Best Long Term Investment Options in India

11 Best Long Term Investment Options in India 2020

Updated on 4 Feb 2020.

Are you planning to take any long term investment decision in the near future? Do you know what are the long term investment options available currently?

Generally, when an investment is done for a period of more than 5-6 years or even more than 10-15 years, it is called a long term investment.

long term investments options india

When someone starts saving money for his/her child’s education expenses, marriage etc. that comes under long term investment. One can choose from a wide range of such investment products as per risk-bearing capacity.

Being a long term investor has its own cons, as these types of investments need huge commitment & patience. Before you opt for the long term investment options, you should always set aside a certain amount for some urgent crisis which may bring any type of financial obstacle.

In this article, I will share 10 such long term investment options in India. With these, you can smartly diversify your investment portfolio & grow your money further.

11 Long Term Investment Options in India 2020

 #1.Public Provident Fund Investment

You are either a salaried person or a businessman you should consider the public provident fund as one of the best investment options. Because it makes your investment portfolio balanced and also helps in income tax saving under Sec 80C.

A PPF account can be opened at any nationalize, authorized bank & some specified private banks and post office. In the PPF, a deposit has to make every year.

Key Points of Public Provident Fund

  • It is for long-term investment. The investment period is for 15 years. This is can be extended for 5 years at every renewal.
  • The minimum amount of investment in PPF is INR 500.
  • The maximum amount is INR 1,50,000 if you are considering the income tax deduction under section 80C.
  • The current rate of interest on PPF saving is 7.9%. Which higher than the fixed deposit.
  • You can earn the compound interest on your investment.
  • The interest and maturity amount is tax-free.
  • You are allowed to withdraw your investment from your account only after the end of 6th year.

Interest rate on PPF investment from last 5 years

Financial yearRate of interest
2015-168.70%
2016-178.10%
2017-187.60%
2018-198.00%
2019-207.9%

Read: All you wanted to know about PPF (Public Provident Fund)

#2. Investment in Mutual Funds

Mutual funds are the best investment option to invest in equities and bond with a balance of risk and return.

In mutual funds, you can diversify your investment portfolio across a large number of securities.

You can invest in equities of different sector companies like finance, energy, healthcare, technology. This will reduce the overall risk. For example- in any case, one sector is not performing well, but the other sectors are doing well, still, your portfolio will be in profit,

A systematic investment plan (SIP)  is the best way of investing in mutual funds (best Investment option for a salaried person) in which a fixed sum is invested at regular intervals in the mutual funds. The minimum amount of SIP is Rs 500 per month.

Many people don’t understand the importance of regular investment. This article would help you Power of compounding- Hidden Secret of Richness

#3. Direct Investment In Equities (Stocks)

If you ask me, where to invest in India for maximum returns, I would suggest you to in the equities.

In fact, as per analysis, the return on the equities is highest as compared to the other investment plans. There is no upper limit of return on equities. Even many investors get more than 20% return on their investment through equities.

But, higher returns come with greater risks. The same applies to equities. The Probability of rising in the share market is always equal to the probability of its downfall.

The risk can be reduced by making a wise decision while making an investment in equity.

There are 2 ways in which you can invest in equities:

  • Through the primary market (applying for shares that are offered to the public)
  • Through secondary market (buying shares that are listed on the stock exchanges)

Things to Keep in Mind While Investing in Equities 

  • If you are the beginner, make your research to figure out how it works before. This will help you in avoiding herd mentality.
  • Always invest, with a vision for long-term investment. If you invest for the long term with a term of 10 -15 years it will give the best return on the investment.
  • Never invest, your all saving in the stock market.  50%-70% of total savings is ideal to invest in the stock market. It will make your investment portfolio diversify.
  • Make a list of your favorite stocks. Make a deep search on these shares’ past performance and the company’s future plans. After doing all this research, invest in shares.
  • Never invest in the random shares for those you don’t do any research work.

