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5 Best Investment Options for Newly Employed Individuals

07 Aug 2019

The phase of being newly employed brings with it joy and a sense of freedom. It feels good to have your own money in hand. While the urge to splurge may be overwhelming, one should think about investment too. Being employed also brings in the responsibilities with it, which would mean you need to work on the long-term financial security. For a newly employed professional, being in your 20’s, investment is something you would not take so seriously. You’d rather put it on the back-burner till you wake up alarmingly. The initial years fly by, and you get caught up in a multitude of stuff till retirement approaches. It’s rather easy to gift yourself financial security if you follow these simple investment options:-

  • Public Provident Fund (PPF)
    1. The PPF account can be made in any bank or post-office near you.
    2. You can deposit between Rs 500 to Rs 1, 50,000 per year.
    3. Since it has a lock-in period of 15 years, it lets your money grow untouched and benefits you greatly in the long-run.
    4. The interest rate is variable but high for small saving schemes. The current rate is 8.7% p.a.
    5. It enjoys EEE tax exemptions under Section 80C which means:
      • The annual PPF investment
      • The interest earned
      • The lump sum proceeds

        Are tax exempt!

        It offers new employees a secure long-term investment with amazing tax benefits

  • Systematic Investment Plan (SIP) for mutual funds

    Mutual funds are much sought after investments as they provide a diverse portfolio. There are funds which will pay off in a year, and those which give returns after a decade. In short, mutual funds can be your one-stop shop for financial planning. SIP is fast becoming the preferred method to invest in mutual funds. SIP’s allow us to invest a particular amount into our chosen mutual fund every month rather than investing at one go. The best part about investing in SIP is that a new employee can start off with just Rs 500 every month.

    The major benefits are:

    • It instils a sense of financial discipline by ensuring monthly payments are made.
    • It benefits from rupee-cost averaging. Simply put, you buy more stocks for the same amount when prices are down and vice versa.
    • It’s especially beneficial for newly employed people as they often lack a significant lump sum to invest. These bite-size investments can benefit you greatly as the power of compounding makes every penny count.
  • Unit Linked Insurance Plan (ULIP)

    This scheme brings together the benefits of life insurance and mutual funds on the same page. The premium paid provides insurance coverage as well as return on investment through stock, debts, bonds etc. The major plus points of this being:-

    • It offers the flexibility of dividing the premium amount between the term insurance and the investment, thereby making ad-hoc planning easier.
    • It allows you to shift the sums invested in debt and equity funds. This offers a unique opportunity to take variable, calculated risks and maximize your investments.
    • Tax rebates under 80C are available for premiums, and the payouts are exempt under Sec. 10D.

      This offers young earners a rare opportunity of simultaneous insurance and earnings.

  • National Pension System (NPS)

    Retirement seems like a far-off spectre during the halcyon days of youth. Time, however, takes its toll. NPS is considered a prime retirement savings instrument.

    • The Tier 1 NPS primarily aims at post-retirement savings
    • Anybody between 18 and 60 can open an NPS account
    • It allows the investor the option of choosing investment avenues and fund managers under the new pension scheme.
    • The contribution amount and frequency can also be chosen at will
    • Investments are eligible for tax deductions of upto Rs.2 lakh under Section 80CCD

      The low operating charges make it ideal for new employees.

  • Recurring Deposit (RD)
    • For more conservative investors, RD’s offer a much better avenue then Fixed Deposits
    • It allows for monthly deposits and enforces savings
    • They’re great for short-term investments as they offer guaranteed returns with minimum risk

    RD’s are a great avenue to save up for those little yearly treats, just beyond your reach.

    Conclusion:

    If you are newly employed, then you could invest in the above 5 best investment options and secure your future financially. Happy Investing!!!

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