Which is the Best Investment Plans for Upper Middle Class?

  • Akarshita Yaji
  • Oct 25 2021
  • 5 minutes
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Wealth creation and investment for need management require a lot of planning and systematically follow-through of the plan over a considerable period of time. An important component of creating this plan is to decide which kind of financial instrument one is to invest in. Given below is a list of the best investment options available for individuals placed in the upper-middle class. 

Mutual Funds

Mutual funds are known to provide the investor with excellent returns through a diversified portfolio. An individual belonging to the upper-middle class can choose to invest in either of these mutual funds – 

  • Equity Mutual Funds – promises high returns in the long run. There is no risk of concentration as the portfolio is diversified in a range of stocks across different market capitalisation.
  • Liquid Funds or Debt Funds – Liquid funds are debt mutual funds that require investments in certificates of deposits, treasury bills and commercial papers with maturity period of 91 days, for short investment horizons. These mutual funds have a relatively lower risk attached to it and the returns are commensurately lower. 
  • Hybrid or Balanced Funds – these funds invest across debt instruments such as corporate bonds, treasury bills, government bonds etc. and equity instruments such as equity shares, preference shares etc. these funds balance the risk-reward ratio to provide the best of returns for the risk that the investor is willing to undertake.
  • Fixed Maturity Plans – these close-ended debt funds invest in fixed income instruments such as high rated securities, certificates of deposit, bonds etc. These plans are safe investments and have a lock-in period of 30 days to 5 years to eliminate interest rate fluctuations faced in the debt markets. The investor can enjoy tax benefits by virtue of indexation.

Stock Market

Investing the stock market is a lucrative option but there are high market and credit risks attached with it. The returns are usually can be in the range of 15% to 18%. These stocks must be held for a considerable amount of time, in order to mitigate losses and overcome risks. It is important to have some financial cushion, a lot of research, and some assistance from a financial expert before making an investment into stocks directly.

Public Provident Fund

Public Provident Fund is a secure investment backed by the government. PPFs are exempt from taxes for all stages of investment. The minimum amount that is to be invested is Rs. 500 and you can choose to put in a maximum of Rs. 1,50,000 per annum. The investment is locked in for a period of 15 years that is extendable for a period of 5 years after that period.

Equity Linked Savings Scheme 

Equity Linked Savings Scheme are diversified equity funds that are meant to offer tax benefits under the Income Tax Act. With at least 80% of the total assets invested in equity and equity-related instruments, ELSS has a lock-in period of 3 years and this is a respectable investment period as the power of compounding ensures that the investor gets high returns that helps beat inflation over the long run. Being market-linked, the returns range between 12 to 14%.

Corporate Deposits

Corporate deposits or fixed company deposits are unsecured deposits that are offered by financial and non-banking financial companies. They offer much higher returns than bank deposits but have a small risk attached to them. The reliability of these deposits can be gauged with the help of rating agencies such as CRISIL etc. 

Bonds

Offered by government and large corporations, bonds are debt instruments that are long-term investment tools with fixed or floating interest rates. These financial instruments are long-term investment tools that promise stability in investment. They offer a regular source of income to otherwise idle funds and have a lock-in period of 5 to 40 years. There is no TDS deducted for the returns generated from these instruments.

Bank deposits 

Time deposits such as fixed deposits and recurring deposits, as well as savings deposits, offered by banks and non-banking financial institutions, help the investor earn some interest income through disciplined investing. 

Conclusion

An investment cannot be successful if one does not have a clear investment goal and a predetermined road map to achieve the same. Select the right investment vehicle with good potential returns in order to make your money work for you! Diversify your investments and monitor it carefully to make the most of your investments!

Frequently Asked Questions

What are the most important considerations to be kept in mind while creating an investment plan?

The clarity in financial goals, 
The time horizon of the investment i.e. the timelines associated with it, 
The current expense to saving ratio,
Future expense to savings ratio, 
Contingencies for which some savings have to be set aside 
Alternate options available.

What are the objectives of an investment plan?

Safety of investment, guarantee of return, and tax minimization are the three main goals of an investment plan.

Is there a right time to start investing?

There is no such fixed time that one must start investing but it is said that the earlier one starts, the better it is for them.

How does one invest into mutual funds?

There are two ways that one can invest in mutual funds – the direct plan or the regular plan. If one opts in for the direct plan, then he or she must open an account with the fund house and invest directly. If one chooses the regular plan option, then the investment is made through an intermediary, who will charge a commission or fee in lieu of his or her services.

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