Best Investment Plans for Middle-Class People to Grow Your Money

Earning a handsome salary isn’t going to remove the middle-class tag from your life. Our ever increasing demands and uncontrolled inflation proves our ‘good earning’ as ‘insufficient’. Until you learn to grow your money through investing in wisely selected best investment plans 2017, you can’t manage to secure your future.

However, having a savings account with bulk balance and investing in some insurance policies isn’t enough in today’s fast inflating market – you need something ‘faster’ and of course ‘safer’ scheme. Yes, you aren’t supposed to get trapped in the cheat-funds or equity brokers who claim to double your money overnight – you will end up losing everything.

Here in this blog we have described some highly profitable schemes. We have also mentioned the risk-level so that you can play safe as per your capacity and endurance. But, before beginning let’s revise the golden investment rules first.

Rule No.1: Limit Your Investment
One MUST NOT choose a regular premium exceeding 40% of their salary/income. Why? It will badly affect your monthly budget and there would be great chance that you miss some installments/premiums. It is better you continue with less, than staggering with high. As you become habituated with your revised budget, you can gradually increase the amount, if you feel confident.

Rule No.2: Distribute Money Wisely
While we all want to grow our money through the fastest scheme, one must know that faster is riskier. The banker would reinvest your money in volatile market to get quicker return and the agreement you sign confirms that you are ready to accept any loss caused due to sudden fall in the market. What that means? You may end up getting an amount less that you actually invested. Be cautious about the agreement terms — not all that claim to be the best investment plans 2017 are good for you.

So, don’t invest all your earning in a high-risk instrument – divide and invest your money in three types of investment schemes – 1. Low Risk Low (and assured) Return, 2. Moderate Risk Moderate Return and 3. High-Risk Higher (but NOT guaranteed) Return.

Rule No.3: Go for Proven Schemes
Being the most lucrative industry, every year new companies get listed and they introduce some ‘never-before schemes’. Though mostly all bankers are controlled by RBI and are ‘declared’ as reliable, it is best to stick to axiom – old is gold. Those who have abundance of money to put on risk are always free to try those ‘excellent schemes.

So, now let’s go through some of the popular and reliable finance multipliers schemes and know which are faster and which are safer.

Savings Account
Risk Meter: No Risk – Negligible Return (Assured)
While a savings account is almost mandatory for every person for day to day transactions, keeping your money here isn’t actually an investment regardless of the percentage of interest. It is nothing but a place to keep your money safely in idle-mode. If we go in depth of calculation, actually keeping your money in savings account decreases the total value eventually. So, it is not wise to keep adding digits to your bank account; rather invest some parts in other systematic investment plans (SIP).

Here we must include that technically there is no difference between a ‘government bank’ and a ‘private bank’ as all are controlled by RBI and wherever you keep your money it is ‘same safe’. The only thing you need to be aware of is the charges. Generally the so called ‘government banks’ are cheaper or charges-less in this regard.

SSY (Sukanya Samriddhi Yojna)
Risk Meter:
Lowest Risk – High Return (Assured)
This is a new avenue introduced by Honourable PM Narendra Modi for the girl child to help them build an independent future through small investments and it is one of the best investment plans 2017 in our list. The stunning interest rate and flexibility makes it lucrative for both child and her parents. A parent or legal guardian can open this account for their girl if she is under 10 and one can deposit 12 instalments in a year – lowest Rs.1,000 and total Rs.1,50,000 in a year.

Though it is mostly considered as similar to PPF, it gives more return with a great benefit of 8.7% compound interest on the deposited money and it is the highest return scheme (guaranteed) in current market. The drawback that a mostly people point is in SSY, you’ll have to serve a lock-in period until your girl becomes 21 years old. However, on reaching the age of 18 years you can apply for a partial withdrawal of an amount up to 50% of the deposited amount. The interest earned in SSY is also totally tax free.


PPF (Public Provident Fund)
Risk Meter:
Low Risk – High Return (Assured)
Public Provident Fund is an excellent scheme for every individual to get a great return through regular small investments and get tax benefit under Section 80C of the Income Tax Act, 1961. It has a lock-in period of five years and you get compound interest at the rate of 8.1% every year. The maturity period of PPF is 15 years and after that one can extend it in blocks of 5years. The best part of this scheme is you can open it in any member’s name of your family – adult and minor and can invest as low as Rs.500 or as high as Rs.1,50,000 per year in not more than 12 installments. The interest earned in PPF is tax free. One can open only one PPF account on their name in any post office or authorized bank. If you ever required, you can transfer your account to any other bank or post office at any time.

 

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RD/FD (Recurring Deposit/Fixed Deposit)
RD and FD are one of the most common and well popular schemes used by people. Almost every bank, NBFC and post office offers FD and RD at their own interest rate; mostly it is something between 6.5% to 8.5%. It is a misconception in people that FD gives more return than RD; however, mostly it is same or almost same.

