Investment Options for Long-term Growth in India
Long-term investments typically last over 5 years and are known for offering a higher yield when compared with short-term investments. As a result, they are quite popular amongst investors who want to set aside funds for specific milestones in the future. If you’re wondering whether long-term investment strategies are right for you, keep reading!
A. What financial goals can you achieve with long-term investments?
Following a goal-oriented approach when it comes to your investments is one of the best ways to ensure you’re using your funds in the most efficient way. When it comes to long-term goals, the following are a few that many investors like to set aside funds for:
- Child’s education: Especially if the parent wishes to send the child abroad
- Child’s marriage: With destination weddings and glamorous venues now being the norm, it only makes sense to start saving money for this momentous day!
- Buying a house: If you wish to avoid paying high-interest rates to banks, you can always grow your wealth through investments and buy a home once your policy matures
- Early Retirement: Retirement policies typically activate after one retires, but what happens when you want to say goodbye to your job way before the retirement age of 60? Investing in a long-term policy can help you set aside enough funds to live your life as you’ve always dreamed of doing!
- Financial Freedom: Having the safety net of a lump sum of money can free your mind from anxiety and the perils of working in a field you’re not passionate about. With greater financial freedom, you can explore the lifestyle and professional avenues that suit your personality, without worrying about how you’ll take care of your family
B. Top 7 long-term investment options for growth in India!
1. Public Provident Fund (PPF)
A PPF is a popular investment avenue in India as it offers a high yield along with low risks, making it suitable for most investors out there. The shortest tenure that you can opt for is 15 years, and you can also increase the term by an additional 5 years to further grow your funds.
One of the biggest advantages of investing in PPFs is that most employers can help you with the same, making the act of investing a little more manageable for those who are new to it. Additionally, you can invest as little as INR 500 to as much as INR 1.5 Lakhs per year in a PPF account.
Let’s say you make a yearly investment of INR 24,000. At an interest rate of 7.1% for 15 years, here’s what you gain:
Funds at maturity
INR 6,50, 913
Gold is another popular investment option due to the fact that it can be liquidated quite easily and often beats inflation rates. However, contrary to popular belief, there is more than one way to invest in gold. Apart from buying physical gold in the form of coins, jewellery, or bars, you can also invest in gold ETFs and gold funds.
As this implies, you can invest in physical gold in the form of bars, coins or jewellery.
Exchange-traded funds track the performance of gold. Investing in a gold ETF is the same as investing in the value of gold, without actually having the physical asset in your bank.
When you invest in gold funds, you’re typically investing in companies that mine gold, or in bullions.
This can be a more affordable option as there are no charges. Once you’ve bought the gold, you don’t have to pay for anything else.
Gold ETFs are less affordable as there are brokerage and asset management fees involved, which adds to the overall expense at your end.
There is a minimal charge associated with fund management, making this moderately expensive.
The price of gold can increase or decrease in the market, and this impacts the value of your investment.
As Gold ETFs track the performance of gold, the value of the investment is linked to the market price of the same.
The value of gold funds is not linked to the price of physical gold.
You do not need to worry about paperwork when buying gold.
You have to complete a few banking formalities to invest in gold ETFs.
You have to complete a few banking formalities to invest in Gold funds.
The biggest risk of owning physical gold is theft.
This cannot be stolen.
This cannot be stolen.
You do not require a Demat account to invest in physical gold.
You require a Demat account to invest in gold ETFs.
You do not require a Demat account to invest in gold funds.
Additionally, you can also invest in Sovereign Gold Bonds, which refers to digital gold that is issued by the Government of India via the RBI. These bonds have an assured annual interest rate of 2.5%. There are many options available for the same, however, based on past market performance, the top ones include:
Sovereign Gold Bond
Axis Gold Fund
Canara Robeco Gold Savings Fund
ICICI Pru Regular Gold Savings Fund
Aditya Birla Sun Life Gold Fund
HDFC Gold Fund
3. Mutual Funds
Mutual funds refer to policies that pool money from investors in specific assets such as stocks, money market instruments, bonds, and more. When you invest in mutual funds, you own a certain number of units based on the investment amount. As the investor, you can decide whether you want a larger portion of your funds to be allocated in the debt market or the equities market, based on your risk appetite.
