As Salaried employees in India, various investment options are available for the Indians in 2022 to smartly invest and grow their hard-earned money. From traditional investment options like Fixed Deposits, Recurring Deposits, Flexi Deposits, National Pension schemes (NPS), ULIPs to modern investment options like investing in equities, Cryptocurrencies, etc are different instruments available for investing.
This article will look into a few of India’s best investment options for salaried employees.
7 Best Investment Options for Salaried Employees in 2022
Here are the seven best investment options available for Salaried employees in India. It would be recommended to diversify your investments into multiple investment instruments and not invest in just a single alternative.
Table of Contents
1. Direct Equity (Stocks)
With the rise of discount brokers, investing in direct equity through buying stocks has become easy and mainstream in 2022. Now, salaried employees can quickly open their demat and trading accounts within hours with top stockbrokers like Zerodha, Angel Broking, etc, and start investing the same day.
Though investing in Direct Equity involves high risk, the returns are also higher than any other investment alternative. With smartly planning, the stock investors can expect an average CAGR return of as high as 15% per annum. Moreover, the minimum capital requirement to invest in direct equity is also very small and investors can buy stocks worth even Rs 100 or lower.
2. SIP in Mutual Funds
“Mutual Funds Sahi Hai” (Mutual Funds are Right), you might have heard this statement already.
Mutual funds are investment vehicles managed by professionals that seek to pool investments from many people together before investing them into markets within the financial ecosystem such as equity markets or debt markets or a hybrid of both debt and equity.
In general, mutual funds are thought to be the best platforms for investors to get the benefits of capital appreciation from the equity markets even if they are not confident to manage their own money in the markets or if they are not able to dedicate time for their own research.
Through SIP, investors can plan a monthly recurring investment, say Rs 5000 per month, in a mutual fund to rip long-term benefits without affecting their lifestyle. The risk involved in mutual funds is high and the investors can expect a return between 11–14% CAGR if they have invested in the right funds.
3. ELSS (Tax Saving Funds)
An ELSS (Equity Linked Savings Scheme) Mutual Fund is a variety of Equity Mutual Fund which allows individuals and HUFs to avail of Income Tax deduction from their Total Income for an Assessment Year subject to a maximum limit of Rs.1.5 lakhs u/s 80C of the Income Tax Act, 1961.
They have a lock-in period of 3 years. The said duration is counted from the respective allotment date of the unit(s). Although the returns are little compared to direct equity investment, however, the tax-saving part covers up to this, especially for the salaried employees falling in the top tax bracket.
4. Employee Provident Fund
If you are a salaried employee in India, the Employee provident fund is the most crucial investment option for you. It is exclusively designed for retirement planning funds where the employee and employer contribute 12 percent of the former’s basic salary amount in the employee’s provident fund account every month.
If you are a salaried individual, you can claim a tax deduction on the contributions you make to your EPF account. The maturity amount and the interest income on EPF have also been exempted from Income Tax provided you have completed a minimum of years of service. EPF is a must to have investment option for a salaried person in the private sector in India.
5. Gold Investment
Gold is the most preferred traditional investment option available in India which requires no paperwork (for direct gold purchase), high liquidity, and above-inflation returns in the long term.
During equity market downturns, the gold investment provides a good hedge as the prices shoot up. Gold may also be a great investment to pass on to the next generation who might not have such luxuries to find gold in abundance.
A few Gold investment options available in India are Physical Gold investments like buying Jewelry, Gold Coins/Bars, or Paper Gold Investment Options like Gold ETF, Equity-based Gold funds, etc. Gold investments are low-risk and moderate return investment options in India.
6. Real Estate Investment
Buying a house is the dream of every Salaried employee. Though real estate investment might not be feasible for a fresher or an employee with very minimal salary and savings, it can be a good investment option for moderate to high salary earning employees.
For example, if an employee plans to buy a 3BHK apartment worth Rs 70 lakhs, and he can pay Rs 20 lakhs as a down payment from his savings, the rest of Rs 50 lakh can be borrowed as a home loan with an interest rate of 6.7%. Here, he’ll have to pay a home loan EMI of Rs 32,485 per month. (You can use a home loan calculator for your calculations). However, if his current age is 32, he’ll have a house of his own by 62, when the home loan tenure is complete.
With a little planning and systematic EMI payments, employees can have their dream house within 30 years of tenure, which can be used as a house to live for themselves or even an investment option as real estate price appreciates significantly with time.
7. IPO Investment
IPO or Initial Public Offering is the first time when a privately owned company offers its shares for sale to the public and enters the stock market. It is also known as ‘Going Public’.
Investing in IPOs can be very profitable if you are able to pick the right company at the IPO stage. As a salaried employee, if you have the patience to hold the correct IPO stock for the next 15–20 years, it can make fortunes for you. Many early IPO investors in companies like Infosys, TCS, Eicher Motors, etc have made crores of returns by investing just rupees ten thousand or lower.
However, please note that IPO investments are high-risk and high-reward investment options.
Best investment options for Salaried Employee: 1) Direct Equity 2) SIP in Mutual Funds 3) ELSS 4) Gold Investment 5) Real Estate Investment 6) IPO Investing 7) Public/Employee Provident Fund 8) FDs/RDs 9) NPS 10) ULIPs 11) Cryptocurrencies How many of these have you invested in? — Kritesh Abhishek (@kritesh_rocks) May 2, 2022
Today, we looked into the top investment options available for Salaried employees in India. Though investing in direct stocks, Equity Mutual Funds, and IPOs are more rewarding, however, chances of investment getting wrong are higher and high risks are also involved in these investment options. On the other hand, Provident Funds, and Gold investments are safer investment options.
A salaried employee will do well if his/her basket of investment includes multiple of these investment options, along with a few other low-risk investment options that are not included in this article like RDs, NPS, etc.
That’s all for this article, do let me know which one is your favorite investment option as a salaried employee.
Further, also check out our FREE webinar on How to Save Taxes Using Mutual Funds and other Tax Saving Instruments?, available on FinGrad to learn more about other investment options. Happy investing.