The extra advantage you get in RD is that you don’t have to invest in bulk – you can deposit as your convenience. The interest rate of RD may vary depending upon the lock-in period you choose which can be any from 1 year to 15 year. Nonetheless, in FD you have to serve a lock-in of 7-8 years. In most of the cases you can make premature withdrawal after 3years; but you’ll have to pay a good amount of charge for that.


Bond (Debt Security)
Risk Meter:
Low Risk – High Return (Assured)
Bonds are one of the neglected yet highly profitable debt securities to multiply your money offer by public sector units (PSU), local governments or the blue chip corporate organizations. Actually people have very little knowledge about this debt. In simple, when you purchase a bond (or debt), you actually lend your money to that ‘party’ through a broadly organized system; and so you become a creditor (and also an investor). The institution returns you the money with a good amount of interest after an agreed period. Being a creditor the advantage of this security is that you hold more right on the assets of the organization and in case of insolvency or bankruptcy, you get your money back before the shareholders. Currently bonds pay a lucrative interest rate of 8% p.a. You can buy bonds through authorized banks or the offices of the issuer company by filling up a form and providing the required documents.


NSC (National Savings Certificate)
Risk Meter:
Low Risk – High Return (Assured)
Another high profit and fully secured way to increase your money is investing in NSC. This is a government product issued in denominations of Rs. 100, Rs.500, Rs.1000, Rs. 5000 and Rs.10, 000 and a person can buy any number of NSC for him, her or their child. It is introduced in two issues – 5 years and 10 years where you have to serve a lock-in period of 5yr or 10yr accordingly. However, the most lucrative part here is you can use it as bank mortgage to borrow money or can even sell it to another person without any legal obligation. It provides a lucrative rate of interest of 8.5% p.a. for the 5year plan whereas 8.8% p.a. for the 10yr plan. However, every year in the month of April government declares the rate of interest and whoever buys on that financial year enjoys the same fixed interest rate for the full tenure; so you need to keep an eye on the latest financial news. NSC holders can claim for a tax rebate under Section 80C.


Gold/Silver
Risk Meter:
Low Risk – Moderate to High Return (Not Assured)
While we all buy jewelry both as an ornament as well as an asset for future, you get less to what you have invested as the buying cost includes a good percentage of making charges. Also while you try to sell it, you have to digest a good amount of deduction for the so called ‘melting losses’.

So, if you want to buy gold or silver as investment, you should buy silver/gold coins or bonds from authorized banks. It ensures that you get return for the full item without any deduction (might be some negligible selling commission). At the same time, if you buy gold bond, you don’t have to be worried about keeping it at home. You can enjoy a good amount of profit if the market price of gold goes high. And the best part is gold is well known for its liquidity and you can get the cash in single day without much paper-work. However, as the ‘risk meter’ says, the return is not assured and if the market price goes down, either you have to hold it for long or have to sell in loss.

Though people who purchased gold during the years of 2006 and sold around 2011 banked a profit of 29% p.a., in general the long term return in gold is less that 10% which needs to be considered. So, if you don’t have much hurry for becoming millionaire, make your financial plan and purchase some gold or silver when the price drops next time.


Mutual Fund
Risk Meter:
Moderate Risk – High Return (Not Assured)
Mutual funds are nothing but a bunch of shares, bonds and other securities brought to you collectively by a company. So, as you can assume, there are some risk lies in MFs as it contains volatile stocks. Though mutual funds don’t guarantee an assured minimum or maximum income, we can expect that there are ‘experts’ who are always alert to save our money from falling on its nose – after all their goodwill matters.

Basically, we earn through two major sources in mutual funds – price hike of shares and interest on bonds. As there is no lock-in period of MFs, you can sell your MFs anytime if the price of any share has spiked or dropped to a remarkable amount. Almost every bank provide mutual funds and all are to same extent reliable. However, it is suggested to discuss with experts before choosing your MF and never invest all your money in MF.

Equity Fund (Stock/Share)
Risk Meter:
High Risk – High Return (Not Assured)
Buy in low price and sell when price goes high or vice versa! No, this is not that simple; however the theory is okay. One needs to learn how to read the market trend and how to forecast properly and still no one can guarantee that you will win the jackpot. Still, there are some proven methods and stamped shares that generally give good return in long term. Well, there is no good definition of long term in equity market – it can be six months or sixteen years. The better you understand the pulse, the better profit you can gather. It is not ‘impossible’ to double ones money in one year or even less; but, nothing is assured. So, if you have enough extra money to experiment and have the guts to digest any bad news, start investing with a ‘small portion’ of your total savings. As I suggest, it should not be more than 30% of your total savings – no matter how much you earned or lost in equity.

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Aroop Ratan Banerjee

Hi, I’m Aroop Ratan Banerjee – your personal financial advisor. I am a blogger and a financial geek who keep researching financial topics of common people’s interest. My aim in this blog is to provide you with simple and detailed guidance on every financial topic that you may be interested on. Read more...

2 thoughts on “Best Investment Plans for Middle-Class People to Grow Your Money

  • 09/11/2016 at 10:34 pm
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    Very useful post. can you tell me something about KVP?

    Reply

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