supreme Court in March 2020. The decision led to a brief resurgence in crypto trading in India.
However, the Indian government is reportedly reconsidering a plan to ban cryptocurrency and the new bill may not only kill the market but pose a significant legal risk if you have invested in cryptocurrencies.
For this reason, we do not recommend investing in cryptocurrency at this time and are only listing it here for the purpose of information.
Kryptostreet founder, Satyakam Chakravarty, offers an introduction to Bitcoin or cryptocurrency.
Cryptocurrencies are exchanged or transferred from one person to another directly, in a Peer-to-Peer fashion, and do not need the help of any intermediary like a bank or a credit card company to complete the transaction.
Cryptocurrency transactions are much more efficient than fiat currency transactions. Other than the currency they are also being used in smart contracts and in Decentralised Finance and are slated to be transforming the financial services industry.
Bitcoin is the first scarce digital asset and is also called digital gold as many of its properties resemble gold. There will only be 21 million Bitcoin eventually and this property makes it a good store of value.
Millennials are especially fond of Bitcoin and are including it in their scheme of investments. It has been growing in value since its inception and is becoming a part of a balanced investment portfolio.
Pro Tip: Diversify Your Financial Portfolio
It is important to seek the services of a financial advisor if you can at all afford to do so. In all honesty, you really can’t afford to put your financial future in the hands of an amateur who knows very little about the way the stock market works and how best to structure your portfolio.
If for whatever reason, you choose to go it alone, the best thing you can do for yourself is to have a truly diverse portfolio. Many people have learned that the price for failing to diversify can be very high indeed.
During the dot-com bust, they learned about the risks of having too much invested in one industry. Had they spread their investments around they would not have been hit nearly as hard as they were.
The first thing you need to realize is that there’s no such thing as a risk-free investment, only one which carries less risk than others. With this in mind, you can minimize your risk by dividing your holdings between several sectors, such as different stocks, bonds, and funds.
It is always a wise decision to have at least three to four different investments in diversified plans. Putting all cash reserves in one plan can limit growth and is also very risky.
There are many reasons for this, not the least of which is spreading out your risks and rewards so that one bad day on the market doesn’t do in your entire financial future.
You’ll want to purchase a few stocks, some mutual funds and other assets such as real estate and gold, to balance things out. You never want to rest your entire financial future on one stock, bond, or fund because that really is an all or nothing risk and rarely turns out well.
Ultimately, in diversifying, you want to avoid having too much of a concentration in one stock, one sector, and one investment type. So if one sector performs poorly, you still have other sectors that will most likely not share the same fate.
Also, different concentrations of stocks, bonds, and funds are advisable at different stages in your life and according to the amount of money you currently have set aside.
There are all kinds of formulas as to how to do this for maximum effect, but the truth of the matter is that you can’t really determine the best route for yourself without becoming a little clearer about your current situation, your goals and plans.
That’s why having a financial planner or advisor is important and you really should consult with one about how to best diversify your investment portfolio.
Your financial advisor can help you get started on the path to financial planning, so you can create a brighter future than you may have ever imagined for your family.
There are numerous options for investments available in the market. An investor needs to only choose the best-suited ones and invest.
Women can plan their finances with great accuracy. All that is required is a little awareness of the different kinds of investment options available in India, and some guidance on where to invest money for good returns.
You can also look for safe investment options in India online to learn about the latest and best saving schemes and investment plans.
Life offers no guarantees and it’s not humanly possible to predict what may happen in the future. A little timely planning and action can go a long way in ensuring an independent, secure and stable future as an Indian woman.
Disclaimer: All investments, including real estate, are speculative in nature and involve a substantial risk of loss. The ideas and strategies on this website are based on personal opinions. They do not and should not be considered as professional financial investment advice and should never be used without first assessing your own personal and financial situation, or without consulting your professional investment advisor. We advise you to do your due diligence before acting on any information that we publish and do not, in any way, warrant or guarantee the success of any action you take in reliance on our statements or recommendations.
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