Which Is The Best Investment Plan In India For Middle Class?

Which Is The Best Investment Plan In India For Middle Class?

Which Is The Best Investment Plan In India For Middle Class: If one intends to achieve financial goals in a disciplined way within a stipulated period of time, then having a good investment plan is of utmost importance.

A good investment plan has different definitions for different individuals. However, such plans make sure that there is the safety of investment, a guarantee of return, and tax savings all at once.

Therefore, a significant amount of time and effort goes into selecting such type of investment. India’s middle-class population continues to rise and is an important indicator of economic growth. 

Middle-class people are those individuals who are not as rich to purchase anything that comes to their mind.  At the same time, they are not that poor and are not able to afford anything.

Middle-class people are always on the lookout to find ways to make more money. The middle classes of all countries are the ones supporting the growth of the global economy.

Therefore, most of the government announcements at the time of the budget are focused on middle-class people. Since middle-class people have limited savings to invest in, it is very important to choose the best investment plan in India for middle class population.

If you wish to know some of the important measures that should be included in the investment plan, read on! This article will uncover the best investment plan in India for middle class population. 

Best Investment Plans for Middle-Class Risk Averse Category Of Investors 

On the basis of risk tolerance levels, the investors can be classified as aggressive investors, moderate investors, and conservative investors. Aggressive risk investors know the market very well and they take a significant number of risks.

They choose asset classes having dynamic price movement, like equities. Moderate risk investors are comparatively less risk-tolerant in comparison to aggressive risk investors.

These types of investors take some risk and they usually set a percentage of losses they can bear. They try and balance their investments. Conservative investors are the ones who take the least risk in the market.

They don’t indulge in risky investments at all. They tend to go for those options they think are safest. To know best investment plan in India for middle class, it is important to understand the plans available for different categories of investors. 

For risk-averse middle-class investors, the following are some of the options:

  • Public Provident Fund (PPF): PPF is the most renowned and popular long-term investment product. The minimum investment amount is just INR 100 per annum. This investment option guarantees returns of ~7% per annum which are completely tax-free. Apart from this, investments made in PPF qualify for tax savings under Section 80C of the Income Tax Act. Investors should know that there is a lock-in of ~15 years.

  • National Saving Certificate (NSC): NSC is a government scheme having 5 years’ tenure. Investors in NSCs can expect an interest of ~6.8% p.a. In this, both investment and interest are tax deductible. 

  • Fixed Deposits: FDs come under the category of traditional investment products and are the most popular. Almost all the banks issue FDs, and they are very safe as the return is fixed. Fluctuations in the financial markets will not impact the returns delivered by FDs. Interest rates vary from bank to bank, but they are in the range of 3-7% p.a. FDs can be both short-term and long-term.

Since the investments stated above are extremely safe, returns are significantly low in comparison to market-linked investment products.

For aggressive middle-class investors, the following are some of the options:

  • Equity Mutual Funds

If you are looking for market-linked investments which promise returns high enough to beat inflation, mutual funds can be considered ideal investment plans for the middle-class population.

Equity mutual funds make sure that there is risk diversification as one can either invest in index funds, large-cap, mid-cap, or small-cap funds, or a combination of these funds.

The idea behind these investments is to preserve capital while generating stable returns which can help in beating inflation over time.

  • Unit-linked investment plan

Having a dual benefit of insurance and investment, these investment products are considered good investments since they provide decent returns.

Amount invested in ULIPs can be partly used for insurance, while the remaining amount gets invested in market-linked instruments. Several ULIPs come with a minimum lock-in period of 3-5 years. This investment product offers the additional benefit of tax exemption.

  • Direct equity 

Direct equity is another option suitable for aggressive middle-class investors if they have a longer time horizon. Investments in direct equity require a significant amount of research and must be opted for only if an investor has financial cushions which can support them through shocks.

This is a high-risk investment option offering high returns in the long run. However, making investments in stocks also provides investor ownership rights in a company. For moderate middle-class investors, the following are some of the options:

If you don’t fall in any of these categories, you will probably fall in the category of a person having moderate risk tolerance. 

  • National Pension Scheme (NPS): NPS is a government scheme encouraging retirement savings. A government institution regulates this scheme, and it is considered a moderately safe investment option for the middle-class population of India.

  • Debt Funds: Debt funds principally invest money in fixed-income securities. These investments are low-risk and provide predictable returns. These investments are short-term, and money is invested in government securities, commercial paper, corporate bonds, treasury bills, etc. 

The best investment plan in India for middle class should be considered after understanding different investment options which are available. It is important to understand investment goals, investment tenure, risks involved, etc. before pursuing any type of investment.

Also Read: Types of Investments Explained – Growth, Value, Dividend & More!

In Closing

Choosing the best investment plan in India for middle class should be done with the help of a financial advisor as they can help in drafting a customized financial plan. It is of utmost importance to gain knowledge regarding different financial products before selecting a particular investment option.

Middle-class investors are required to spread their investments across different asset classes so that the principle of diversification is followed. Finally, middle-class investors should not follow the herd mentality while making investments. Investments should always be made in those products which suit the risk appetite of a particular investor.

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