Investing can help you grow your wealth over time and help you achieve your financial goals. Returns from investments can be used as an additional source of income. However, with so many plans available, you must ensure your investment portfolio is diversified to balance risk and return.

What are the best investment plans for a middle-class family?

Unit Linked Insurance Plan (ULIP)

ULIPs provide the dual benefit of both insurance and investment. They allow you to invest in financial goals such as, buying a home, child's education, wedding or retirement. They also offer a life cover¹ to secure your loved ones in case of an unfortunate event. These help you to grow your savings and secure your financial future.

Savings or Endowment Plans

Savings or endowment plans ensure financial security for your loved ones while also helping you save for your goals. These plans provide stable returns to help grow your savings over time. They also offer a life cover¹ to your loved ones in case of an unfortunate event. This makes them a smart investment option for long-term financial planning.

Fixed Deposits (FD)

FDs are one of the safest investment options provided by banks, post offices and Non-Banking Financial Companies (NBFCs). FDs typically have a minimum deposit amount, however, there is no upper limit on how much you can invest. When your FD matures, you will receive both the original deposit and the interest earned, making it a great way to grow your savings.

Sukanya Samriddhi Yojana (SSY)

SSY is a government-backed savings plan designed for your girl child. It allows you to make annual investments and prepare for your child's financial needs, such as education or marriage. These plans offer a minimum payment period of 15 years, while the account matures after a minimum of 21 years.

Public Provident Fund (PPF)

PPF is another government-backed savings plan that allows you to plan for your financial goals. The amount you invest each year is eligible for deductions up to Rs 1.5 lakh under Section 80C^* of the Income Tax Act, 1961. Apart from this, the interest and maturity proceeds are also exempt from tax.

Employee Provident Fund (EPF)

Under EPF, employees and their employer contribute an equal amount every month based on the employee's basic salary. The combined amount is then deposited with the Employee Provident Fund Organisation (EPFO). You get a certain rate of interest every year on this amount.

Mutual Funds SIP

Mutual funds are market-linked funds that allow you to invest your money in different types of securities, such as equity, debt and others. They also provide an option to invest through a Systematic Investment Plan (SIP). This enables you to make regular investments at your preferred frequency, such as monthly, quarterly, annually or even weekly.

Gold

You can invest in physical gold by purchasing jewellery, bars or coins. You can also buy gold virtually through mutual funds that invest in gold. This helps balance the effects of inflation. Since it is not a market-linked investment, gold also allows diversification and lowers your portfolio's overall risk.

Stocks

Stocks or shares are issued by public companies and traded on the Stock Exchanges. Unlike other investments, there are no limits on the amount or duration of investment. They can be bought and sold at any time. The returns from stocks vary based on market fluctuations. It is advisable to keep monitoring your stocks regularly to ensure your investments align with your financial goals.

National Pension Scheme (NPS)

NPS is a government-backed retirement savings plan. You can invest in a mix of equity, debt and other assets to build a retirement fund. During your working years, you can contribute regularly to a pension account. After retirement, you can withdraw a part of the fund as a lump sum. You receive the remaining amount as a monthly pension post your retirement.

Investment plans according to life stages

Wondering which is the best investment plan in India for the middle class? Here is a breakdown of suitable investments based on the life stage you are in:

First job

The right time to begin your investment journey is as soon as you start earning. This ensures your investments have enough time to grow. You can invest in market-linked options such as ULIPs, mutual funds and stocks. These offer potentially higher returns but are also associated with higher risk. However, staying invested for a longer term, can help balance out market fluctuations.

You can also consider investing in a term insurance plan early in your career as the premiums are lower when you buy at a younger age. This will also help you save taxes by claiming a deduction under section 80C* of the Income Tax Act, 1961.

Buying a house

If you are planning to buy a home some years down the line, you can invest in an endowment or savings plan. This can help you build a financial foundation ensuring you are well-prepared for these purchases. It is a disciplined approach to saving, allowing you to secure your dream home.

If you are planning to take a home loan, you can go for a term plan to secure your loved ones. In case of an unfortunate event, your loved ones receive a large life cover¹ to help pay off any outstanding debts.

Marriage

At this stage, with increasing responsibilities, it is essential to identify and prioritise your financial goals. This will help align your investments to your milestones. You must consider the amount you will need for each goal and the time you have to invest.

To strengthen your financial plan, you can explore a term plan, which ensures long-term security for your loved ones. You can also consider enhancing the life cover¹ with a critical illness rider. The amount you receive under this rider can be used to cover unexpected medical expenses.

Birth of a child

AWelcoming a child brings new responsibilities and the need for child education planning. Your child’s aspirations may include becoming a doctor, pilot, data scientist, entrepreneur, or any other. You must keep in mind their goals and can consider investing in ULIPs or child insurance plans. These plans can help you secure your child’s future

Pre-retirement

At this stage, you have many responsibilities like taking care of your spouse, child, aging parents, outstanding loans and so on. However, you must also start thinking about retirement planning. You can choose pension plans or NPS to help you save regularly and build your retirement fund.

If you are already building a retirement fund, you might consider investing in deferred annuity plans as well.

Retirement

Once you retire, your regular income stops. However, you want to maintain your current lifestyle post-retirement, be prepared for rising healthcare costs and be financially independent. You may also have goals like pursuing a hobby, starting a venture, travelling and more.

Immediate annuity plans are great options to secure your post-retirement years. They provide fixed regular income after retirement which continues for life. These plans can also help cover any unexpected expenses.

Conclusion

There are several financial instruments available in India for the middle class. To make the most of these options, it is essential to first identify your financial needs and then review the plans carefully to ensure they align with your goals before investing.