Seven Ways to Invest Your Money Now for a Tension Free Life Ahead

What makes you happy? For most of us a tension free life is what makes us happy. To live a tension free life, we must be financially secure. And to be financially strong you must invest wisely. So now the question is, are you a wise investor?

If your answer is no, here is the list of the most popular investment options to help you become one. You may be surprised to know that you already knew all these investment schemes before. The difference is that you never thought about investing in these before.

7. Equity-Linked Saving Schemes (ELSS)

ELSS is a saving scheme that explores the power of equities. The amount that you invested in the units of the fund is invested in the equity shares of the companies. Of course the risk involved is high, yet it yields highest return closer to 47%. This investment option actually diminishes the chance of possible liquidity.

Here is more on this high- return investment option:

• There is no max limit for investment
• Investment up to Rs. 1 lakh qualifies for tax deduction
• Lock-in period of 3 years
• Max returns even up to 47%
• High risk involved

6. Infrastructure Bonds

These are bonds issued by public financial institutions like IDBI and ICICI Bank. It can take form of shares, bonds or debentures. Unlike mutual fund bonds, the risk involved is less as the investment made are not market-linked. These are the perfect option for investors looking to save taxes and invest in a diversified equity scheme.

Things to note about infrastructure bond:

• Lock-in period of 3 years
• No tax saving in case money is taken back before the lock-in period
• Less risk involved
• Less dependent on market situation

5. Public Provident Fund (PPF)

PPF is an investment option that needs you to set aside some specific amount on a yearly basis. The best part is that you can even open one, even if you are not earning at all. PPF accounts can be opened at Head Post Offices or nationalized banks that handle PPF accounts.

Here goes a briefing of what all PPF has to offer:

• Min limit is Rs. 500 and maximum limit is Rs.100,000.
• Rate of interest is 8.6% p.a.
• Spans for a min of 15 years
• Restricted withdrawals, 50% of the balance standing at the end of the 4th year to be precise.

4. National Saving Certificates (NSC)

NSCs are a saving scheme which appears like a lighter form of PPF. These are certificates issued by Postal department and government of India. The beauty of this scheme is that it combines growth in money and tax benefits. It can make Rs. 1000/- grow to Rs. 1601/- in six years.

Here goes more on this smart long term saving option:

• Issued in denominations of Rs 100, Rs 500, Rs 1,000, Rs 5,000 and Rs 10,000
• Duration is 6 years
• Minimum amount for investment is Rs. 500; No maximum amount
• High interest rate at 8% compounded half yearly
• No prescribed upper limit on investment

3. Life Insurance

Life Insurance schemes make sure that your loved ones can move forward with the life even when you can’t help them any more. Apart from this benefit that inherits, it offers tax deduction to you. Tax deduction means more money for investing. The life insurance policy is available from LIC and many private insurers.

Some key points about life insurance:

• Maximum Tax deduction limit for each year is Rs. 1 lakh for insurance investments
• Tax exemption for direct taxes and not for service taxes payable on insurance maturity
• Premium paid in any year should not exceed 20% of the sum incurred
• No deduction on any sum paid in excess of 20% of the sum incurred

2. Unit-Linked Insurance (ULIP)

ULIP is basically a combination of investment fund and insurance. ULIPs help you enjoy the goodness of investment funds that yields more returns, along with the insurance cover in a single investment option.

Here goes more on ULIP:

• Min limit is Rs. 15,000 with annual contribution of Rs. 1,000 and max limit is Rs. 2 lakhs with annual contribution of Rs. 20,000.
• Your age should be between 12 and 55 years 6 months.
• Exemption from wealth tax
• Service tax may be charged since it gives insurance cover.

1. Home loans

Mortgages are an attractive way of investing as it gives two visible benefits. You can actually own a home by paying in installments at the same time it provides huge tax benefits. With the real estate sector booming you can easily fetch double of what you have invested in a while. It is estimated that there would be a shortage of 26.53 million houses during the Eleventh Five Year Plan (2007-12).

Here are some key points why home loans are attractive than the rest:

• Easy Availability from banks and other Financial Institutions
• Tax concessions
• Get tax deduction on repayment of the principal amount of a loan taken
• Interest paid on a loan is tax deductible from income from the property
• Interest paid on a new loan taken to repay the original housing loan is also tax deductible.

This is what the most successful investors recommend. It is entirely up to you to invest based on the combination of risk involved, returns and tax saving that suits your need.

Happy Investing!

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