Diwali is the festival of joy, traditions and new beginnings. New clothes, jewellery, delicacies; the festival has it all. Across the country eager investors, await the festival to make new investments, as the legendary belief is that the money spent on Diwali would shower more prosperity in the coming New Year. Keeping this mind, we though it apt to suggest five great investment beginnings for this festive season. We hope the festival of light brings with it more wealth and prosperity, to each and every one of you.
1. Index Funds
The symbolic ritual of Muhurat trading in the stock market every Diwali is considered auspicious in the beginning of the traditional New Year. For those who aren’t familiar with the muhurat trading or lack the time for active trading, the index fund is a perfect option.
What is it?
Index funds replicate the stock market index (such as the BSE Sensex or the S&P CNX Nifty) by investing in the same stocks that constitute the market index. For example if you consider a Nifty index fund, it would invest in the same 50 companies, in the same proportion, that make up the Nifty.
Key Features
Costs -These funds are generally lower in cost in comparison to other funds, with an annual maintenance charge of around 1 to 1.5%, as fund managers just replicate the index without any active portfolio management.
Transparent and easy for investors to understand the composition of the fund.
Returns in line with the index- You stand to gain as the index moves up. However volatility of the index affects the returns on the fund too.
Who is it suitable for?
These funds are suitable for beginner equity investors and for those who lack the time and inclination to constantly monitor the stock market movements.
2. Gold ETF
Diwali is the time to buy precious metals, especially gold. Apart from the festive significance, gold is a great tool to hedge inflation. Here is a newer way to invest in the metal through gold ETFs.
What is it?
Gold Exchange Traded Fund (ETF) is very similar to your open ended mutual fund. Your money here is invested in standard gold bullion of 0.995 purity. The price of each unit of the fund is based on the price of 1 gram of gold. As the price per unit of gold increases, your fund appreciates in value.
Key Features
- Purity of gold assured
- Possibility to invest in small denominations of gold
- A convenient way to store gold – You would no longer need to stack up jewellery or bars in those bank lockers or at home.
Who is it suitable for?
An ideal option for investors, keen on having gold as an asset in their portfolio.
3. Children’s Education Plan
Diwali is the time to shower blessings on our children. On this occasion, gift your child with a plan that would aid his educational milestones in the years ahead.
What is it?
Childrens education plans offered by insurance companies are designed to meet the costs of education of your child. Such child plans also come with a life cover for the parent, in case of any unforeseen event. Some of the plans also capitalize on market opportunities, to generate higher returns.
Key Features
- Sum Assured to the beneficiary.
- Partial money back at key educational milestones of your child.
- Tax benefits as per prevailing tax laws.
Who is it suitable for?
A child plan is suitable for investors who wish to have a single plan that lets them save for their child’s higher education, plus have provides protection and tax saving. Plans may be market linked and therefore involve risk. So choose the one that suits your risk appetite and financial goal the best.
4. Family Health Plan
Wealth, health and prosperity go hand in hand. A health plan for your family would be a good investment this Diwali to protect them from all health concerns.
What is it?
Family health or floater plans is a comprehensive health insurance cover for your entire family against sudden illness, surgery, accidents or even terrorist activities.
Key features
- Works out more cost effective than individual plans
- Convenience of having one policy instead of multiple policies for different family members.
- Age groups covered start from around 5 months to 80 years
Who is it suitable for?
Ideal for all families. Health insurance should be a priority in all households.
5. Company Fixed Deposits
For those wishing to earn a bit more on their Diwali bonus investment, fixed deposits floated by company could be a help.
What is it?
Companies float fixed deposits to raise capital for their operations. These deposits are unsecured instruments, unlike bank deposits which are insured up to a sum of Rs. 1Lakh.
Key Features
- Offer a higher rate of interest anywhere in the range of 9% to 15% p.a.
- Rated by agencies to help you understand the stability and outlook of the company.
Who is it suitable for?
Company fixed deposits are suitable for moderate to high risk appetite investors, keen on earning a bit more on their investments. These fixed deposits carry a default risk. So investors have to tread cautiously before investing.
