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.
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.
Jump to Section
- 11 Long Term Investment Options in India 2020
- #1.Public Provident Fund Investment
- #2. Investment in Mutual Funds
- #3. Direct Investment In Equities (Stocks)
- #4. Real Estate Investment
- #5. Investing in Gold
- #6. Post Office Savings Schemes (POSS)
- #7. Sukanya Samriddhi Account Yojana (SSA)
- #8. Corporate Fixed Deposits
- #9. Invest in IPOs
- #10. Buy any ULIP plan for a long term
- #11. Invest in Bonds
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 year||Rate of interest|
#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.
#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 Name||1 year||3 year||5 year|
|Aditya Birla Sun Life Gold Fund||25.02%||10.77%||6.82%|
|SBI Gold Fund||22.52%||10.79%||6.58%|
|Kotak Gold Growth Fund||23.14%||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.
- 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.
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.