10 Best Investment Options in India (Guide to Invest in 2022)

Whether you want to create wealth, save taxes, or saving money for your kid’s higher education, you should know the best investment options available to invest responsibly and grow your money.

Investing responsibly means you are diversifying your investments rather than putting all eggs in one basket.

You can diversify your money by investing in risk-oriented instruments like direct stocks or equity-based mutual funds as well as safe investments such as PPF, debt funds, and fixed deposits.

I am going to show you 10 best investment options in India that you can invest as per your risk appetite and future goals.

Best Investment Options in India For 2022

#1. Mutual Funds

Mutual funds have yielded good returns over the years. You can get an average return of 9% to 15% in mutual funds depending on the type of mutual fund you are investing in.

If you want to invest in the stock market but don’t have stock market expertise, then you should go for mutual funds using SIP (Systematic Investment Plan).

The best thing is you don’t need a hefty amount of money to start investing. You can start investing in mutual funds as low as Rs. 100 via SIP.

Mutual funds diversify your portfolio in different instruments such as equities, bonds, government securities to secure your investment from market fluctuations. However, mutual funds are prone to market volatility.

You can invest in equity based mutual funds as well debt based mutual funds depending on your risk tolerance. You can also invest in hybrid mutual funds for moderate returns.

Features and Benefits of Mutual Funds

Minimum Investment AmountRs. 100 through SIP
Interest Rate9% to 18% (expected)
TenureUntil you sell the units (except ELSS funds)
Risk ProfileRisk-oriented
Tax BenefitsNo  (except ELSS funds)
Partial WithdrawalNot applicable
Premature ClosureBy paying exit load fee

Advantages of Mutual Funds

  • Not much expertise required
  • Diversification of funds
  • You can start with small amounts
  • Various fund types for different investment goals

Disadvantages of Mutual Funds

  • Affected by market fluctuations
  • High risk involved

#2. Direct Stock Investment

Investing directly in stocks yields higher returns but if you have the expertise in stock selection along with a longer time horizon.

Stocks are highly risky as they are directly linked to stock market’s ups and downs.

Without any analytical knowledge, you can easily burn your hard earned money in stocks. The worst thing about stock investing is that newcomers follow daily tips broadcasting on business channels, different stock news portals as well as in different stock related whatsapp or telegram groups.

But if you have keen interest in stocks, market behaviours and you have patience to keep invested for long term despite the market volatility, then you must go with stocks.

Features and Benefits of Direct Stock Investment

Minimum Investment AmountNo min investment 
Interest Rate15% to 20% (expected)
TenureUntil you sell the share
Risk ProfileRisk-oriented
Tax BenefitsNo
Partial WithdrawalNot Applicable
Premature ClosureNot Applicable

Advantages of Direct Stock Investment

  • Exceptional returns
  • Beat inflation rate
  • Compounding effect generates wealth over long periods of time

Disadvantages of Direct Stock Investment

  • Highly risky investments
  • Directly related to market fluctuations
  • Expertise required

Check outUpstox review to start stock investment

#3. National Pension System (NPS)

National pension scheme is a must for all government employees but anyone can also voluntarily invest in NPS to save corpus for the post retirement life.

In NPS you have to contribute a fixed amount every month till the age of 60 and you get your corpus when you complete your 60 years.

The 40% of your accumulated wealth is reserved for a monthly pension at the time of retirement and you get the rest 60% money as a lump sum amount.

You can expect a return around 8% to 10% annually, however, the NPS invests 50% money in the stock market, so it may vary as per the market behavior. 

Features and Benefits of National Pension System (NPS)

Minimum Investment AmountRs.1000 per year
Interest Rate8% to 10% (expected)
TenureTill 60 years age or retirement
Risk ProfileRisk-oriented (Slightly)
Tax BenefitsUp to 1.50 lakh u/s 80 C
Partial WithdrawalAfter 3 years, up to 25% of invested amount
Premature Closure20% of the accumulated wealth and rest will be paid as pension on completing 60 years or retirement.

Advantages of National Pension System

  • Long term investment for retirement purpose
  • Better returns than FD
  • Tax rebate u/s 80 (C)

Disadvantages of National Pension System

  • Lock-in period till 60 years of age or retirement
  • Slightly risky investment
  • Limited premature withdrawals

Best Investment Options for Salaried Person

#4. Public Provident Fund (PPF)

Another long term investment instrument which is a safe player with attractive returns as compared to other stock market oriented investments because PPF money is invested in government securities.

