10 Best Long Term Investment Options in India

Written By Sushma Singh

Are you thinking about making a long term investment soon and confused about the long term investment options available? Don’t worry, just go through our guide where we discuss 10 Best Long Term Investment Options in India.

Basically, when we invest for a duration of 5-6 years or even more than 10-15 years, then it is called a long term investment.

For instance, when someone starts saving money for his/her child’s education expenses, marriage, etc., it comes under long term investment. Based on the risk-bearing capacity of the individual, one can choose from a wide range of investment options.

Being a long term investor has its own pros and cons. These long term investments require huge commitment and patience.

Some investment carries high risk but also have the potential to generate high inflation-adjusted returns than other asset class in the long term, whereas some investments come with low-risks, thus low returns.

Moreover, the investment products fall into two buckets- financial and non-financial assets. Now the financial assets can further be divided into two categories –

  1. Market linked Product: Stocks and Mutual Funds
  2. Fixed Income Products: Public Provident Fund, Bank Fixed Deposits

And non-financial assets are gold and real estate, a lot of Indians invest in these modes. Now, before you choose any of the investment options, you must always keep a certain sum of money aside for some urgent crisis that may occur.

10 Best Long Term Investment Options in India

Here in this article, we have listed 10 best long term investment options where you can invest and smartly diversify your investment portfolio to grow your money.

#1.Public Provident Fund Investment

Whether you are a salaried person or a businessman, an investment in the public provident fund would be one of the best options. It helps you make a balanced investment portfolio and save income tax under Sec 80C.

You can open a PPF account at any national authorized bank, some particular private banks, and post office.

Key points to know about the Public Provident Fund:

  • It is a long term investment. Here the investment period is for 15 years.
  • The minimum amount you can invest in PPF is INR 500.
  • If you consider the income tax deduction under section 80C, then the maximum amount is INR 1,50,000.
  • Presently, the rate of interest on PPF saving is 7.9%.
  • You will earn compound interest on your investment.
  • The interest and maturity amount in PPF is tax-free.
  • You can only withdraw your investment amount after the 6th year.

Past 8 years’ interest rate on PPF investment:

Financial Year Interest Rate
2019-20 7.9%
2018-19 8.00%
2017-18 7.60%
2016-17 8.10%
2015-16 8.70%
2014-15 8.70%
2013-14 8.70%

#2. Direct Investment In Equities (Stocks)

As a general and genuine suggestion on where to invest in India for maximum returns, anyone would suggest you invest inequities.

As compared with other plans, the return on equities is the highest. Also, there is no upper limit on equities. Mostly all the investors get more than 20% return in their investment.

But as we all know, higher returns come with higher risks, and the same is the case with equities. Remember, there are always chances of both the rise and downfall in the share market. However, you can minimize the risk by investing wisely in equity.

You can invest in equities in these two ways:

  • Primary Market (applying for shares that are offered for the general public)
  • Secondary Market: (buying shares that are listed on the stock exchanges)

What should you keep in mind before investing in equity?

  • If you are a beginner or an amateur, then start by doing research to find out how it works. It will help you to avoid herd mentality.
  • Whenever you are investing, always have a vision for the long term. (Maybe 10-15 years if you want the best returns on your investment)
  • You must never invest all your savings in the stock market. Ideally, you should invest 50-70% of the total savings in the stock market. It will also help you in diversifying your portfolio.
  • Create a list of your favorite shares and perform thorough research on these shares’ past performance and the company’s future plans, then invest in shares.
  • Those who don’t want to do the research, you must never invest in random shares.

Also Read: Long term investment vs Short term investment

#3. Investing in Gold

Gold investment is a risk-free investment that would help you beat inflation in the long term. It can also be called as a liquid investment that gives you decent returns.

