Background: In simple terms, investing is utilising your money to earn more money. Investments are important because in today’s world, just earning is not enough. To be able to live the life you imagined for yourself and for your family, you need savings. And with unavoidable circumstances like illness and accidents making a hole in your pocket, your invested money is like insurance that no matter what the situation is, you have financial security. In India there are a number of investment policies to choose from. Vaishali Hitesh Dhankani of Analah Captial shares the various options for salaried people in India.

While focusing on a specific territory i.e. the salaried sector in India, the average savings of an Indian middle-class person is around INR 10,000 per month. Taking into account the most influential factor i.e. inflation, one must save 30% of their earning in order to survive in an iffy world like ours. For a salaried person in our country, who already has the responsibility of meeting the augmented needs of the whole family; the following reasons justify for him/her to invest:                                                                                                                                                    

In our world where expenses surpass the income, buying a house, a car, marriage, child education in a foreign university, or something that requires a lot of funds can be only achieved by investment.

1. In case of emergency situations
The emergencies usually have a way of arriving unannounced. A situation of emergency can create a financial crisis. An unanticipated medical emergency can disturb you mentally as well as financially. Investment can thus provide you a cover for such emergencies.

2. Achieving financial goals
In our world where expenses surpass the income, buying a house, a car, marriage, child education in a foreign university, or something that requires a lot of funds can be only achieved by investment.

3. Inflation
It won’t be wrong to say that with every increasing year, prices keep on increasing. This ever-increasing inflation can swallow your savings and here your investment in a good option that provides good returns higher than the rate of inflation can help you beat it.

Let’s understand which options are best for a salaried person:

Public Provident Fund (PPF)
One of the tax-efficient tools in India, PPF is a fixed-income investment. Launched by the Ministry of Finance in India in the year 1968, this has been one of the most popular tax-free saving avenues. The interest earned on the deposits in the PPF account is not taxable. The main purpose of the initiation of this account was to increase the savings among Indians, particularly for their retirement.

Recurring or Term Deposits
A Term deposit is considered as one of the safest forms of investment by many people for the one reason that the return is guaranteed after the tenure is over. A term deposit offers a higher interest rate than a normal savings account which has proven to be a motivational factor for people to opt for this option. Salaried employees should even think about investing in Recurring deposit in order to create a contingency fund to ensure liquidity for emergency situations.

National Pension Scheme (NPS)
It is very significant to start planning for your retirement from the start of your career. Investing in NPS not only provides tax benefits but also a moderate return to the salaried individual. Here, investment is made with a mix of equity, Corporate Bonds and Government securities depending on your age. Apart from the retirement benefit, you also get a deduction under Section 80C.

Equity Linked Saving Scheme (ELSS)
This scheme invests most of your money in equity. This makes the investment risky but there is a benefit- ELSS has a period of 3-year lock-in. You need to mandatorily stay invested in ELSS for 3 years. Equity generally does well over 3 years. While acquiring some profits, you get a tax deduction at the same time under Section 80C up to a maximum of INR 1.5 lakhs.

Other options
Being a salaried employee you might only think of the above mentioned usual avenues of investment.  The accomplishment of financial goals sometimes needs thinking out of the box and thus let us introduces an innovative and unconventional way of investment- Unlisted/Pre-IPO shares. It is basically an opportunity to invest in early or late stage unlisted companies which are closer to Initial Public Offer. The shares offered under this option are of leading companies with future prospects of growth. Some of the shares of unlisted companies that are highly in demand and traded include HDB Financial, Hero Fincorp, ANI Technologies (OLA), B9 Beverages (Bira), Mohan Meakin (Old Monk), One97 Communications (Paytm), Barbeque Nation and Zomato.

You can invest in an Unlisted/Pre- IPO which would be a feasible option for you creating lucrative returns on your funds along with a benefit of early subscription of shares of high growth companies. There is an added benefit of investing in such stocks i.e. receiving the shares on a discount to the share price as compared to the expected IPO price which gives you decent returns along with controlling interest and higher absolute dividends.

Salaried investors should cultivate the habit of investing from an early age itself. They should not wait for a sufficient amount of saving in order to invest, but they should invest in whatever they have 

If you liked this article, you may be interested in:

Make the ‘sahi’ choice of Mutual Fund

Outlook 2018-19: The way ahead for India based investments

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