In this article, we are discussing the various financial instruments available in India for individuals to Invest and grow their wealth. The goal of any investment should be wealth creation in the long term. The risk appetite and investment horizon for each instrument are different. Investors can choose financial instruments according to their financial goals, investment terms and risk appetite.

Here is a list of some important financial instruments available in India for investment:

Equity Shares

Equity shares are commonly known as stocks, they represent the ownership in a company and offer investors a way to participate in the company’s success and growth. Equity shares can be bought and sold on stock exchanges. Stock exchanges, such as the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE), provide platforms for buying and selling equity shares. Investors can buy and hold stocks with the expectation of capital appreciation and potential dividend income.

Mutual Funds

Mutual fund houses collect funds from multiple investors and create a larger fund for investment purposes. Investors can invest in Mutual funds by way of Systematic Investment Planning (SIP) or through Lump sum investment. The Securities and Exchange Board of India (SEBI) regulates the mutual fund industry in India. The investor can invest in various types of funds as per their risk appetite and financial goals. Equity, Debt, Hybrid, Index, Sectoral funds and Exchange Traded Funds (ETFs) are some important types of mutual funds.

Fixed Deposits (FDs)

Fixed Deposits, also known as Term Deposits, are offered by banks and financial institutions. Investors can deposit a lump sum amount for a predetermined period and interest rate. The tenure for FDs varies from a few days to several years. Fixed deposits have fixed returns and are considered as safest investment option in India. Banks and financial institutions offer higher interest rates to Senior citizens.

Public Provident Fund (PPF)

The Public Provident Fund (PPF) is a popular long-term savings and investment scheme in India, backed by the government. Introduced in 1968, PPF is known for its safety, tax benefits, and the provision for wealth accumulation over a substantial period. PPF comes with a fixed tenure of 15 years. However, account holders have the option to extend it in blocks of 5 years indefinitely. The interest rate on PPF is declared by the government and is compounded annually. The rate is subject to periodic revisions but generally offers attractive returns. Account holders can deposit a minimum of ₹500 and a maximum of ₹1,50,000 in a financial year. Deposits can be made in one go or in multiple instalments, not exceeding 12 in a year. Investments made in PPF are eligible for tax deductions under Section 80C of the Income Tax Act. Partial withdrawals are allowed from the 7th financial year, and the entire corpus can be withdrawn only after the completion of 15 years.

National Pension System (NPS)

The National Pension System (NPS) is a voluntary, long-term retirement savings scheme designed to enable systematic savings and provide financial security during old age. Launched in 2004 by the Government of India, NPS is managed by the Pension Fund Regulatory and Development Authority (PFRDA). NPS is open to all citizens of India, including employees from the private, public, and unorganised sectors. Both salaried and self-employed individuals can participate.

NPS comprises two tiers – Tier I and Tier II. Tier I is a mandatory, long-term retirement account with restrictions on withdrawals. Tier II is a voluntary, short-term savings account with more flexibility in withdrawals.

Subscribers can claim tax benefits under Sec 80 CCD (1) within the overall ceiling of Rs. 1.5 lac under Sec 80 CCE. Subscribers can claim an additional deduction under Section 80CCD(1B) for contributions up to ₹50,000 per financial year.

Sovereign Gold Bonds (SGBs) in India

Sovereign Gold Bonds (SGBs) represent a unique investment avenue for individuals in India seeking exposure to gold while enjoying the benefits of government-backed security. Launched by the Government of India, SGBs combine the stability of gold with the income element, making them an attractive option for investors. SGBs are issued by the Reserve Bank of India (RBI) on behalf of the Government of India, making them a sovereign-backed investment. SGBs are available in denominations of one gram of gold, making them accessible to a broad range of investors. Resident individuals, Hindu Undivided Families (HUFs), trusts, universities, and charitable institutions can invest in SGBs. With the backing of the government, fixed interest income, and potential for capital appreciation, SGBs offer a unique proposition for those looking to diversify their investment portfolios.

In summary, this article has provided a comprehensive overview of diverse financial instruments available for investment, catering to a spectrum of investor preferences and risk appetites. Equity shares offer ownership in companies, presenting the potential for capital appreciation. Public Provident Fund (PPF) combines safety with tax benefits, making it an attractive long-term savings option. Mutual funds pool resources from multiple investors, providing diversification and professional management. Fixed deposits offer stability and guaranteed returns, appealing to risk-averse investors. The National Pension Scheme (NPS) offers a systematic way to build a retirement corpus with a mix of equity and debt instruments. Sovereign Gold Bonds provide a unique avenue to invest in gold while earning interest. Each financial instrument discussed here carries its own set of advantages and considerations, allowing investors to tailor their portfolios based on individual financial goals and risk tolerance.