You can invest in gold in multiple ways, such as:

  • Buying Gold
  • Gold Funds
  • Gold ETFs(Exchange Traded Funds)

The traditional way of investing in gold is to buy gold. However, advanced investments like gold funds and gold ETFs allow investors to invest in gold without actually buying physical gold.

The investment made in companies that are involved in gold mining is the gold fund. Gold funds involve a minimum expense ratio ranging from 0.5-0.75%.

To invest in Gold ETFs, you will need a Demat account. In this, you will buy gold but not in the physical form. Moreover, changes in gold rates affect gold ETFs.

Asset management and Brokerage fees that may range between 0.5% to 0.75% are the charges involved in this investment.

Top 5 Gold ETF Schemes with Highest Returns

Mutual Fund Scheme 1 Month 3 Month 6 Month 1 Year 2 Year 3 Year 5 Year
SBI- ETF Gold 8.62 10.53 8.89 14.48 24.01 4.43 16.33
Religare Invesco Gold ETF 8.64 10.57 8.95 14.66 24.41 4.94 15.68
UTI Gold ETF 13.6 15.5 14.7 7.1 1 -1.9 6.8
Axis Gold ETF 13.4 15.4 14.6 7.2 1 -1.9 6.7
HDFC Gold ETF 13.5 15.4 14.3 7 0.9 -1.9 6.7

#4. Sukanya Samriddhi Account Yojana (SSA)

If you have a girl child, then you can go for the Sukanya Samriddhi Yojana. It is an investment scheme introduced by the Indian Government for only for the girl child. If you are looking for an investment option for your girl child with no risk involved, then this is the best investment plan to go for. However, the money deposited in SSA will be eligible for tax deduction under Section 80C up to the limit of INR 1,50,000 per annum.

Key factors to know before investing in Sukanya Samriddhi Account Yojana: 

  • You can open the account right from the birth of your girl child till she is 10 years old.
  • From the date of opening of the account, the tenure of this scheme is 21 years.
  • The minimum yearly investment is INR 1000, and the maximum investment limit is INR 1,50,000 per year.
  • In case of a financial emergency, you can withdraw 50% of the account. However, your child must have attained the age of 18 years for such withdrawal.
  • The account will automatically close at the time of your child’s marriage.
  • The current rate of interest is 8.4% (compounded annually).

Also Read: 9 Best Short Term Investment Options In India

#5. Mutual Funds

Mutual funds pool in savings of various investors to invest them in shares(stocks), fixed income securities or debt securities, etc.

Over the past few years, mutual funds have gained a lot of traction from potential investors. In simpler terms, you will be investing in stock and securities, but through mutual funds.

All the companies that manage these funds are called Asset Management Companies or AMC’s. These companies are regulated by the Securities and Exchange Board of India.

Mutual Funds are further divided into three categories:

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  • Debt Mutual Funds or Fixed Income Securities
  • Equity Mutual Funds or Stocks.
  • Hybrid or Balanced Funds

Debt Mutual Funds

Debt funds are the best options for investors who are looking for steady returns. These are less volatile; therefore, less risky as compared to equity funds. In debt mutual funds, the amount is generally invested in fixed-interest generating securities, such as corporate bonds, treasury bills, government securities, etc.

Presently, the 1, 3, 5-year market return is around 6.5%, 8%, and 7.5% respectively.

Top-performing Debt Mutual Funds

Tenure 3rd Year 5th Year
UTI-ST Income Fund 7.16 8.03
Reliance Low Duration Fund 7.49 7.95
Aditya Birla Life Savings Fund 7.89 8.43
HDFC Short Term Debt Fund 7.47 8.22
DSP Credit Risk Fund 4.4 6.7

Equity mutual funds

Equity mutual funds, the majority of investment is made into stocks. According to SEBI Mutual Fund Regulations, an equity mutual fund scheme should invest at least 65% of its assets in equities or equity-related instruments.

An equity fund can be actively or passively managed.