Do note that many investors also consider mutual funds when looking for short-term investments. In such cases, they do not exceed a tenure of 5 years. However, if you’re planning to invest in such policies to fulfill long-term goals, then your minimum tenure should be 10 years.
Let’s say you start investing INR 10,000 per month in a mutual fund and are offered an interest rate of 12% for 10 years. Here’s what you gain:
Funds at maturity
Based on their previous performance, here are a few mutual fund options for you to consider:
Aditya Birla Sunlife Frontline Equity Fund
HDFC Mid-cap Opportunities Fund
ICICI Pru Focused Bluechip Equity Fund
Indiabulls Savings Income Direct-G
Mirae Asset Hybrid Equity Direct- G
ICICI Pru Equity & Debt Direct-G
Aditya Birla Sun Life Active Debt Multi-manager FoF Scheme
Axis Short Term –Direct Plan
Canara Robeco Income- Reg
4. Exchange Traded Funds (ETFs)
ETFs are investment instruments that track the performance of an underlying asset. While some may track tangible assets such as gold or waters, others track the performance of funds such as the NIFTY50, allowing investors to benefit from tried-and-tested strategies.
To get an idea about the way ETFs typically perform, here is a table showing the 3-year returns of some of the top ETFs in India:
HDFC Gold Exchange Traded Fund
UTI Gold Exchange Traded Fund
Nippon India ETF Gold BeES
Nippon India ETF Liquid BeES
Nippon India ETF Nifty BeES
Nippon India ETF Bank BeES
Motilal Oswal Midcap 100
Nifty Midcap 100
Motilal Oswal Nasdaq 100
Stocks listed in the Nasdaq (US tech companies)
5. Real estate
Real estate is one of the most reliable investment avenues for people with a low-risk appetite. Its reliability and stability are the main reasons why investing in real estate is such a popular option. For the longest time, the only drawback of real estate was the large capital required to invest in it, however, this is no longer the case with the introduction of investment instruments such as REITs.
REITs, or Real Estate Investment Trusts, function in a way that’s similar to mutual funds. They allow investors to pool funds in a company that manages real estate assets, to enjoy regular returns.
Note that whether you choose physical real estate as your investment tool or REITs, both are intended to be long-term investment instruments and will only yield good results if you give them enough time to grow.
6. National Pension Scheme (NPS)
While identifying the right long-term investment options for your needs, don’t forget about the NPS as it allows you to save a corpus for your retirement. You can begin investing in the same while working and can choose to withdraw a lump sum amount once you have retired. You can also use the remaining to ensure you have an annuity.
As is the case with mutual funds, there are also many different NPS policies run by various companies. The following table details the performance of some of the top NPS policies in India.
1-Year Returns (%)
3-Year Returns (%)
5-Year Returns (%)
7. Post Office Saving Schemes (POSS)
POSS work in a manner that’s similar to recurring deposits in banks, however, they generally offer a higher interest rate than banks. Like Sovereign gold bonds, these schemes are also backed by the government, lending investors peace of mind.
Some of the popular POSSs include:
- Senior Citizen Savings Scheme
- Sukanya Samriddhi Yojana (SSY)
- Public Provident Fund
- 5-year NSC-VIII Issue
- Post office time deposit (POTD)
- Post Office Monthly Income Scheme (POMIS)
- Kisan Vikas Patra (KVP)
- Post office recurring deposits (RD)
- Post office savings account
8. Stocks and Shares
If you have a high-risk appetite and understand the factors that drive market volatility, you can invest in stocks and shares. In India, the stock market falls under two categories, the Bombay Stock Exchange and the National Stock Exchange. You require a DEMAT account and a trading account in order to invest in stocks and shares and will need to contact a stockbroker for the same.
These investment avenues can help you grow your wealth significantly when the tenure is over 10 years. So, do consider the same while choosing the right avenue for your needs, and make sure you diversify your portfolio with these short-term investment instruments too!