Since a new financial year has just commenced, now’s the best time to pay attention to your investments. Beginning early will not only save you a good deal of anxiety at the end of the year but will also help you boost profits. However, in order to do so successfully, it’s important that you have a plan that clearly states your financial goals for the year. Thereafter, to achieve them, refer to these 5 smart investment tips.
Start saving on taxes right away with ELSS
Equity-Linked Savings Schemes are a type of mutual fund investment that helps you save taxes. As per Section 80C of the Income Tax Act, you can claim a deduction of up to Rs.1.5 lakh with a short lock-in period of 3 years. Similarly, long-term capital gains of up to Rs.1 lakh remain tax-free. ELSS funds are also high-return investments, yielding interest of around 15% to 18%.
Moreover, you have two ways of investing in an ELSS: lump sum or through a Systematic Investment Plan (SIP). This means that regardless of your current financial situation, you can invest in an ELSS right away.
Recalibrate your investment and tax-saving strategy if need be
While the start of the year is the best time to roll out your investment and tax-saving plans, this rule isn’t set in stone. For example, if you get surplus income through an unexpected promotion, step back, evaluate your new risk profile and then tweak your investments accordingly.
Likewise, when it comes to tax planning, you not only need to keep track of your various sources of income but also government rules. For instance, the Interim Budget is out now, but the Union Budget will be presented only after the elections, which means that you may have to change your approach at a later date.
Use instruments like FMPs to diversify your portfolio
Since 2018 was a difficult year for the market and the economic climate will settle down only after the general elections, it’s best to diversify your portfolio and include a few safe instruments. One such option is a Fixed Maturity Plan (FMP), as it serves as a back-up in case the market dips.
FMPs require an investment for a fixed tenor and invest in debt instruments to give you returns at maturity. They keep risk to a minimum and offer you attractive tax benefits too. When held for more than 3 years, an FMP is taxed at a lower rate of 20% post indexation.
Direct finances towards your retirement fund via VPF
Your investment plan is incomplete if it doesn’t cater to your retirement needs. While there are many instruments you can choose from, one of the safest and easiest ways is a Voluntary Provident Fund (VPF). This fund works as an extension of your EPF and earns interest at the same rate, that is 8%.
As your VPF amount gets deducted even before your salary reaches you, you don’t feel the pinch of each contribution. Secondly, VPF is one of the few instruments that enjoy all-round tax benefits because of its EEE status.
Park your finances in an FD to gain assured returns
When it comes to making smart investments, it’s always important to take historical information into account. As of 2018, data shows that fixed deposits yielded better returns when compared to equities and debt funds.
You can capitalize on this and pick an FD that is a true high-return investment, such as one from Bajaj Finance. When you take a 3-year Bajaj Finance Fixed Deposit with interest payable at maturity, as a regular investor you earn 8.75% interest, which goes up to 9.10% if you’re a senior citizen. This investment carries ICRA’s and CRISIL’s highest credit ratings and allows you to invest for 12 to 60 months, as per your goals. You can compute your returns quickly with the FD calculator and begin your investment from the comfort of your home.
With these smart investment tips for FY 2019–2020, make sure you invest right away to maximize your gains.