RISK FREE INVESTMENT OPTIONS

Before going to build up a smart and strong portfolio discussion, we need to look over various types investment plans. So first of all we discuss various types of investment plans in India and make it understand.

We will discusses Investment option in two format

(a)    RISK FREE INVESTMENT OPTION

(b)   INVESTMENT OPTION SUBJECT TO RISK.

Today we discusses only          

(a)    RISK FREE INVESTMENT OPTION

1.     Recurring Deposit:   It is a type of term deposit which help people with regular incomes to deposit a fixed amount every month into their Recurring Deposit account and earn interest at the prevailing rate.

This facility provided by Banks and Post office.

Interest Rate : generally 6.5% to 7.5 %.

Term:  12 month to 10 years.

2.       Fixed Deposit:   In this scheme a fixed amount of sum is locked for a predetermined period of time and in return which earns fix interest on the locked amount during the locked period of time.

This facility provided by Banks, NBFCs, Post office.

Interest Rate : generally 7% to 8.5 %.

Term:  it varies from 90 days to as per choice how many days any person can fix his/her money.

3.       Public Provident Fund (PPF):  This is also a type of recurring deposit with various terms and regulations imposed by the Government of India.

Term:  15 years

Minimum amount to open : 500/- and maximum no limit.

Person must deposit minimum rs. 500/-  every year. One can deposit with maximum 12 installments in this PPF account.

Partial amount withdrawn from this account is permissible after completion 7.5 years. But without any exceptional cases whole amount withdrawn is not permissible before completion 15 years. It is very well known investment option to individuals.

The amount deposited in a year and interest accrued is permissible for tax deduction u/s 80c of IT Act, 1969 subject to rs. 1,50,000/-.

4.       Due to tax advantage purpose in India there are some kind of Fixed Deposit Scheme is launched with different names. They are below:

(a)    National Saving Certificate (NSC) (Available in Post Office)	in which interest accrued is exempt from tax and lock in period is 5 or 10 years. Interest Rate : 7.1%  (current rate) may be changed by the Government of India.
(b)   Senior Citizen saving Scheme : (Available in Post Office and Banks also)	in which interest accrued is exempt from tax and lock in period is 5 years. But only the person having the age of 60 years and above (55 in case of women) can make this. Interest Rate : 8.5%  (current rate) may be changed by the Government of India
(c)    Kishan Vikash Patra (KVP): (Available in Post Office)	In this scheme amount will be doubled in generally 8.5 years to 9.5 years as per prevailing interest rate. Interest Rate : 7.1%  (current rate) may be changed by the Government of India

N.B:         Now the point is a large group of people take the Life Insurance plans as an Investment option. Because it covers life as well as protect our money and back our given amount with some Bonus, loyalty, and some addition. But we see in our earlier discussion that traditional Life insurance plan is saving plan not an investment plan. The Life insurance plan must also be incorporated in our Portfolio but it will be discussed in our building of portfolio secession.

Now a day in this modern time an Insurance Plan name as Unit Link Insurance Plan (ULIP) has becoming popular which can be taken as a investment option due to its characteristic. The ULIP will be discussed to our next part.