For working professionals, the stressful season of March end is over and tax responsibilities are not an immediate priority now. In the start of the new financial year, you may have an excess fund to invest. However, the time to invest is very sensitive due to a couple of factors: Ongoing elections in the country and picking up the interest rates.
Hence, it is not the time of mere savings, but it is the opportunity of Smart Investment. In the next 15 to 20 days, your investment strategies should aim at the safety of your hard earned money and reasonably good return. Below are the four financial instruments to invest in the coming two-three weeks.
The fixed deposit is all time favorite for the investors who seek the safety of the capital and assured a return. The concept of safety and fixed return is more relevant in these days of political uncertainty following national elections. A fixed deposit is the only instrument that can assure you pre-committed return on your investment. Any uncertainty can create turmoil in the stock markets and money markets. Hence, it is advisable to be away from investments like equity and equity oriented mutual funds.
Moreover, interest rates on fixed deposit are on their pick. Anytime soon, the interest rates may stop rising and the downward curve may start. Hence it is advisable to park your money in fixed deposits as early as possible so that you can seize the opportunity to earn FD rates. If you expect ‘better than bank’ return on FD, consider investing in NBFC fixed deposits. The reputed companies like Bajaj Finance carry AAA rating for their fixed deposits. AAA ratings state that the credit quality of the FD is high and the investor can expect timely repayment of his capital and interest. Such ratings are awarded by national level independent rating agencies like CRISIL and ICRA. To give compounding power of your FD, consider selecting cumulative FD.
Debt Mutual Funds
Until recent past, debt mutual funds were considered as secure as fixed deposit. However, since few months, corporate defaults have shaken the trust of the debt mutual fund investors. You may or may not get your invested money completely if the borrower of your fund fails to fulfil its commitment. Moreover, the fluctuation in interest rate may affect your return on investment. The right selection of debt mutual fund involves factors like the size of the mutual fund, duration of securities held by the fund and investment grade of the borrowers in the fund. Although such information is available in public domain, however, you need to carry through research by investing your time.
Since few years, Non-Convertible Debentures(NCDs) are popular among investors due to their offering of higher interest rates. However, as an investor, it is recommended to carry out a thorough investigation of the company who offers NCDs. Apart from credit rating, the track record of the past ten years or more should be taken into consideration. Many NCDs can offer a higher interest rate by classifying their debentures as “Unsecured”. As the name suggests, you cannot get your money back in case of default of the company. The risk-averse investors should maintain distance from unsecured NCDs.
Public Provident Fund
The new financial year has started and you can invest the fresh amount in your Public Provident Fund(PPF) account. Because of the sovereign guarantee, your money in the PPF account is safe. Moreover, the income interest from the PPF account is completely tax-free. In spite of such a safety net, PPF may not be the ideal choice for many investors due to two reasons: First, it has an investment limitation of Rs. 1.5 lacs per year. If you want to invest anything more than 1.5 lacs, the right choice is a fixed deposit. The second drawback of the PF account is accessibility in an emergency. Based on the age of your PPF account, you can withdraw only part of your balance. Moreover, being a socially important account you may have to perform more paperwork to withdraw your money in an emergency. Again, to overcome such a situation, a fixed deposit can be your friend in need of urgent money.