Investors know for a fact that they have an array of investment instruments at their disposal. They can invest in government-backed schemes such as EPF, NPS, and PPF. These are some of the safest and best investment instruments offering high ROI as they are supported by sovereign funds. Other than that, there are options such as FDs and RDs as they are safe government-backed schemes.
In general, most investors prefer investing in low-risk investment options. However, the trend is changing and most investors have a greater risk appetite. So, they are willing to take greater risk for a higher return on investment. So, let’s take a look at some of the best investment instruments offering high ROI.
5 Major Investment Options with High ROI
This is one of the most popular investment instruments that everyone has at least heard of. It is a market-linked investment option that invests funds into stocks, equity, money market fund, debt, and more.
The return amount is directly dependent on the market performance of the fund. While the risk exposure of a mutual fund is quite high, it offers a far greater return compared to most other investment tools.
- A mutual fund scheme has an allocated manager who helps the investor to choose the most lucrative investment for the scheme.
- Mutual fund investors are exempted from wealth tax.
Unit Linked Insurance Plan (ULIP)
These plans are one of the most appreciated insurance plans as they serve the dual purpose of insurance as well as investment plan. Moreover, ULIPs offer tax exemption ULIP plans come with a lock-in period of 3 to 5 years.
A part of the premium for such a plan goes for insurance while the rest is invested in market-linked instruments such as bonds, shares, and others.
- These are long-term investments that help investors reap a high ROI.
- It allows for tax-free maturity.
Public Provident Fund (PPF)
A PPF is regarded as one of the safest long-term investment options. Not only is it tax-free, but it can be opened in a post office or a bank.
With such an instrument, the invested money is locked in for 15 years. The investment option allows investors to earn compound interest on the accumulated money. One can also choose to extend the period for the next 5 years. The only drawback of a PPF account is that the investor cannot draw the invested money before the end of the 6th year. So, if you need the money, taking a loan on the balance of the PPF is the only alternative.
- The interest earned through a PPF is tax-free.
- A PPF is one of the safest investment instruments as it is government-backed. The principal and interest amount in the PPF account is guaranteed.
National Pension Scheme (NPS)
It is another government-backed investment that is secure and offers pension solutions. Such a scheme invests in equity, bonds, government securities, and various other investment options as per the investor’s preference.
The instrument offers two options: auto and active. In the auto option, the funds are invested in different assets by default. In the active option, the investor gets to invest in assets as per his/her choice.
The lock-in period for such an investment depends on the investor’s age since the scheme begins to mature only after the investor turns 60. With an NPS scheme, the accumulated interest is tax-free. Moreover, when an investor chooses the lump-sum payment upon maturity, 40 of the maturity proceeds are tax-exempted.
- An NPS permits investors to partially withdraw funds.
- It also allows an investor to remain independent post-retirement.
Bank Fixed Deposit
Fixed deposits or FDs as they are commonly referred to are known for their fixed-pay venture choices. An FD offers fixed returns over the tenure of the investment. The returns from a fixed deposit are paid monthly, quarterly, or yearly depending on the bank’s rules.
Fixed deposits offer cumulative and non-cumulative options of investment. For a non-cumulative option, as per the underwriting the interest is paid. On the other hand, the interest is reinvested and paid during maturity within a cumulative option. Hence, FDs are considered to be the best investment option.
FD interest rates are very attractive as they offer around 6% for regular account holders and around 7% for senior citizens over a period of a year. Moreover, an FD offers an investment period that ranges from 7 days to 10 years. So, investors can choose their scheme as per their investment capacity.
- A fixed deposit renewal is quite easy to make and some banks offer an overdraft facility for fixed deposits.
- Market fluctuations do not influence fixed deposits and the returns are fixed.
So, which of the best investment instruments are you going to invest in?
A person who invests in mutual funds does not own the underlying investments. However, they have a claim to a number of units within the fund representing the size of the investment.
It is an investment strategy where the investor invests a sum in a specific investment regularly, regardless of price. It results in more units of the fund being purchased when the NAV falls and fewer units being purchased when the NAV rises.
As a result, the average cost per unit of investment reduces the risk of investing a greater amount in a single investment during a high NAV period.
An investor commits to investing the minimum amount when he commits to making an investment. He also commits to understanding the clauses of the scheme and its associated risks. Hence, he agrees to incur the investment risk in return for a superior return knowing fully well that the outcome is not guaranteed.