Recently, the government kept interest rates on small savings schemes, including PPF, NSC and SCSS unchanged for the second quarter of 2021-22 amid the COVID-19 pandemic.
According to Shams Tabrej, founder and CEO at Ezeepay, the unchanged rates will help the investors have more time to use up these schemes offering better yields as compared to many other income options.
“The small savings schemes will continue to fetch small investors better rates than other fixed income avenues such as bank fixed deposits (FDs),” Tabrej says.
Small savings schemes, as we know, encourage the general public to have savings. They do not involve any risk and have guaranteed returns.
However, according to Tabrej, the most crucial decision before savings is the amount which investors commit to saving and time horizon, which should be at least for 5 years.
“In the beginning, one can start with a small amount which can gradually increase over time,” he suggests.
Talking about the five-year time horizon while investing in a small saving scheme, Abhinav Angirish, founder Investonline.in points out that it should be goal-based.
Assuming, Angirish further tells, an investor saves for his/her children’s education, it’s crucial to take inflation into account. For example, he explains, twenty years from now, an MBA course costing Rs 10 lakh today might cost upwards of Rs 40 lakh.
“Though interest rates on such schemes are fixed by the government, they are still determined by the market forces. This must be remembered and invested accordingly,” he advises.
However, Angirish added that if the goal is a few years away, investors can consider a part of their amount in equity mutual funds.
“Given the fact that equity mutual funds have delivered compounded annualised returns of 15 percent per annum, they make an ideal investment bet to grow money and beat inflation,” he illustrates.
Agam Gupta, spokesperson of Share India Securities Ltd also believes that investing in mutual funds especially tax savings mutual funds is a great idea when it is goal-based.
However, it is advisable to consult one’s financial advisor before making any decision.
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