7 Best Long Term Investment Options in India 2020| North Loop Official Blog
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15 Jul 2020

7 Best Long Term Investment Options in India 2020

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If you are an investor looking for the right investment opportunities, you should surely consider investing in long term options. These investments offer several advantages, such as giving superior returns whenever they mature and are also more tax-efficient than other investment options.

What are Long Term Investment Options?

An investment made for more than three years, and in some cases, five years is considered a long term investment. Long term investment options mainly involve choosing the right investments and then waiting for a comparatively long time for them to increase in value until you are ready to redeem them to meet your financial goals.
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Here we have listed the seven best long-term investment options for you in 2020 –

  • PPF and EPF - PPF or Public Provident Fund is a Government-supported savings scheme and has a fixed rate of return that gets set every quarter. You can open a PPF account with the post office or even most banks. The current PPF interest rate is 7.1%, and you can contribute any amount to the PPF subject to a minimum of Rs.500 and maximum of Rs.1.5 lakh per year (to be eligible for tax benefits).

    EPF or Employees Provident Fund, on the other hand, is a government established savings scheme and applies to you if you are an employee of the organized sector. The EPF interest rate is declared every year by the EPFO, and for the current financial year, it is 8.50%. PPF is one of the most popular investment options in India.

    By investing in PPF, you can avail tax benefits under section 80C of the Income Tax Act and also enjoy tax exemption on interest income earned on your investment.If you have a long term financial goal and a low-risk appetite, you can choose to invest in these options. However, even those of you who are open to higher risks can invest in them to balance your investment portfolio.

    PPF usually matures in 15 years, and while you can withdraw it after six years, you cannot exceed the withdrawal amount beyond 50% of the balance at the end of the fourth year or the immediately preceding year, whichever is lower.

  • Bank Fixed Deposits - Fixed Deposits (FDs) are one of the most popular investment options available. If you are a conservative investor who is risk-averse and looking for guaranteed returns, investing in fixed deposits is one of the best options for you.

    It is a fairly liquid investment and offers high rates of return with minimal risk. That makes the bank FDs one of the oldest and safest investment instruments providing a regular source of income. While the interest rate offered by most banks varies from 3.30%-6.50%, if you invest in FDs with a North Loop account, you get an interest rate of 7.50% on your Fixed Deposits, which is the current industry highest. If you want to know more about bank FDs and how they compare with corporate FDs, read here.

    When investing in Fixed Deposits, you can either make a cumulative or non-cumulative deposit. With cumulative deposits, the interest gets reinvested into the principal amount, that is payable at the time of maturity. With non-cumulative deposits, it gets paid as per the underwriting.

  • Mutual funds - Mutual Fund is an excellent investment option to get exposure to expert managed portfolios. They are one of the most popular investment options these days. After investing in mutual funds, you get allotted with fund units based on the amount you spend, and there are professional fund managers who manage your pooled investment which can help you earn optimum returns.

    The best advantage of investing in mutual funds is that it can give you access to professionally managed portfolios of equities, bonds and other securities. While they may be considered risky by many because they are market-linked, the high returns are a big plus point. Know differences between mutual funds and fixed deposits.

    There are broadly three categories of Mutual Funds- Equity Funds, Debt Funds and Hybrid Funds, each of which invests in different asset classes.

    Equity funds – These are market-linked securities that invest 65% of their assets in equity.
    Debt Funds – These include instruments like government securities, corporate bonds, commercial paper, treasury bills and other money market instruments.
    Hybrid Funds – These are Mutual Funds that invest in more than one type of investment security, such as stocks as well as bonds.

  • Real Estate - Real estate is an ever-growing industry and holds huge prospects in sectors like hospitality, commercial, housing, manufacturing, and retail. This investment option is quite popular because the risk involved is lower, and the return you receive is very high as property prices keep increasing continually.

    Real estate assets are moderately liquid investments and can be in the form of – commercial or residential properties or even Real Estate Mutual Funds. Investments in commercial spaces such as offices or shops can help you generate considerably high returns.

  • Bonds - A bond is a fixed income instrument that represents a loan made by you to a borrower (typically corporate or the Government).Government bonds are not only the best long term investment options, but they also come with a substantial degree of safety. However, interest rates on these tend to be quite low.If you consider investing in the stock market to be risky, a Government bond is a good option for you.

    You can also opt for Inflation-Indexed Bonds as here the Government sets the interest rates based on the inflation index. However, it is necessary to be aware that bond prices are inversely proportional with interest rates, which means that when the rates go up, bond prices fall and vice-versa.

    Bonds have a specific maturity date at which point the principal amount borrowed by you is paid back in full or risk default.

  • Gold - You can invest in gold in any format – Gold bar, Gold ETF, gold mutual fund, gold deposit scheme etc.

    If you are a conservative investor with a low-risk appetite and are willing to invest in gold but do not want to spend on the making, storage and additional charges, Gold ETFs or Gold Exchange Traded Funds are a good option for you.

    These are instruments that function as a mix of stock and gold investments and get traded on the National Stock Exchange (NSE). Gold ETFs can be bought and sold just like any other company stock and are passive instruments based on gold prices, which make them completely transparent in terms of pricing.

  • ULIPs - A Unit Linked Insurance Plan (ULIP) is an investment product that is offered by insurance companies that give you both insurance and investment options under a single integrated plan.

    If you are looking for secure life plans and returns, you can opt to invest in ULIPs. Under a ULIP, you can pay a premium either on a monthly or annual basis and while a part of this premium is used for providing insurance cover, the rest of the amount gets invested in the fund (Equity, Debt or Hybrid) chosen by you.

    If you are an investor seeking dual benefits of capital investments as well as life cover and have a long term investment horizon, these are a good option for you. There are also active fund managers of the ULIPs who keep complete track of the investment portfolio.

    Moreover, ULIPs offer tax benefits under Section 80C of the Income Tax Act, 1961. The maximum deduction that you can claim is Rs.1.5 lakh. Redemption proceeds are tax-free under Section 10(D), and therefore, ULIPs also play the role of an ideal tax-free investment option in India.

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This publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended be advice. You must obtain professional advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax, investment or other professional advice from North Loop or its affiliates. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date. All opinions expressed do not reflect the views of North Loop nor are endorsed by North Loop.