Good investments are like good wine. The longer you keep, the higher you can earn from them. The duration, however, can vary as per your requirement and risk appetite. If you need the money sooner than later, then you will need to withdraw or choose a maturity to match your timeline. Long-term is defined as anything beyond a two to three years time horizon.
For stocks, the long-term is usually seen for a period longer than five years. You should pick out long term investment not just per your timeline but also per the tax treatment and what will be the in-hand return. Many investments in the long-term get affected by various external factors, such as interest rates and various macroeconomic changes. This can increase the volatility of returns, which makes it essential for you to choose the options more carefully.
Let us look at well-appointed long-term investment options in India that are sought after –
- Public Provident Fund – A PPF account is a small saving scheme which can be opened with any bank or post office wherein you can deposit installments of surplus cash or lump sum and earn interest to the tune of 7.9% as currently prescribed (Oct-Decc 2019). This is an account where returns are reviewed and revised by the Ministry of Finance every quarter, and you need to invest a minimum of Rs. 500 annually, and it can go up to Rs. 1.5 lakhs. This is a tax-free account, and you are allowed a tax deduction up to Rs. 1.5 lakhs each year under Section 80C. The entire duration of the account is 15 years, which can be extended for a block of 5 years at a time, indefinitely.
- Equity Mutual Funds – Mutual funds are a collective investment vehicle to pool in money to invest in various stocks following specific criteria. You can diversify your portfolio with multiple companies and growth sectors by buying units of different funds. Sticking with a good fund for more than five years when one or two economic cycles pass through will help gain traction to your investment.
- Bonds and Debentures – Fixed income instruments are used for earning a particular interest income over some time. While bonds and debentures of good, well-performing companies will pay on time, you might need to monitor the prices if you intend to sell them earlier than maturity. If you buy one with a high-interest rate, ensure you do not get negative returns due to high inflation.
- Fixed Deposits – One of the most trusted and widely used instruments, banks, and financial institutions alike offer fixed deposits. Bank interest rates are governed by RBI policy rates and banks’ internal rates. However, these are on the lower end for the past year or so, and there is an opportunity to look out for more paying FDs such as those offered by corporates and NBFCs, known as Company FDs.
- Other Small Saving Schemes – There are other long term investments you should invest in, such as EPF (Employee Provident Fund), where you can invest voluntarily higher than the designated 12%. You should also look out for Sukanya Samriddhi Yojana if you have a girl child. Also, once you turn 58 years of age, you can open a Senior Citizens’ Savings account.
To receive the safety of fixed deposits with even higher returns, look at company fixed deposits as an alternative. These are accredited for their safety and stability by CRISIL and ICRA, such as Bajaj Finance FD. It provides higher fixed deposit rates of 8.35% and goes up to 8.7% for senior citizens. This is a lucrative option for salaried individuals looking to lock-in money safely for a period of 12 to 60 months. Coming from a trusted brand and having proven that repeatedly, Bajaj Finance Fixed Deposit has a total deposit book of 16000+ crores, with about 2,50,000 customers.
