Investment

Best 9 Safe Investments To Build Wealth In 2022, And How They Work

Investment
Investment

Safe investments are those that tend to hold their value or increase in value over time. They are often low-risk and provide a consistent income stream.

When it comes to investment, the post-covid world is very different. Diverse investment possibilities are being taken into consideration, with an increased emphasis on wellbeing and wealth management. These can be anything from insurance-plus-investment solutions to stock market wagers that might result in long-term gains.

The best investment possibilities were examined and divided into risk groups by Forbes Advisor India. The top 10 investment alternatives are listed below for your consideration.

Also Read : What is an NFT? The Complete Guide to Understanding Non-Fungible Tokens


Government Provident Fund (PPF) :


Given that the government guarantees the returns on this fixed income programme, it can be said to be a risk-free investment.

Among its attributes are:

Availability
accessible at practically all banks and post offices in India.
There is a single account limit.
age is not a factor in determining who can open an account. Up to the age of 18, a minor’s guardian manages their account.


Finance Amount
The annual minimum investment amount is 500 INR.
The annual maximum is INR 1.5 lakh.
In a fiscal year, you may deposit one time up to twelve times.


Profit from Investment
Currently, the annual interest rate is 7.10%.
The fact that PPF interest rates are variable means they could alter on a quarterly basis. In general, the interest rate change ranges from 0.25% to 0.75%.


Maturity
A PPF fund reaches maturity after 15 years.
After five years from the date the account was opened, partial withdrawals are permitted.


Taxation
PPF investments are tax-free.
Your investment’s interest income is likewise tax-free.
Risk: Minimal to none

Certificate of National Savings (NSC) :


The NSC is a fixed income investment programme guaranteed by the government that is viewed as a risk-free investment.

Availability
The certificate is easily available at all post offices, some private banks, and state banks in India.


Finance Amount
There must be a minimum investment of INR 1,000.
Any amount greater than $100 may be invested in 12 equal payments over the course of one fiscal year, or you may make the desired contribution all at once.
There is no maximum investment.


Profit from Investment
At the quarterly rate made public by the Ministry of Finance, interest compounds annually.
At the conclusion of the maturity period, interest is paid.


Maturity
The lock-in period for NSC is five years.
Premature withdrawal is conceivable in circumstances like the certificate holder’s death.


Taxation:
Section 80C of the Income Tax Act exempts investments up to INR 1.5 lakh per year from your taxable income.


Every year’s interest is regarded as reinvestment and is not subject to taxation; however, the final portion of the interest will be subject to your regular tax rate.
Risk: Minimal to none

Postal Service Monthly Income Plan :


The programme allows account holders to benefit from the interest accrued on lump-sum deposits that are paid on a monthly basis. Both individual and combined accounts are eligible for the 6.60% interest rates offered by the government-backed programme.

Availability
The Indian postal service offers single accounts, joint accounts (up to three people), accounts under the names of minors over 10 years old, guardians or parents of minors, and accounts for disordered minds.


Investment
A minimum deposit of INR 1,000 is needed to start an account, while INR 4.50 lakh and INR 9 lakh are the maximum balances allowed for single and joint accounts, respectively.


A maturity account may be closed five years after it was first opened. Premature closure, however, is not permitted before the year. Similar to this, if the account is closed between one and three years, 2% is subtracted from the principle, and between three and five years, 1%.


If the depositor passes away prior to the maturity period, nominees may submit a claim.


Profit from Investment
The programme offers a 6.60% annual interest rate that is payable on a monthly basis.
The depositor’s savings account may automatically receive the interest payment or it may be cleared electronically.


Taxation
Deposit interest is subject to taxation.
Level of Risk: None to Low

treasury bonds :


To promote domestic involvement in the sovereign bond market, the Indian government has enabled direct bond purchases for ordinary investors, who previously could only trade in government bonds through gilt mutual funds.

Availability
The government makes its bond offering public before the auction date. These bonds are issued by the federal government as well as the state governments.


State Development Loans are the name given to the bonds issued by the State, and G-Secs, or simply “government bonds,” are the name given to the bonds issued by the Center.
To buy government bonds, you need to have a bank account. Government bonds may be kept in a demat account.


Finance Amount
When the government announces bonds, the price of the bond is also disclosed.
Using the e-Kuber App, preferred by India’s central bank, the Reserve Bank of India, is the simplest way to invest in G-Secs.


The alternative option is to take part through a primary dealer or a commercial bank that has been listed by the government for that reason. You will need to create a securities account for that.


Additionally, stock exchanges allow you to purchase it. The National Stock Exchange has the NSE goBID mobile application, whereas the Bombay Stock Exchange uses NCB-GSec, an online platform.
It can also be purchased through a brokering platform.


Mutual funds that invest in government assets are another option. These funds make government bond investments.


Profit from Investment
Most government bonds have fixed interest rates, which means they have a fixed rate of interest until they mature.


You receive a half-yearly interest during the required bond holding period, based on the coupon rate decided at the time of bond purchase.


any capital gain (or loss), whether the bond is sold or matures, will be considered.
Income from interest-on-interest reinvestment of interest payments.


