Millennials, also known as Generation Y, are willing to take more risks than Gen X. They never feel satisfied with the fixed earnings and the merger returns generated from those selected sources of revenues. Gen Y has a high-risk appetite and is willing to generate higher returns by investing in high-risk investment options. The equity market has given a plethora of investment options to get high returns. The young generation is inclined towards the best investment plan with the perfect combination of tax saving and optimal returns.
The millennials born between 1977 and 1995 believe in the golden rule of initiating an investment at the age of 25-30 and escaping sufficient time to make a diverse investment portfolio. As per the estimations made by the financial expert, the Indian market is blooming well, and there is no chance for it to fall in 2023. Thus, a suitable investment in the right instrument at the right time is crucial for Gen X to draw high returns.
Following are some financial instruments that are compatible with the current market status and can offer the option to invest money smartly in 2023. If you are a millennial, you must consider the following options.
1. Public Provident Fund (PPF)
The strategy of the millennials is to initiate the investment early so that they can generate an enormous corpus and reap the benefit of compounding. They can secure higher returns under the long-term investment option if they plan well and execute accordingly. The minimum investment in PPF is as low as ₹ 500 in a financial year, which is considerably easy to bear. One can invest a maximum amount in PPF of ₹ 1.5 lakhs in a year. The current PPF interest rate is 7.1 percent, which may vary slightly and falls approximately 0.25% to 0.75% up or down. The best part is that the investment and the interest generated through PPF are tax-free. The Public Provident Fund mature in 15 years. The risk level is absolutely nil; hence, the investment is safe.
2. Unit link Investment Plans (ULIPs)
ULIPs offer an array of investment options, including debt, equity, and balanced funds, which come with a combination of both equity and debt. Now, it depends upon the risk appetite of an individual to choose the one among them. It offers the dual benefit of life insurance coverage with wealth accumulation. The ULIPs are among the most suitable and the best investment plans for millennials in 2023. ULIPs have additional benefits like tax-free returns, low cost, structuring liquidity, and an opportunity to switch funds. Unit link Investment Plans fall under section 80C; hence, it is tax-exempt up to ₹ 1.5 lakhs. Though it usually begins with a minimum of ₹ 1500/- the maximum investment depends upon the investor’s capacity. There exists a five-year lock-in period after which the policyholder is allowed to withdraw the fund without paying any penalty. The benefit is that most insurance companies have reduced the premium allocation charges, making it a favorable investment option. The risk associated with ULIP plans ranges from medium to high.
3. National Pension Scheme
National Pension Scheme was launched in 1999 by the Pension Fund Regulatory and Development Authority. A national pension scheme is the most suitable and the best saving scheme for those who are seeking to build a sound retirement fund in a government-operated pension scheme. Its best feature, which makes it one of the best investment options for millennials, is its diversified portfolio which includes a perfect blend of equity, fixed deposits, government bonds, corporate bonds, and liquid funds. Investors can acquire tax deduction under section 80C up to the amount of ₹ 1.5 lakhs, while it allows an additional tax exemption under section 80CCD (1B) of ₹ 50000/-
One can open the NPS account with merely ₹ 500/- while, one can keep it active by depositing a minimum of ₹ 1000/- in a year. However, there is no upper limit for the investment. The withdrawal is restricted till the account holder turns 60. At the age of 60, one can withdraw a maximum of 60% of the total amount, while using the remaining 40% in a pension scheme of your choice is compulsory.
4. Equity Mutual Funds
These days, equity mutual funds are gaining more popularity among millennials because of their attractive features. It is the safer
option that provides higher returns as the investment is under the investor’s control. Investment can be made through SEBI-authorised agencies or stock brokerage companies. One can invest a minimum amount of ₹ 1000/- but no cap exists for the maximum amount of investment. There is no lock-in period to redeem the amount except for equity-linked saving schemes for which a three-year lock-in period exists.
These are popular due to the higher returns that they offer. Sometimes, the returns reach more than 20% in the long run. Alongside, you have control over the investment, meaning you can opt for a more extensive portfolio with a higher risk appetite. The best part about mutual funds is that the investment fund gets diversified and also offers tax benefits up to ₹ 1.5 lakh under section 80C of the Income Tax Act. To get the best result, one must invest for the long term in equity mutual funds.
5. Insurance
The pandemic has made us realize and accept life’s uncertain and darker phases. The millennials should prioritize health insurance to protect them against unforeseen circumstances. Besides health insurance, numerous insurance products can serve separate purposes. Life insurance investment offers tax benefits and acts as a safety shield in an emergency. Opting for health or life insurance for millennials is easy because the insurance company considers them low-risk; hence, they can get the insurance product at a considerably low cost.
Further, insurance policies are tax-free, up to ₹ 1.5 lakh. By investing in insurance products, millennials safeguard their as well as their family members’ lives. Term insurance is also a good product that a millennial should opt for to protect the future of their family members.
Bottom line
The investment market is full of options. Several products are available for millennials to invest in, but one must take a research-driven approach to opt for the perfect combination of the best safe investment options. One must cautiously check the risk appetite, the investment requirements, and the financial goal before choosing the best saving scheme and making an investment decision.
