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Here are some options for Investment planning in 2011

   Efficiently planning your investments well ahead ensures threefold benefit. Investment planning helps you save on taxes, build a strong portfolio and enhances future wealth. An individual's investment plan should strive to meet his financial goals in line with his risk appetite.


   There is a wide variety of investment choices, including stocks, bonds, mutual funds, bank deposits, real estate, and futures and options. Apart from these, you may also have a need for an insurance risk cover and retirement savings. Investment planning helps you in arriving at a portfolio mix that meets your financial goals comfortably.


   Your financial needs over the years dictate your investment picks For instance, people who require lump sum funds at periodic intervals within the next 12 months must repose their faith in fixed income instruments such as bonds. On the contrary, those who invest with a long-term perspective look for capital growth through investments in stocks, real estate and mutual funds.


   Here are a few instruments, a mix of which promises both stability and returns from your portfolio:

Systematic investment plan    

Starting a few systematic investment plans (SIPs) for the next year may not be a bad idea. A SIP involves investing a fixed amount at regular intervals rather than investing a lump sum amount. In case of SIPs, when markets fall, investors automatically acquire more units. Similarly, investors acquire lesser units when the market trend is upwards.


   Essentially, the investor buys less when the price is high and buys more when the price is low. Consequently, the average cost per unit drops down over a longer period of time.


   Investors can buy units of diversified equity funds and balanced funds regularly through a SIP.

Monthly income plan    

Consider a monthly income plan (MIP) if you are an investor with a low or moderate risk appetite who requires liquidity. Since they invest 75 to 80 percent in debt instruments and the remaining in equity, MIPs yield better returns than pure debt instruments. The debt portion of investments in a MIP ensures stability while the equity exposure boosts the returns.


   Investors with moderate risk appetite can benefit from these mutual fund schemes. You can also opt for such schemes if you are looking for monthly returns from your investments.

Public Provident Fund    

The maximum amount you can deposit every year is Rs 70,000. With a handsome return of eight percent, this is a lucrative investment opportunity. The amount invested is eligible for deduction under the Rs 1 lakh limit of Section 80C. On maturity, you pay absolutely no tax.


   PPF is recommended for both moderate and low risk investors.

Gold exchange-traded fund    

The yellow metal is an excellent option in the current high inflation scenario. Further, you can mitigate the effect of market volatility by diversifying 5- 10 percent of your money in physical gold or gold exchange-traded fund (ETF). Some invest in units of gold ETFs spread across the year.


   Depending on your target quantity of gold to be purchased in the year, investing at regular intervals also helps you soak in volatility in the price of gold.

Real estate

If you live in a rented accommodation then explore if you can afford your own roof. Apart from tax benefits on loan repayments, an investment in a house appreciates in value over the long term.


Here are some investment options eligible for tax exemption:

Under Section 80C

Employee Provident Fund Public Provident Fund (up to Rs 70,000 per annum) National Savings Certificate 5-year bank fixed deposit Endowment life insurance policy Equity-linked mutual fund saving scheme Unit-linked insurance plan School fees Home loan principal repayment The deduction eligible is up to Rs 1 lakh.

Under Section 80D

Medical insurance for yourself, your spouse, dependant parents and children is eligible for deductions up to Rs 15,000 (and additional Rs 15,000 for your parents' medical insurance) for the premiums paid.

Under Section 80CCF

Investing in specific infrastructure bonds gives an extra deduction of Rs 20,000.

Plan ahead

Procrastinating investments to the last minute lands you with worthless products that do not meet your requirements. Planning well ahead gives you enough time to invest in products that will suit your needs.

 

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