Now, even the equity schemes are categorized according to market-capitalization or the sectors in which they invest. Presently, the 1, 3, 5-year market return is somewhere around 15%, and 20%, respectively.

Top-performing Equity Mutual Funds

Equity Funds Returns
Tenure 3rd Year 5th Year
SBI Bluechip Fund 9.9 13.59
ICICI Prudential Bluechip Fund 13.36 12.08
SBI Magnum Multicap Fund 12.32 16.07
Axis Bluechip Fund 14.47 12.48
Mirae Asset Large Cap Fund 17.43 6.7

#6. National Pension Scheme (NPS)

National Pension Scheme is a government-approved pension scheme regulated by Pension Fund Regulatory and Development Authority (PRDA). The main objective of investing in NPS is building a retirement corpus for oneself. One can easily start investing at an early age of 18 years and until 65 years. However, it is mandatory for central and state government employees, while others can contribute to it if they want.

There are two types of Pension Accounts in the National Pension Scheme:

(i) Tier I Account: The non-withdrawable account. You can contribute to the NPS account where the investor cannot withdraw the amount till retirement.

For the Tier I account, the minimum annual contribution is reduced to INR 1000 from INR 6000.

(ii) Tier II Account: This is a withdrawable account. The investor can withdraw from the Pension account at any time.

In NPS, your money is invested in different asset classes as per your choice.

If you want to play safe, then you can invest in C or G classes. But if you want to take high risk, you can choose E Asset Classes. You can easily put a maximum of 50% in equity.

#7. Post Office Saving Scheme (POSS)

For investors who want to earn fixed returns, investment in the Post Office Saving Scheme would be the best option. Since this is a government scheme, so there are no risks involved.

What are the forms of the Post Office Scheme?

All these schemes are best suited for risk-averse investors, looking for guaranteed returns, and having long term goals.

#8. Unit Linked Insurance Plan

The unit-linked insurance plan is one of the safest long term investment. It offers benefits of both insurance and investment, and it comes with a lock-in period of 3 years to 5 years. Also, the plan offers a tax exemption.

Although ULIPs are not much recommended because of various charges involved, you can earn a decent return of 5-7% on your investment.

Top 5 ULIP Plans

Insurer & ULIP Name Fund Name 3 Years Return 5 Years Return 7 Years Return Maturity Value (Premium 5000 per month)
Bajaj Allianz Goal Assure Pure Stock 7.11 10.34 15.3 53.6L
HDFC Click 2 Wealth Opportunities Fund 5.42 11.54 13.74 48.6L
Edelweiss Tokyo Wealth gain+ Equity Top 250 Fund 5.75 9.83 14.71 55.8L
ICICI Signature Multicap Growth Fund 3.53 8.48 11.64 42.3L
SBI Life e-Wealth Insurance Equity Fund 7.84 8.9 13.01 45.4L

#9. Invest in IPOs

IPOs (Initial Public Offering) is no less than a “once in a lifetime” opportunity as it only takes place once for every company.

IPOs are slightly different from the average stocks as they have numerous risks associated with them. Now to make a wise investment decision, research about the company as much as you can.

Usually, companies look for long term investors who will hold their stock for a longer period of time. Therefore, if you are investing a certain amount of money, then keep it for a longer period of time.

#10. Real estate investment

Most of us wish to buy our own house one day or a piece of land where we can build our own home. If planned properly, you can invest your savings in the real estate sector as well. But make sure to be thorough and choose the right option as it involves huge investment.

Also, you need to be really patient to face the impact of fluctuating prices. Your property may or may not take years for appreciation. Since you will be investing a huge amount in the real estate, so to enjoy good returns, you need to plan things in a systematic manner.

Recommended: Top 50 Ways to Save Money in India 2020

The key to successful investing in real estate is to be cautious and be aware of the latest market trends.

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Sushma is a full-time blogger and financial expert. Join Sushma and 10,000 monthly readers here to learn how to save and invest your money wisely.

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