My advice – Brokerage companies provide free investment advice. Never become a blind follower for their advice. Merely their advice for tempted their clients to indulge in trading on which they earn brokerage. Go ahead with your own research.

Read: Best Investment Options in India

#4. Real Estate Investment


The real estate industry has faced many ups and downs in India. Still, it is good investment option if you have surplus money. It has huge prospects in all the major sectors like housing, commercial, manufacturing, hospitality, and retail. As an individual investor, buying a flat or a plot could be the best decision for your investment portfolio.

Real estate investments in India guarantee a return of 11% to 30% annually. You may even better annual return depending upon various factors like infrastructure development of the area, government projects launched or industry established nearby.

Always do proper research and then buy some property with a 5-10 year horizon.

If you don’t want to go into the complexities of buying and selling property, you can earn regular rental income on your property.

#5. Investing in Gold

Gold investment is a risk-free investment that may beat inflation in the long term. It is also a very liquid investment that gives decent returns.

To invest in gold you have multiple ways to go about.

  • Buying Gold
  • Gold Funds
  • Gold ETFs(Exchange Traded Funds)

Buying gold is a traditional way of investing in gold. Nowadays, advanced investments like Gold Funds and Gold ETFs enable investors to invest in gold without having to buy gold physically.

Gold Funds are investments made in companies involved in gold mining. Gold Funds involve a minimum expense ratio ranging from 0.5-0.75%.

You can see 3 top-performing gold funds and returns on a yearly basis below.

Fund Name1 year3 year5 year
Aditya Birla Sun Life Gold Fund25.02%10.77%6.82%
SBI Gold Fund22.52%10.79%6.58%
Kotak Gold Growth Fund23.14%11.68%6.52%

Gold ETFs require a Demat account. You will buy a proportionate amount of gold but not in physical form. Changes in gold rates affect gold ETFs.

This investment also has asset management and brokerage fees that range between 0.5 to 0.75%.

You may like to read about Sovereign Gold Bonds in India.

#6. Post Office Savings Schemes (POSS)

Post Office Savings Schemes are popular for their risk-free returns. The monthly income plan of POSS is mostly suitable for retired individuals or people with regular income needs.

Being a govt. savings scheme, it has very low risk. Also, there is no TDS in a POSS.

Post Office offers various schemes such as National Savings Certificates (NSC), National Savings Scheme (NSS), Kisan Vikas Patra, Monthly Income Scheme, and Recurring Deposit Scheme.

Among them, NSC comes with two investing options – 5 years tenure and 10 years tenure. NSC is a good post office investment option with a guaranteed return amount.

In case you don’t want to take the risk and want to invest for longer time frame like 5 or 10 years, then NSC can be good investment option than keeping money idle in a savings account or  FDs.

#7. Sukanya Samriddhi Account Yojana (SSA)

You can go for Sukanya Samriddhi Yojana if you have a girl child. SSA is an investment scheme introduced by the Indian government only for girl children. If you are looking for an investment plan for your girl child’s future having no risk then SSA is the best investment plan for you.

In SSA you can invest for your girl child’s higher studies or for marriage. The rate of interest in SSA is higher than the other no-risk investment plans like PPF, NSC, and fixed deposits.

Money deposited in SSA will be eligible for tax deduction under 80C up to the limit of Rs 1,50,000 per annum.

Key Points

  • The account can be opened from the birth of a girl child till she attains the age of 10 years.
  • Tenure of SSA is 21 years from the date of opening of the account.
    • Minimum yearly investment is Rs. 1000
    • Maximum investment limit is Rs. 1,50,000 per year.
    • You can practically withdraw from the account up to 50% only in case of financial urgency. The child must attain the age of 18 years for such withdrawal.
    • At the time of marriage of the child, the account will automatically close. Whether it happen before the 21 years of account opening.
    • The current interest rate is 8.4% compounded annually.

#8. Corporate Fixed Deposits

Company FDs are preferred over bank FDs for their higher interest rates. Corporate FDs are instruments used by companies to borrow money from small investors. You need to select the investment period carefully as the money cannot be withdrawn before maturity.

