Life can be tough, and financial emergencies can pop up at any moment unexpectedly. These needs can be tackled if you have managed your finances well. If not, it is high time that you consider options that would keep you finance ready in the future. When you step into the investment zone, you will find numerous options. These options can be helpful for the future but are they suitable for you? This is the question that you should ask yourself while investing.
There are various investment sources in the market, but if you are a first-time investor, it would be wiser if you consider safe investment options. Options like Monthly Income Schemes (MISs), Public Provident Funds (PPFs) and Fixed Deposits (FDs) are easy to avail, and you can gain returns from them monthly or annually. You gain returns from these forms of investment based on the interest rates offered by the investment sources. The PPFs and MIS have a similar application process to FDs but function differently. Let us understand it briefly:
Monthly Investment Scheme: It is not among the popular investment options in India. It is a service offered by the banks and the post office. It is beneficial for the individuals who plan to invest their savings monthly for returns in the long term. MIS is also known for its faster liquidity of investment that would help an individual to withdraw the invested money at a discounted interest rate.
Public Provident Fund (PPF): PPFs are government curated investment sources. You can apply for them in the banks or the post office. The PPFs have a lock-in period of minimum seven years, during which you cannot withdraw your invested money. You can deposit your investment at once or keep paying during the course of 15 years.
Fixed Deposits: FDs are the most popular form of investment as they are easy to avail and have guaranteed returns. The application process for the Fixed Deposits is quite simple; you just have to deposit your money with your type of investment source (Banks or NBFCs) and choose the suitable period for your FD investment also known as maturity period.
These options may seem similar and beneficial at the same time, but they have different sources associated with them for investment. It might seem tough choice for people to choose between which one is better. To know more, you can differentiate between them on following grounds:
- Liquidity: In times of crisis, we turn towards our investments in the hopes of drawing funds from them. PPFs have a lock-in period of 7 years. Hence you might not be able to withdraw your investment during the lock-in period. MIS investments can be withdrawn on the monthly or quarterly basis, but this might affect your investment amount. On the other hand, you can convert your investment in FD from cumulative to non-cumulative returns which would help you manage your finances.
- The term of Investment: The term of investment decides the amount of time during which you can gain returns. The term of investment is also related to liquidity. Hence, it is essential that you plan your investments according to your financial condition. In FDs, the minimum term of investment is 12 months and can range up to 60 months. In Monthly investment Schemes, you can avail a maximum term of investment up to 10 years. Wherein, PPF can be a part of your long term plan. As it has a lock- in period of 7 years, you cannot liquidate your PPF investment. PPFs maturity period can range up to 15 years.
- Investment amount: Since MIS are also flexible regarding investment, the minimum investment amount starts from around INR 1,500 and can range up to INR 4 lakhs. You can start a PPF account with a small amount of INR 500 and can go up to the maximum amount of INR 1.5 lakhs. For FDs, you need a minimum amount of INR 25,000 and which can go up to INR 1.5 lakhs.
Investment security can be among the prime concerns of an amateur investor. Since MIS, FDs and PPFs have their benefits regarding security, liquidity and investment amount, it is recommended that you choose a loan which meets your expectations and suits your financial condition.