Maturity
Depending on the offering, a government bond’s maturity length may be one year or longer.
The revenue produced by the interest that one receives from these bonds will be subject to taxation based on a person’s income bracket. Any increase in the bond’s price will likewise be treated as a capital gain and taxed as such.
Risk: Minimal to none

The National Pension Plan (NPS) :


The National Pension Scheme is for people who want to invest their savings in a government-monitored pension fund that invests in varied stock market portfolios, including government bonds, corporate debentures, and shares, in order to create a substantial retirement fund. A portion of the life annuity purchased with the returns or accrued pension wealth from such investments is eligible for withdrawal at the conclusion of the plan cycle.

There are two different types of NPS accounts: Tier I and Tier II.

Tier I NPS Account Features Availability
Indian nationals can invest between the ages of 18 and 65.
Any authorised bank branch or point of presence (POP) designated by the Pension Fund Regulatory and Development Authority may be visited to open an account. As an alternative, you can go to the eNPS online portal.


A 12-digit number is given to you once you seek to open an account, and a permanent retirement account is made.


Finance Amount
You need to deposit 500 INR to open this account.
You must deposit at least INR 1,000 each financial year to keep the account operational.
There is no maximum amount you can invest annually.
Your invested money cannot be withdrawn until you are 60 years old.


Profit from Investment
Returns are computed based on the net asset value reported by the various bank pension schemes.
They are not predetermined and are based on the performance of your investment over time.


Maturity
You can only withdraw up to 60% of your total balance once you turn 60.
The remaining 40% must be spent for the purchase of your preferred pension plan.


Taxation
Under Section 80 C and Section 80CCD, investments up to INR 2 lakh per year are free from taxation.
Taxes are not applied to returns made on NPS tier I accounts.


Available Tier II NPS Accounts
Only those who already have an NPS Tier I account are eligible to open this voluntary account.
You can open an account offline at any bank that has been given authorization by the PFRDA or at its POP. The eNPS portal can be accessed to create an online account.


Finance Amount :
a 1,000 INR minimum investment is required during account opening.
No yearly payment is required, as there is with an NPS Tier I account.
There is no upper limit on the amount you can invest.


You choose how much of your money, in each of the four accessible asset classes—government bonds, corporate bonds, equities, and alternative assets—you want to invest each year.
There is no lock-in time for investments.


Profit from Investment
Your investment’s return is not predetermined. It is based on the net asset value that pension funds declare at the end of each investing cycle.


Maturity
You are only permitted to take up to 60% of the entire corpus beyond the age of 60.
You can purchase the remaining 40% of your choice of pension plan.


Taxation
There are no tax advantages, and the income is taxed according to your tax bracket.
If they keep their investment frozen for three years, only government employees are eligible for tax benefits.
Low level of risk

Gold sovereign bonds (SGBs) :


The Reserve Bank of India (RBI) is the issuer of SGBs, which are government securities valued in grammes of gold. They have a minimum investment of 1 gramme and are issued in multiples of grammes of gold.

Availability
On dates specified by the central government, SBGs are available for bidding. The RBI issues these bonds several times every year.
To purchase an SGB, you need a PAN Card.
Banks, post offices, and stock trading firms all provide SGB purchases, both online and off.


Finance Amount
According to the average closing price of gold over the previous three business days, each bond unit you buy is equivalent to one gramme of pure gold. SGB purchases are limited to 4 kg per individual and 20 kg per trust. Currently, each gramme of online purchases comes with a discount of INR 50.
Profit from Investment
2.5% received twice yearly.
Maturity
For eight years. Redeeming early after five years.
Taxation
Your tax bracket determines how much interest you pay in taxes.
Gains made at maturity are not subject to tax.
Level of Risk: Low to Medium

Mutual Equity Funds :


A mutual fund that invests in equities on behalf of a group of investors is known as an equity mutual fund.

Availability
You can easily invest through SEBI-approved people, organisations, and stock brokerage firms online or offline

.
Finance Amount


The majority of mutual funds require a minimum investment of INR 1,000; there is no maximum investment amount.


You require a demat account as well as a trading account in order to invest in equity mutual funds.
Investors can select from eight primary categories of equity mutual funds.
Growth funds, which are equity mutual funds, are another option for investing. You can accomplish this without creating a demat account.
Maturity


Investors in open-ended equity mutual fund schemes are free to redeem their investments.
The lock-in period for equity-linked savings plans included in the equity mutual fund category is three years starting from the date of investment.


Profit from Investment


Among all mutual fund investment options, equity mutual funds are regarded to offer the best returns. For instance, in 2021, a year of record highs, some equities mutual funds have provided a 5-year annualised return of up to 35% and as high as 117%.
The return is based on market swings and the overall state of the economy.
Taxation:

A short-term capital gain is subject to a 15% tax plus a 4% cess.
The investment return is entirely tax-free for long-term capital gains if the profits are less than INR 1 lakh in a fiscal year.


