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Little drops make a mighty ocean. From
childhood we have been taught to save for the future. Opening a savings account
has become a necessity once you cross 18 years of age to manage your own
finances. However, there are other high yielding instruments that you do not
want to overlook as an alternative option to savings account.
There are both long and short-term
instruments that give better returns when compared to savings account. However,
one cannot deny the usefulness of the savings account in terms of facilitating
financial transactions at ease. If you want better returns, alternate vehicles
could help you here.
#1. Liquid
Funds
This is typically debt mutual funds that
can be short-term investment instruments. This includes treasury bills,
certificate of deposit, commercial paper, government securities etc. This type
of instrument fetches returns with interest rate of up to 8% per annum for
short-term investments. The investors can park the funds for a few days or
months to earn returns for the holding period. However, the returns are subject
to market risks.
Besides the higher returns, liquid funds
get you tax benefits when compared to savings account. An individual who comes
under higher tax bracket will have to pay high amount of interest in savings
account. In mutual funds, long-term capital redeemed after a year will attract
20% of after indexation which is a huge tax benefit.
#2. Ultra-Short-Term
Funds
This is a kind of debt fund which is very
much close to liquid funds except that it can mature before 91 days. These short-term
funds can be invested in securities that can mature within a week to 18 months.
The returns are little higher and quicker than the liquid funds.
#3. Recurring
Deposit
This is another popular vehicle that allows
an individual to earn a fixed return at the end of maturity date after having
deposited a small amount regularly every month. Generally, the interest rate
may range between 4.5% to 8% depending on the tenure of the investment. When
compared to savings account, this account gives you higher returns, however,
you cannot withdraw money anytime you wish. You may have to pay a penalty for
premature withdrawal.
#4. Gold
ETFs
Investing in gold is preferred by a lot of
people in India to get high returns in a long term. You no longer have to buy
gold in physical form for investment. You can now buy Gold ETFs (Exchange
Traded Funds) online and get the returns in the long-term as per the market
value of that time.
This is a kind of open-ended mutual scheme
that does not have any risk of theft. You can either sell the gold ETFs as per
the market value or buy the gold in physical form. The interest rate ranges
between 3.5% to 7.5% per annum.
Conclusion
You may not have been familiar with the
above-mentioned alternatives before. Though these options bring higher returns,
a careful study and research are essential before investing in them.