The real importance of investment lies in the fact that it helps a person to gain Financial Independence. The following are five instruments that lead one to the golden path.
Mutual Funds, Equity
Common people in India have taken to investments in equity and mutual funds as ducks take to water. Almost 3.7 crore demat accounts were added in FY24, or 1 lakh accounts a day. The number of mutual fund folios rose by 3.2 crore last year. For the lay investor, mutual funds hold out a big promise of generating assets in the long term beating inflation.
Mutual fund investments are less volatile than that in stock markets and through this route even a small investor can have the luxury of a qualified professional fund manager managing his/her money. Systematic Investment Planning, or SIP, allows one to invest a fixed amount of money at regular intervals – a day, week, month, quarter etc – in funds of one’s own choice.
National Pension System or NPS
The National Pension System or NPS can turn even small streams of investment into very big pension and even a lump sum payment from and at the age of 60. If one starts investing Rs 1,000 at the age of 18 and continues it till 75, he/she can earn a monthly pension of more than Rs 1 lakh and a lumpsum payment of Rs 1.4 crore at 60 years.
EPF and VPF
The Employees’ Provident Fund (EPF) and Voluntary Provident Fund (VPF) are two instruments that help one silently and imperceptibly build quite a fortune, especially if an employee also opts for VPF in addition to EPF. They carry the highest rate of interest (8.25% last year), a sovereign guarantee and tax deductibility. EPF also entitles one to a monthly pension from the age of 58 years.
PPF
It’s a guaranteed-return debt instrument that can generate big returns in a completely tax-free manner with a significant rate of interest (currently 7.1%). The instrument has a minimum investment period of 15 years but can be extended indefinitely by blocks of 5 years.
Life and health Insurance
One should buy both life and health insurance not only to shield his/her finances from the vagaries of huge medical expenditure but also to secure one’s family members in the event of one’s death. The breadwinner of every family needs to have life insurance cover which is about 10 times the current annual income.
On Independence Day let us not forget that Independence loses a lot of its significance without Financial Independence. And financial independence in all the more significant in post-retirement years, when one is most vulnerable in mind and body. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