Unlike bank FDs, The corporate fixed deposit schemes are not covered under any Insurance benefit. These instruments are not governed by the Reserve Bank of India. So Company FDs are mostly suitable for those long term investors who can bear some amount of risk.

#9. Invest in IPOs

Initial Public Offerings or IPOs are often presented as “Once in a Lifetime” opportunities as they happen only once for every company. IPOs are very attractive if launched by a reputed company.

IPOs are a little different from the average stocks as they have many unique risks associated with them. The uncertainties associated with IPOs are mainly because of the lack of available information. To make a wise investment decision, try to learn as much as you can about the company.

Generally, most companies want long-term investors who will hold their stock. In such a case, one can put some money for a longer period of time and get benefited.

#10. Buy any ULIP plan for a long term

Unit linked insurance plans or ULIPs invest in equities and debt markets. The ups and downs are captured by the net asset value (NAV). Although ULIPs are not recommended products due to the various charges, if you are investing for a long period of time then ULIP can also give a decent return of 5-7% on investments.

Besides that, one can also get income tax exemption on investment as well which means the net yield will be higher. ULIPs offer tax benefits under Section 80C. Maximum Rs 1.5 lakhs of deduction can be claimed under this.

Also, the redemption proceeds are tax-free under Section 10(D).

#11. Invest in Bonds

If you are not comfortable with mutual fund or direct equity market investments, then investing in bonds could be a good option. There are many good bonds that actually give a decent return in the long term.

You may opt for the Govt. 10-year bond which is currently giving an interest rate of 7.70%.

As the govt. sets the interest rates on bonds based on the inflation, you may also go for Inflation-Indexed bonds.

Conclusion

Always diversify your investment portfolio, try to distribute your risk in various stocks, mutual funds, bonds & debentures and other different instruments. Past performance of any product doesn’t guarantee for their future performance, so go through as many details about company, management and track record of past years performance before investing.

Share your experience & thoughts if you have invested in any of the above mentioned long term investment options.

 

14 thoughts on “11 Best Long Term Investment Options in India 2020”

  1. It’s a shame you don’t have a donate button! I’d definitely donate to this fantastic blog! I suppose for now i’ll settle for book-marking and adding your RSS feed to my Google account. I look forward to brand new updates and will talk about this site with my Facebook group. Talk soon!

  2. Dear Santanu

    Hi, I am a 43 year old man looking for your valuable advice regarding my portfolio & investments. I have started 20k SIP 7 months back & increased it to 30k from this month only. I am planning to invest around 20Lacs Lumsum amount in different schemes. Need you to please help me to identify where should i invest. My preferred areas would be ?

    1. PPF
    2. FD
    3. Short term DEBT Funds/Liquid Fund
    4. NSC
    5. Corporate FDs
    6. Gold Funds

    Also please let me know if i can go for equity large cap STP through ultra short term fund, i am little apprehensive as i already have sufficient exposure in equity through SIP.

    My time horizon is 4 years for partial amount 8 to 10 years for rest of the amount.

    Regards
    Rajeev

    1. Hi Mr.Rajiv,

      Saw your post, can you please elaborate more on why you are investing in SIP, by asking you this I mean what is the goal, are you investing this fund for you retirement, for education of your children or marriage of children.

      The products which you mentioned are good diversification but to select which best suits you is more dependent on the period you want to stay invested, the purpose of your investment.

      Can contact me if you need detailed understanding financial planning

      Regards
      Vineet
      email: vineetsian@hotmail.com

  3. ear Basavaraj

    Hi, I am a 43 year old man looking for your valuable advice regarding my portfolio & investments. I have started 20k SIP 7 months back & increased it to 30k from this month only. I am planning to invest around 20Lacs Lumsum amount in different schemes. Need you to please help me to identify where should i invest. My preferred areas would be ?

