Salaried individuals are quite different from self-employed or professional ones. They tend to have a fixed monthly cash flow where they need to meet their expenses and save for various short term and long term goals. Most of the salaried person in India is often guided by the paycheck-to-paycheck living where they live through the amount that they pocket. It’s not as if the salaried person is averse to investment, in fact, it’s the other way round. They equally want to participate in the investment and let their wealth grow but cannot do so because of limitations and binding.
We here look at the struggles and present-day situation of a salaried person in India and look forth to find the best investment option for them. Read along.
Salaried person and their limitations
Often times when it comes to investment salaried person are limited by the boundary and the limited supply of money that they yield. A salaried person receives a paycheck in regards to their work which often times are bifurcated to meet the expenses like food, lodging, travel, health needs, EMI’s and much more. A salaried middle-class person often lives throughout the month with the hope of seeing the salary credited to the account in order to fulfil those responsibilities.
Add that to the other family-related needs and care that they need to oblige too, they are hardly left with anything to venture into the investment scene. But many salaried people still find enough to venture into investment options in the market. The only major drawback even though they are investing, the options that they go for are not the optimum ones.
Present-day Investment scene for Salaried person and its struggles
Traditionally, India has had a strong desire for fixed deposit, gold, and real estate investment. It’s no surprise that salaried person also thinks of these ones as the prominent options to go for. But thinking of it practically, a salaried person has a limited supply of money and with the same, they can venture into fixed deposits or in Recurring Deposits. Some of them also opt for equity-based investment while those with large savings go for something like gold and real estate.
The major investment options regarding the salaried person in India are Equity investment, Public Provident Fund, National Pension Scheme, Bank Fixed Deposit and Unit Linked Insurance Plan. These investment options are one of the practical options around yet they also tend to go through some tough struggles. For say investment options like Public provident fund and National pension scheme, these require you to lock-in your amount for a large period of time and the return is pretty low at around 8%. As for the fixed deposit, the returns are around 7% in the market. If you take into consideration the aspect of inflation, then the net returns for the same would amount to a mere 3%-4% after inflation and taxation. This is a very poor return on your invested money.
Meanwhile, the equity market suffers from the inbuilt fear and myth among people that equity investment is a risk and requires a large pool of money to invest in what has limited the investment in this field. There are still fractions of people who deem equity as a risky venture and term it in accordance with gambling which in itself is a myth. Equity investment hasn’t had the facility to upscale majorly due to the ongoing fear and myth about it.
But it’s not all dull and gloom as there is an investment option that befits the salaried person. We’ll talk about it down below here.
What is the best investment option for a salaried person in India?
Although equity in itself has suffered from the misconception of risky and a gamble, it is still the best investment plan for wealth generation in India. Historically equity has offered better returns at 15%-20% in comparison to other investment options. Equity is a great investment plan and you don’t even need a large pool of money to start with.
You can opt for Equity Systematic Investment Plan where you can start slow and low without the fear of losing out your money. Equity Systematic Investment Plan works in a way where you can invest either a specific amount of money or buy a fixed number of shares on the trigger date.
What is Equity Systematic Investment Plan?
Equity SIP is an investment plan where an interested investor can purchase the shares periodically in a systematic manner. This allows the user to purchase the shares by investing small amounts without having the need for a lump sum payment straightaway.
There are two different ways you can opt for equity SIP in the form of amount based SIP where you divide the SIP by the market price per share. Herein you have to invest a fixed amount for a period of time as decided by the intended investor. Another option is the quantity based SIP wherein you have to purchase a fixed amount of share for a specified period of time.
Benefits of investing in Equity SIP for a salaried person>
Here are the benefits of Equity SIP for a salaried person. Read along.
- A salaried person can start their investment into equity without having the need to invest a lumpsum amount.
- It helps in capital appreciation and offers a larger corpus later in life in comparison to other investment options.
- Investment in equity helps to provide a higher return in the range of 10%-13% in comparison to the other choices of investment.
- It helps to bring forth a disciplined nature as equity SIP helps you to avoid disastrous calls on the market timings and trends.
- It helps to average out the cost in the long run.
A salaried person is often bound by the limited amount and cannot call upon many investment options even though they harbour such intention. This is where Equity SIP can help a salaried person to invest in the equity and enjoy the privilege of higher returns rather than going for the traditional choices which do not help build the wealth in the same vein as equity.