Most of us (after 45 years) wish to put around at least 20-25% of the corpus to debt instruments. Considering a 33% tax bracket and long-term goals.
Obviously, 1. The emergency funds are in short-term FD/Debt funds. 2. 1.5 lakhs goes to PPF, and 3. Also, to the Sukanya Samriddhi Yojana, if applicable.
For the rest, what are the best options?
1. FD -
Pros: Easy to open, fixed rates for the tenure, risk-free (most banks).
Cons: Lock-in period, more old-school, Penalty for premature closure, pay tax on gains even if you do not encash, not ideal for very long-term goals (you are tempted to withdraw once in a while)
Expected returns post tax (33% slab, non-senior residents) - 4 - 4.5%
2. Debt MF
Pros: Very transparent, no lock-in, easy to withdraw, no tax is paid until withdrawal, and considered more trendy.
Cons: Returns vary, credit risk, exit load, not ideal for very long-term goals (you are tempted to withdraw once in a while)
Expected returns post tax (33% slab, long-term funds) - 4 - 4.5%
3. Insurance schemes
Pros: Fixed income plans, earlier 7% tax-free guaranteed returns (now 6%), tax-free up to ₹ 5 lakh per PAN, ideal for very long-term investments, as you are locked in.
Cons: The whole (social media) world hates it!, 15-20 years lock-in.
Expected returns post tax (33% slab, non-ULIP) - 6%
Anything else am I missing (for a routine investor)
Obviously, 1. The emergency funds are in short-term FD/Debt funds. 2. 1.5 lakhs goes to PPF, and 3. Also, to the Sukanya Samriddhi Yojana, if applicable.
For the rest, what are the best options?
1. FD -
Pros: Easy to open, fixed rates for the tenure, risk-free (most banks).
Cons: Lock-in period, more old-school, Penalty for premature closure, pay tax on gains even if you do not encash, not ideal for very long-term goals (you are tempted to withdraw once in a while)
Expected returns post tax (33% slab, non-senior residents) - 4 - 4.5%
2. Debt MF
Pros: Very transparent, no lock-in, easy to withdraw, no tax is paid until withdrawal, and considered more trendy.
Cons: Returns vary, credit risk, exit load, not ideal for very long-term goals (you are tempted to withdraw once in a while)
Expected returns post tax (33% slab, long-term funds) - 4 - 4.5%
3. Insurance schemes
Pros: Fixed income plans, earlier 7% tax-free guaranteed returns (now 6%), tax-free up to ₹ 5 lakh per PAN, ideal for very long-term investments, as you are locked in.
Cons: The whole (social media) world hates it!, 15-20 years lock-in.
Expected returns post tax (33% slab, non-ULIP) - 6%
Anything else am I missing (for a routine investor)