    1. PPF
    2. FD
    3. Short term DEBT Funds/Liquid Fund
    4. NSC
    5. Corporate FDs
    6. Gold Funds

    Also please let me know if i can go for equity large cap STP through ultra short term fund, i am little apprehensive as i already have sufficient exposure in equity through SIP.

    My time horizon is 4 years for partial amount 8 to 10 years for rest of the amount.

    Regards
    Rajeev

  4. Investing in Mutual funds is finally catching on in India. Mutual funds are perceived as risky however they are regulated by SEBI and if one chooses wisely then it is possible to gain big returns from this investment mechanism. They can yield much higher returns than other traditional investment options.

  5. I am 30 Years of age unmarried living in Pune and earning 65000 per month take home salary (including EPF deduction). I plan to invest 15000 in monthly SIP as of now which will be increased every year.
    My investment horizon is 22-25 Years. My expenses per month are around 35K including rent.

    My goals and amount needed for them are as below. All amounts are inflation adjusted.
    1. Child education and marriage at around 15 Years – 50 Lakhs.
    2. Retirement at around 55 Years – 2 Crores plus.
    3. Home in about 10 Years from now – 25 Lakhs.
    4. Car in 5 Years – 5 lakhs (rest will be used from Car loan; Total Value of car 7 Lakhs).
    5. Mid term goals like family vacations, home/furniture upgrade etc – 2 Lakhs in every 3-4 years.

    **Apart from this, I have my sisters marriage in about 18 months from now for which I need to accumulate 1.5 Lakhs minimum. I can invest 8000 Monthly over and above my portfolio specially for this.

    Shortlisted Funds:
    1. Franklin India Prima Plus (MultiCap) 2000 Per Month (Long term goal)
    2. Birla Sunlife Front line Equity 2000 Per month (long term goal)
    3. HDFC Mid Cap Oppurtunities(MidCap) 1000 Per MOnth (Long term goal)
    4. Mirae Asset Emerging BlueChip (MidCap) 1000 Per month (Long term goal)
    5. Tata Balanced Fund
    6. EPF of 2200 per month will be used for retirement and cover a part of my debt portfolio for retirement.

    Axis Long Term Equity (ELSS) 3500 Per month.
    Reliance tax saver 3500

    My questions are as below.

    1. Is the current choice of funds in line with my goals.
    2. I plan to use balanced funds for any of my medium term goals which is of 4-5 years and ELSS for Child education and marriage. Is this correct ?
    3. Should I go for traditional Large Cap Mid cap portfolio (60:40 Ratio) or Multicaps are good
    4. Should I go for direct plans right away or should I place a switch to direct after 1 year when I complete in regular plan. I can track direct plan portfolio using external tools available like on VRO. I think I can do that.
    5. Could you please guide me for any debt/income/short term plan for my sisters marriage – I can invest 8000 Monthly over and above my portfolio specially for this. Need some tax effecient and low risk option. This amount is critical.
    6. How good are these funds for 20+ years, Basically I want to know whether such funds would continue for these long years keeping in mind we have some merged funds, closed funds over long term.
    7. I ignored Value discovery fund since it has grown to enormous Aum and I fear it will meet the same fate as HDFC top 200. Is this correct that funds growing in Aum considerably find difficult to show same stellar performance as they shown previously

  6. Hello Mr shantanu
    I am sagar from indore mp I am very confused between mutual funds and ulip investment can you give me advice about this?

  7. As now govt reducing interest rate on small savings like FD,PPF, sukanya smridhi etc & also property is not rising sharply further chances are their inflation rate will come down in india & 7th pay commission will be implement by mid of 2016 so chances are more fund flow comes into equity for better return, is it impact on return of equity?

  8. Thanks Sanyam for publishing my article.

    Among this 10, investing in equity via Mutual fund ways is the best to create wealth in long term. In last 30-34 years, equity has been able to delivery more than 16% return. Hope this will continue and we will be able to see a better data in long term. 🙂

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