Long-term capital gains that exceed INR 1 lakh are subject to a 10% tax plus a 4% cess.
Risk Level: High to medium

Plans with Unit-Linked Premiums (ULIPs) :


Consumers can receive both investing and insurance benefits from ULIPs. It’s easy to understand how ULIPs operate: the policyholder can buy an insurance plan, and the money they pay in premiums is split between equity and debt funds with the remaining amount used to provide coverage.

Availability
Any bank or insurance provider with operations in India is where you can buy ULIPs.
Considering that ULIPs are long-term investment products, financial institutions anticipate you to present your proof of income.


Investment Size
ULIPs have different minimum investments depending on the banking institution. Typically, a minimum monthly premium payment of INR 1,500 is needed.
Since ULIPs are exempt from taxation under Section 80 C, an investment of up to INR 1.5 lakh can be made annually to receive a tax benefit.


The maximum investment in a ULIP insurance is determined by the policyholder’s ability to make yearly payments throughout the duration of the policy.
In addition to the annual premium for the ULIP, there are fees for services including premium allocation, fund management, fund switching, partial withdrawal, premium redirection, and discontinuance, among others.


Maturity
Five years are the “lock-in” period for ULIPs, after which the policyholder may take their money without incurring any fees and may also be able to renew the policy, subject to the terms and circumstances.


After three years, premium payments may be stopped, but only after the investment’s five-year maturity period is it feasible to withdraw the money invested. ULIPs are regarded as long-term investment strategies, with an average investment horizon of up to 10 years.


A portion of your potential profits may be lost if you make partial withdrawals prior to the maturity date.


Profit from Investment
The following straightforward formula can be used to determine the ULIP NAV and determine the anticipated annual rate of return:


NAV is calculated as (Value of Current Assets + Investments) – (Value of Current Liabilities and Provisions)/Total Number of Outstanding Units as of a particular date.


The method of compounding is used to determine the rate of return upon maturity or at the conclusion of the policy period, and it is advised to contact your financial services provider to learn the rate of return of your ULIP for accuracy.

Taxation:

ULIPs are exempt-exempt-exempt from tax on the investment, the proceeds, and the withdrawal of funds once the five-year lock-in term of a ULIP is complete since they fall under the EEE category of Section 10 D.
Risk: Moderate to High

Exchange-Traded Funds for Gold (ETFs) :


Gold ETFs offer the same benefits as purchasing actual gold without the trouble of maintaining physical gold. In a manner similar to how investors own mutual fund units, they demand that investors register a demat account and hold gold units in a dematerialized form.

Availability
The same way one invests in shares from stock brokerage firms and agencies registered with SEBI, one can purchase gold units by opening a demat account.
You can invest in gold funds offered by some banks or different gold ETF funds if you don’t have a demat account.


Investment Size
It is advised to purchase at least one unit, which is equal to one gramme of pure gold. This actual gold is kept with depositories and serves as the basis from which the value of the ETF units is derived.
You can start investing in gold ETFs on the market with as little as 500 INR.
There is no restriction on how many gold ETF units can be bought.


Maturity
The value of your unit will rise in line with the price of gold, and vice versa. There is no lock-in period for gold ETFs, so you may sell them whenever you choose.


Profit from Investment
ETFs are able to be exchanged on stock exchanges, just like an equity mutual fund is. As a result, their return is based on the market performance of the gold ETFs.


Taxes: Your tax rate will apply if you sell your gold ETF before the required 36-month period has passed since you purchased it. Long-term capital gains tax of 20% + 4% cess is applicable after 36 months.
Risk Level: High to medium

REITs :

By acquiring units of the REIT, which work similarly to mutual fund shares, an investor can own a portfolio of income-producing real estate assets. The REIT then distributes any income made by the underlying real estate assets to its unitholders.

Availability
Like equity shares, REITs are listed and traded on the stock market. Therefore, in order to invest in REITs in India, a demat account is required. There are now 3 REITs that let investors make investments in India. These consist of:


Government Business Park Mindspace Business Parks REIT Brookfield India REIT Investment Amount in REITs
For investments made through initial public offerings (IPOs) and follow-on offers (FPOs) of REITs that are listed on stock exchanges, a minimum investment requirement of INR 10,000 to INR 15,000 is required.


Maturity :
There is no maturity date for REITs.


Profit from Investment
90% of the net rental income from a REIT’s portfolio must be distributed as dividends or interest to shareholders. Consequently, as a REIT investor, you can profit from dividends and a growth in stock value.
Returns on commercial real estate typically range from 8% to 10% annually.

Grade A commercial real estate and office space, however, may yield higher returns due to their exceptional locations. After taking into account the fund management charge, which is deducted prior to paying out to the unitholders, the predicted return on investment in REITs is between 8% and 14% in the short to medium term, with minimal risks.


But in order to maintain a long-term horizon and be patient in riding through the real estate cycles, which have a tendency to linger for a long time, one may need to stay invested for extended periods of time—three to five years.


Taxation
Dividend, rental, and interest revenue received by REITs and given to their unit holders are of the same nature, and in the eyes of the unit holder, are seen as dividend, rental, and interest income, respectively. The tax levied on each kind of investment and return is broken down as follows.

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