It's important to start saving early so as to maximize returns over a longer period of time. For those in their 30s, there are many investment options. Since they are able to keep a long term perspective in mind due to their age, we suggest the following investments:
1. Public Provident Fund
The Public Provident Fund is among the very few instruments that offer you tax benefit under Sec 80C and also the interest income is tax free. There are very few instruments that offer you such benefit.
Since a person in his twenties and thirties can take a long-term view, he is able to also build a corpus, since this is a 15-year plan. Apart from this, the interest rate on the PPF is 7.1 per cent currently, which is a good 1.5 per cent higher than the interest rates offered by most banks in the country. Whether it's interest rates or tax savings, the PPF makes enormous sense to invest in. However, one can invest a maximum sum of Rs 1.5 lakhs every year.
2. Equity Mutual Funds
The stock markets have fallen a fair bit from their 52-week highs. This makes it a good opportunity for those in their twenties and thirties to invest for a longer period of time.
The Covid-19 impact has ensured that those looking to invest in equity mutual funds can do the same at a much lower NAV, than what was prevailing at the start of the year.
Apart from this, equity mutual funds also offer one an opportunity to invest through a Systematic Investment Plan, where one can invest small amounts as low as Rs 500 and Rs 1,000 every month.
Equities have generated good returns over the longer term and hence makes sense for those looking at long term investment.
In the last 1 year gold has given a returns of as high as 37 per cent, thanks to the Covid-19 crisis. Gold is a safe haven asset - when there is a crisis it tends to rally, which is why at least 10 per cent of your savings must be parked in gold.
This has been the best asset class in terms of returns over the last three years. Having said that, there is no guarantee that it would generate superlative returns in the next few years. One has to invest in gold, as a measure of diversification only. So, while you look at safe investments like PPF and instruments like equity mutual funds, which can generate good returns, you must also look at gold to diversify.
You can buy gold ETFs, which is gold in the electronic form. Read all about gold etfs here
4. Debt instruments
Investors in their 20s and 30s should also consider debt instruments. Interest rates on debt instruments like bank deposits have fallen dramatically over the last few years. Debt instruments are not giving good returns at the moment. For example, banks like State Bank are offering an interest rate of just 5.5 per cent on their fixed deposits. While, interest rates are low, debt instruments are very liquid and come in handy for an emergency. Some amount of money should be parked in debt.
About the author
Sunil Fernandes has spent 25 years covering business and finance in India and abroad. Sunil has worked with frontline daily newspapers including Hindustan Times, Deccan Herald and Gulf Times. He has also worked with investment magazines like Dalal Street Investment Journal and Oman Economic Review. His forte remains stocks, mutual funds, commodities, debt and tax planning.