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What the recent correction in gold prices means for investors 4 min read. The interest rate for EPF is announced annually. If you are just starting out in your job and are looking for long-term investments, the second-best option to consider is Public Provident Fund PPFwhich currently offers a tax- free return of 7.
PPF comes with a long lock-in of 15 years, so it may work for young investors who may not need regular payouts, but it may be unviable for retired individuals not having an existing PPF account.
Some small savings schemes, which give fixed returns, are meant for specific categories of investors.
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Since most fixed-income instruments have a lock-in or maturity period, ensure that the product you choose will mature according to the timeline of your goals. Fixed-income products became popular a couple of decades ago when their returns were in double digits. But most of these instruments offer much lower returns now, which is why it may be too costly to ignore their effects See graph. This basically reduces the purchasing power of your corpus. If your post-tax FD return is 4.
Ltd, a financial planning firm. Your investments need to be in line risk- free earnings on the Internet inflation.
A component that is more visible and immediate than inflation is income tax. For instance, if you invest in SCSS, which gives a return of 7. The best case scenario is when real returns are positive after taking into account inflation and tax.
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If the real returns are negative, it shows that your savings and investments are shrinking instead of growing. This is because the low returns will work against future goals.
Therefore, choosing the right instruments at the right age and diversifying your investments are two important factors. The key is to have a risk management plan through proper diversification and systematic planning," said Girilal.
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How much the equity-debt proportion should be depends on the duration of the investment and your risk appetite. Ideally, you should take a larger exposure to equity at a younger age and scale it down as you grow older. When you are younger, goals such as retirement are decades away, so you can comfortably invest in equity and ride out any volatility in the interim.
However, when you are retired, the safest course of action generally is to invest primarily in risk-free or debt instruments. While fixed-income products do give priority to capital protection, investors also need to focus on returns," said Saurav Basu, head, wealth management, Tata Capital Ltd.
When investing, stick to your goals and asset allocation. Also, evaluate real returns, risks and liquidity. Join Mint channel in your Telegram and stay updated with the latest business news.