You can start investing in PPF through post office or your nearest bank with a minimum amount of Rs. 100. The lock-in period of PPF investment is 15 years which you can further extend in blocks of 5-years.

You can get income tax rebate on the amount you invest every year under section 80 C of Income Tax Act. Also, the returns (interest earned) are not taxable under income tax. 

The government of India declares the rate of interest quarterly for PPF and the current rate of interest is 7.1%.

Features and Benefits of Public Provident Fund (PPF)

Minimum Investment AmountRs. 100
Interest Rate7.1%
Tenure15 years
Risk ProfileRisk-free
Tax BenefitsUp to 1.50 lakh u/s 80 C
Partial WithdrawalUp to 50% amount at the end of the 4th year 
Premature ClosureAfter 5 years under extreme conditions such as life-threatening disease treatment, and higher education.

Advantages of Public Provident Fund (PPF)

  • Long term investment for wealth creation
  • Better returns than other safe investment instruments
  • Tax rebate u/s 80 ©
  • Safe investment

Disadvantages of Public Provident Fund (PPF)

  • Lock-in period of 15 years
  • Low returns as compared to stocks and mutual funds
  • Partial withdrawal from 7 years onwards

#5. ELSS Funds

You can get double benefits with ELSS mutual funds – Tax savings and wealth creation.

You can claim a tax rebate of up to Rs 1,50,000 u/s 80 C by investing in ELSS Funds. 

The money is invested in equities or equity related schemes with some exposure towards fixed-income securities.  So, this makes ELSS funds “high risk – high return” investment.

You can easily get a return in between 13% to 17% per annum.

ELSS Funds come with a lock-in period of 3 years which is the lowest among the tax saving schemes. 

Features and Benefits of ELSS Funds

Minimum Investment AmountRs. 500
Interest Rate13% to 17% (expected)
Tenure3 years
Risk ProfileRisk-oriented
Tax BenefitsUp to Rs. 1.50 lakh u/s 80 C
Partial WithdrawalNot Allowed
Premature ClosureNot Allowed

Advantages of ELSS Funds

  • Tax savings under 80 C
  • Higher returns
  • Returns beat inflation
  • Compounding effect generates wealth

Disadvantages of ELSS Funds

  • Affected by market fluctuations
  • High risk involved

#6. Tax Saving Fixed Deposits

If you are a salaried employee looking and an FD lover, then rather going with regular fixed deposits, you can opt for Tax saving FDs.

You have to lock your invested amount for 5 years to save tax. You get tax rebate under section 80 c of Income Tax act of India.

Premature withdrawal leads to penalty so always invest if your investment tenure is 5 years or so.

Features and Benefits of Tax Saving Fixed Deposits

Minimum Investment AmountRs. 100
Interest Rate5% to 8%
Tenure5 years
Risk ProfileRisk-free
Tax BenefitsUp to 1.50 lakh u/s 80 C
Partial WithdrawalNot Allowed
Premature ClosureAllowed with charges

Advantages of Tax Saving Fixed Deposits

  • Safe investment instrument
  • Tax rebate u/s 80 C

Disadvantages of Tax Saving Fixed Deposits

  • Low returns
  • 5 year lock-in period

Also read – Kotak Securities Review (in detail)

Best Investment Options for Senior Citizens

#7. Post Office Monthly Income Scheme

If you have a chunk of money that you want to invest with complete protection, then go with Post Office MIS, in which you can invest the lumpsum amount in one go and you get a steady monthly income for the invested period which is 5 years.

You can invest a maximum of Rs. 4.5 lakh as an individual and Rs. 9 lakh for joint account.

The current rate of interest is 6.6% which is calculated annually and payable on a monthly basis to the scheme holder.

For example, if you have invested 4.5 lakh rupees for 5 years in POMIS, you will get Rs. 2745 every month till the investment period is there.

Features and Benefits of Post Office Monthly Income Scheme

Minimum Investment AmountRs. 1,500 
Maximum Investment Amountup to 4.50 lakh as individualUp to 9 lakh as joint account
Interest Rate6.6%
Tenure5 years 
Risk ProfileRisk-free
Tax BenefitsNo
Partial WithdrawalNot Allowed
Premature ClosureAllowed with charges –
2% if closure happens between 1st and 3rd year
1% if closure happens between 3rd and 5th year

Advantages of Post Office Monthly Income Scheme

  • Lumpsum investment
  • Monthly payable
  • Completely safe
  • Open as Joint account as well
  • No TDS applicable

Disadvantages of Post Office Monthly Income Scheme

  • 5 year lock-in period
  • 1% to 2% penalty on premature withdrawals 
  • No tax benefits

#8. Senior Citizens Savings Scheme (SCSS)

If you are looking for a safe, long term investment plan with higher return, then go with SSCS. You will get an annual return of 7.4% which is much better than FD or POMIS.

