Independence Day 2019: Top investment options to attain financial freedom! Let's start from this 15th August

Independence Day 2019: An investor with a low-risk appetite can go for indirect stock investment via equity mutual funds instead of direct share market investment.

With your whole life before you, for a young man, with exciting things waiting to happen, all you would like to think of is having a good time and spending your salary as soon as it comes. WRONG MOVE! Photo: Pixabay

Independence Day 2019: On 15th of August, when India would be celebrating its 73rd independence day, investment experts are advising investors to diversify their portfolio and allocate funds in such a way that the money invested can be maximised. For this, tax and investment experts say that one should have a mix of equity and debt portfolio. For equity investments, experts advise people to go for direct stock market investment. However, if someone doesn't have that high-risk appetite, he or she can go for equity mutual funds or ELSS mutual funds, but this is for long-term. They also advise investors to provide portfolio allocation to fixed and guaranteed returns like PPF, insurance, NPS too.

Speaking on how to attain financial freedom in long-term investment Harsh Jain, CO-Founder & COO at Groww said, "With your whole life before you, exciting things waiting to happen, all you would like to think of is to have a good time and spend your salary as soon as it comes in." Jain said that diversification of the portfolio is a must and it should be a mix of both debt and equity funds. He said that if an investor has a low-risk appetite, then he or she should invest in equity mutual funds because ELSS mutual funds maximise an investor's money.

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Asked about the top five options that can help an investor become financially independent in long-term, Harsh Jain of Groww listed out the following investment option:

1] Stock Market/Equity Mutual Funds: The Indian stock market, as an asset class, has proved to be the best performing over the long-term. The Indian indices (Sensex, Nifty, Bank Nifty etc.), for instance, have given returns in excess of 16 per cent annually over the last 10 years. This means that if you had invested Rs 10,000 every month over the last 10 years you would have more than Rs 29 lakhs by now. A more conservative estimate would assume that stocks give 10 per cent return every year. If you invested Rs 10,000 every month for the next 30 years, you would get an amount of more than Rs 2 crore.

"If you have the risk appetite, you can invest in stocks and watch them grow over the next 20-25 years. You can invest either a lump sum or a little bit every
month thus optimising your cost. If you would like to lower your risk but still be in equities then you can try equity mutual funds. Monthly investments in equity schemes in the form of Systematic Investment Plans (SIPs) can help you build wealth over a long time horizon," said Harsh Jain.

2] Public Provident Fund or PPF: An investor should be conservative in nature and have some belief in fixed returns with no risk as well. Hence, it's advisable for the investors to have some fund allocation in PPF as well.

Speaking on the benefit of PPF investment Kartik Jhaveri, Manager — Wealth Management at Transcent Consultants said, "It is a 15-year scheme that you can extend by another 5 years. You can invest anything from Rs 500 to Rs 150,000 a year. If you invested the maximum permissible every year, you would have a corpus of Rs 44 lakhs at the end of 15 years. A good thing about investing in PPF is that the returns are guaranteed. Another advantage of investing in PPF is that the returns are tax-free and you can get a tax relief of up to 1.5 Lakhs if you invest in PPF. So PPF gives you tax-free returns as well as a chance to reduce your income tax outgo."

3] Insurance: Insurance is strictly a protection product and not really an investment, but some of them can double up as investments to create a sizeable amount over the years. There are policies that mature after 25 to 30 years such as endowment covers. Unit-linked insurance plans are for both protection and investment products. Compare products online to save time and get started with beneficial insurance plans.

4] Property investment: Owning a home comes with many benefits. Firstly, it can help you claim tax breaks on the principal and the interest amount you pay. You can buy a house whose EMIs roughly equal the monthly rent you pay. That way you will have your own asset after a few years that will only appreciate over time. You can sell it if need be or pass it to your children as and when needed.

5] National Pension System or NPS: The NPS is compulsory for central government employees while others can contribute voluntarily. Over the last 10 years, the NPS has given returns between 8 to 10 per cent annually. Assuming a return of 10 per cent, if you invested Rs 10,000 annually in the NPS, after 35 years you would have a corpus of 3.8 crore. On retirement, 60 per cent of the corpus can be withdrawn without any tax implication, while the remaining 40 per cent will serve as annuity (pension) payouts over the life of the individual. In the example above, you can get Rs 75,600 as monthly payouts. If you want more you can increase your monthly investments.

Up to Rs 1.5 lakh is tax-deductible under Section 80C and another Rs 50,000 under Section 80CCD, so your tax outgo is also reduced.

So, when the whole nation is going to celebrate 73rd Independence Day on 15th August, what else could be the best possible date to work on the above-given investment options to attain the financial freedom in long-term.

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