6 best ways to invest money
How to invest? This is a very common question a new bee asks. But, in the first place, is there any best way to invest money ? Yes, the ideal approach will vary from person to person. It is based on parameters like tenure, risk appetite, liquidity and taxation. There are various high-reward investment options in India, however, it is essential to understand the options thoroughly depending on your source of income
1. Determine Taxable Income
Let us take an example if your income is 4 lakhs, then what will be your tax bracket
Since we have already determined the taxable income, we need to ensure that we make relevant tax saving investments ( income tax functions as per different sections , section 80C , 80D etc.). One can choose from several options like ELSS , health insurance , ULIP , etc. These are all long term investments and should be chosen after careful consideration. An ELSS (also known as Equity Linked Savings Scheme) is a firm favorite due to its relatively short lock-in period of 3 years.
The comparison of ELSS and PPF (Public Provident Fund) is below
01.Best ELSS to invest in 2022
02.Set the Monthly Investment Amount.
03. Risk Assessment Risk assessment is an important step and should be determined only.
The risk appetite depends on many factors like age, cash flow , ability to bear the loss etc. One would need to determine based on these whether one can take high risk or medium risk or low risk.
4. Asset Allocation
It is merely deciding the mix of assets in a portfolio, eg. An investor with a higher risk appetite may have more equity in a portfolio than an investor with a lower risk. A basic rule of thumb is 100 minus the investor's age for equity allocation to occur. Take a break from being in debt.
5. Product Selection
After determining the allocation, the next step is to ensure that we select the right products. Mutual Funds can be a good route to invest money as they are professionally managed, regulated by SEBI (Securities and Exchange Board of India) and are convenient to enter and exit
Ratings of Mutual Funds published by rating agencies like CRISIL, MorningStar, ICRA are good starting points for funds that can be chosen. SIP or Systematic Investment plan can be a good option for salaried employees, which provides investor convenience and one-time setup while further investments are automatic. One should choose the final fund to invest with with careful consideration
Best SIP Plans for 2022
| Fund | ARE NOT | Net Assets (Cr) | Min SIP Investment | 3 MO (%) | 6 MO (%) | 1 YR (%) | 3 YR (%) | 5 YR (%) | 2021 (%) | |
|---|---|---|---|---|---|---|---|---|---|---|
| L&T Emerging Businesses Fund Growth | ₹42.621 ↓ -0.54 | ₹8,167 | 500 | -2.3 | 9.4 | 47.9 | 23.1 | 16.6 | 77.4 | |
| Principal Emerging Bluechip Fund Growth | ₹183.316 ↑ 2.03 | ₹3,124 | 100 | 2.9 | 13.6 | 38.9 | 21.9 | 19.2 | ||
| DSP BlackRock Natural Resources and New Energy Fund Growth | ₹53.078 ↓ -0.79 | ₹759 | 500 | 0.3 | 5.1 | 30.7 | 21.8 | 12.3 | 42.8 | |
| SBI Small Cap Fund Growth | ₹98.7099 ↓ -1.19 | ₹11,288 | 500 | -4.9 | 7.3 | 29.2 | 27.4 | 20.3 | 47.6 | |
| IDFC Tax Advantage (ELSS) Fund Growth | ₹93.92 ↓ -1.02 | ₹3,583 | 500 | -1.6 | 7.4 | 28.3 | 22.5 | 16.6 | 49.2 | |
6. Monitoring and Rebalancing
After investing it is not over by a big margin. To ensure that you get good returns, it is essential to monitor the portfolio at least once in 3 months and ensure that you rebalance at least once a year. One would need to see the performance of the scheme and also whether a good performer is present in the portfolio.
Otherwise there is a need to revamp the holdings and replace the laggards with good performers. These basic steps must be followed to make an effective and efficient plan. If one does this and monitors the holdings over time, one should get good results. Best wishes!
questions to ask
1. What is Section 80C? A: Section 80C of the Income Tax Act of 1961 allows individuals, mostly salaried individuals, to receive tax benefits. Individuals can claim a deduction of up to Rs. 1.5 lakh on the total income earned in a year.
2. What is TDS? A: TDS is the short form of Tax Deducted at Source. It is the tax collected at the source where the income of the individual is generated.
3. How is TDS linked to 80C? A: TDS for personal income is linked under 80C, but note that TDS cannot be deducted under section 80C. Suppose, for example, you have a PPF account in a bank with a maximum deposit limit of Rs 1.5 lakh per annum. This account is then exempt from TDS under section 80C; Similarly, if interest income earned from various other tax-saving methods is eligible to be exempted from TDS under section 80C.
4. What are the other sections that can help you avail tax benefits other than 80C? A: There are fourteen more ways by which you can save on taxes other than 80C, and they are as follows: Section 80CCD : National Pension Scheme Section 80D: Insurance premium paid for health Section 80E : Repayment of an education loan Section 24 : a. interest payment of home loan Section 80EE: Home loan interest payment for first time buyers Section 80EEA: Home loan interest payment for first time buyers Section 80EEB: Interest paid on loan taken for purchase of electric vehicle Section 80G : Donations to charitable institutions Section 80G6 Rent paid for accommodation Section 80TTA : Interest from savings bank account Section 80TTB: Interest from deposits in case of senior citizens Section 54: Long term capital gains on sale of residential house Section 54EC: Long-term capital gains on sale of land, building or both Section 54F: Long-term capital gain on sale of capital asset other than a residential house
5. What are the tax benefits under 80D? A: Individuals can claim tax deduction on payment of health insurance premiums. Individuals below 60 years of age and paying for themselves, they can claim a deduction of up to Rs. 25,000. If you are below sixty years of age but are living with parents who are above 60 years of age and are paying premium for them, you can claim a deduction of up to Rs. 75,000. Lastly, for senior citizens living with parents of senior citizens, while paying premium for themselves and their parents, they can claim a deduction of up to Rs. 1,00,000
6. What is the tax benefit under 80E? A: Suppose you are repaying the education loan taken for you or on behalf of your child, spouse or any person whose legal guardian you are. In that case, you can claim tax deduction under section 80E.
7. Should asset allocation be a part of your investment plan? A: Yes, asset allocation should be part of the investment plan. Because to ensure that you have enough investments, a diversified portfolio is essential so that your overall investment is not adversely affected if one does not perform. 8. Who manages the various products you can invest in? A: You can hire a wealth manager from your bank, who will help you build your portfolio of investments. Otherwise, if you think you can manage it, you too can identify suitable products to invest in