You can invest a minimum amount of Rs. 1 lakh or a maximum of Rs. 15 lakh or whatever amount you received on retirement.

You can invest for 5 years initially and you can further extend the investment to 3 years.

Features and Benefits of Senior Citizens Savings Scheme

Minimum Investment AmountRs. 1,00,000
Maximum Investment Amountup to 15 lakh or retirement corpus received
Interest Rate7.4%
Tenure5 years (with 3 years extension)
Risk ProfileRisk-free
Tax BenefitsUp to 1.50 lakh u/s 80 C
Partial WithdrawalOnly after 1 year completion 
Premature ClosureAllowed with charges –
1.5% if closure within 1st year and 2nd year
1% if closure happens 2nd year onwards

Advantages of Senior Citizens Savings Scheme (SCSS)

  • Lumpsum investment
  • Risk free investment
  • Attractive returns
  • Tax benefits u/s 80 C

Disadvantages of Senior Citizens Savings Scheme (SCSS)

  • High investment amount required
  • Maximum investment capped to Rs. 15 lakh

#9. Fixed Deposit (FD)

Fixed Deposit or FD is the most popular investment option in India. Any teen or a retired person can tell you about FD.

If you are a senior citizen then you should avoid high risk oriented investments and go with FD which will give you better returns as compared to savings accounts.

Secondly, most of the banks offer slightly higher interest rates to senior citizens as compared to regular customers which is a plus point for investing in FD.

You get a return around 5% to 8% that varies from bank to bank.

Features and Benefits of Fixed Deposits

Minimum Investment AmountRs. 100
Interest Rate5% to 8%
Tenure7 days to 10 years
Risk ProfileRisk-free
Tax BenefitsNo
Partial WithdrawalNot Allowed
Premature ClosureAllowed with charges

Advantages of Fixed Deposits

  • Safe investment instrument
  • Guaranteed returns
  • Senior citizens get better interest rates
  • Loan against FD available

Disadvantages of Fixed Deposits

  • Low returns
  • Interest income is taxable
  • No tax rebate

#10. Recurring Deposit (RD)

Recurring Deposit or RD, similar to FD, is another popular investment option which will give you guaranteed returns. 

The only difference between FD and RD is that you invest a fixed amount on a regular basis in your RD account and you get the accumulated amount on maturity. You can start as low as with Rs. 100. 

The RD tenure is a minimum 6 months up to 10 years at max. You get a return around 4% to 7% that varies from bank to bank.

Features and Benefits of Recurring Deposits

Minimum Investment AmountRs. 100
Interest Rate4% to 7%
Tenure6 months to 10 years
Risk ProfileRisk-free
Tax BenefitsNo
Partial WithdrawalNot Allowed
Premature ClosureAllowed with charges

Advantages of Recurring Deposits

  • Guaranteed returns
  • Risk free investment
  • Start as low as Rs. 10

Disadvantages of Recurring Deposits

  • Low returns
  • No tax rebate
  • Interest income is taxable

Comparing Best Investment Plans in India

Investment TypeReturns (Expected/Guaranteed)Lock-in periodRisk Profile
Mutual Funds9% to 18% (expected)N.A.High Risk
Stocks15% to 20% (expected)N.A.High Risk
NPS8% to 10% (expected)Till retirementMedium Risk
PPF8.1% (guaranteed)15 yearsRisk-free
ELSS12% to 15% (expected)3 yearsHigh Risk
Tax Saving FD7% to 9% (guaranteed)5 yearsRisk-free
Post Office MIS6.6% (guaranteed)5 yearsRisk-free
SSCS7.4% (guaranteed)5 yearsRisk-free
Fixed Deposit7% to 9% (guaranteed)5 yearsRisk-free
Recurring Deposit7% to 9% (guaranteed)5 yearsRisk-free

Conclusion

PPF is the best investment plan in India if you want to invest in safe instrument over longer periods of time with tax saving benefits.

If your goal is to create wealth in longer period of 10 years or more, then direct stock investment or investing in equity based mutual funds are ideal investment options.

For short term investment of 1-2 years invest in debt funds or you can go for FDs/RDs where you need consistent return without any risk after said time frame.

Senior citizens can go for SSCS where you get 7.4% returns per year without risking your hard earned money.

About Raghav

Raghav is an investment analyst with a commerce education background who loves to write & share his investment ideas.

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