Written by : Knowledge Center Team
2025-07-04
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8 minutes read
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Is your wealth growing along with your salary hike? In today’s world of consumerism, it’s hard to keep your lifestyle expenses in check. One practical way to manage this is by following a smart investment plan and setting aside money regularly.
Since expenses rise due to general inflation, it is important to understand how much and how to invest your money. A good investment plan will help you strike a balance between your spending and savings.
So, you can ensure a good lifestyle today and a better lifestyle tomorrow.
Key Takeaways
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Why should you Invest Money?
Investing money is the third step toward building financial stability, after saving and setting clear goals. First, you need to save and then plan your investments to meet your short, mid and long-term needs. As the cost of living rises steadily, today’s income may fall short in the future. From buying a home to funding retirement, life is full of financial milestones. If you want to have a stable financial life you should know how to invest money.
- To Beat Inflation- You need to beat inflation to ensure your money does not lose its purchasing power. You should invest in such financial instruments that give returns higher than inflation.
- Grow your Money- Investing helps you to grow your money. Most financial instruments offer good returns on investment that allow you to create wealth over time.
- Achieve Financial Goals- It helps you reach your financial goals as your money will be earning a higher rate of return. With high return rates, you can achieve your financial goals faster.
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- To Save Taxes- Some investment options, such as ULIPs etc, offer tax benefits under Section 80C of the Income Tax Act, helping you save tax. The amount you invest in these financial instruments is eligible for tax deduction up to a specific limit.
Types of Investment in India
You can invest in several types of financial instruments in India. Your choice of investment option may change depending on your investment term and risk appetite:
- Life Insurance Savings Plans: Guaranteed benefits, long-term, financial safety
- Unit Linked Insurance Plans (ULIPs): Market-linked returns, multi-asset portfolio, financial safety, medium to long-term
- Fixed Deposits: Safe returns, short to mid-term
- Public Provident Fund (PPF): Safe and guaranteed returns, mid to long-term
- National Savings Certificate (NSC) & Other Small Saving Schemes: Safe returns, short to mid-term investments
- Commodities and Bullions: High-risk, bullions for the long-term, other commodities for the short-term
- Real Estate: High-risk, long-term
Each of these investment instruments can help you fulfil specific financial goals. High-risk assets should be reserved for long-term goals and low-risk or fixed-income assets for short and medium-term goals.
Also Read - Goal-based investing
Best Ways to Invest Money
The best way to invest money depends on your goals and your financial circumstances. Given below are some of the best investment options where you can create a diversified portfolio to meet your different financial goals:
| Investment Option | Why Invest? | Maturity Period | Tax Benefits |
|---|---|---|---|
| Life Insurance Savings Plans | A perfect combination of insurance, investment and tax saving. These plans are perfect for wealth preservation and distribution goals. | 10 years+ | EEE Investment |
| Unit Linked Insurance Plan (ULIP) | These plans offer you insurance coverage with excellent investment options. ULIPs come with benefits like goal safety, multi-fund allocation, and automated portfolio management. These are good investment options for your long-term goals. | 5 years+ | EEE Investment |
| Pension plans | These are apt for your retirement goals. You invest a certain amount in pension plans to build a considerable sum over time. At retirement, the pension plan allows you to generate regular income in the form of a monthly pension. | Up to the age of 55/60 | EET, the interest is not taxed, but the pension you receive is taxed as regular income |
| Fixed Deposits (FDs) | Perfect for short-term parking of funds, emergency funds and mid-term safe deposits. Allows superb liquidity for internet banking users | 7 days to 10 years | Fully Taxable |
| Tax Saving Fixed Deposits | The tax savings fixed deposits have a lock-in period of five years. The interest you earn is taxable as income in the year, and the bank will deduct a 10% TDS on your FD's interest rate every year. | 5 years | ETE investment, the interest is taxed |
| Public Provident Fund (PPF) | If you plan to invest in safe options, PPF is right there at the top of the list. It is a long-term investment option that offers you an attractive interest rate and returns on your investment. The interest earned and the returns are not taxable under Income Tax. | 15 years+ | EEE Investment |
| National Savings Certificate (NSC) | Safe investment with a fixed rate of return. No limit on investment, and no TDS. Interest accruals do not attract tax until maturity. | 5 Years | ETT Investment but accrued interest is considered reinvested |
| Commodities & Bullions | Bullions like Gold provide a good hedge against inflation. Other commodities can offer hedging opportunities for traders. | Less than 1 day to 6 months | Fully-taxable |
| Real Estate | One of the necessary lifetime investments. Builds legacy, can provide inflation-adjusted income. Can provide tax benefits for residential property purchased/constructed on loan. | 3 years+ | Fully-taxable |
Step-by-Step Guide to Investing Your Money
Investing is a process, and you need to bring in discipline to start and continue your investing journey. Follow the steps below to start an investment:
- Save Money- The first step is to start saving money. When you receive a monthly salary or business income, you should first set aside the income in your savings bucket and spend the remaining. Spending first and then saving is not the right approach.
- Assign Goals to your Savings- Savings will be more fun when you know you are going to achieve something good with them. You can list down all your short-term and long-term financial goals. Classify your goals as short-term, mid-term, and long-term goals. It will also help you tag your investments with a financial goal. For example:
- ULIP for the child’s higher education goal 15 years later
- NPS for self-retirement goal 30 years later
- This way you can start with the essential investments first such as retirement and child’s goals.
- Find Appropriate Investments-You should find an appropriate investment option based on your goals. You should select options from different categories for diversification. Time to goal is one thing which will limit or expand your investment choices. For example:
- If you want to invest for less than 3 years: Super savers, FDs, Liquid Funds, Savings account.
- Investments you can use for 3 to 5-year allocation: Bank and post office FDs.
- If you want to invest for longer terms: ULIPs, PPF, NSC, etc. Investing in the different instruments will help reduce the overall risk of your portfolio.
- Seek Help if Needed- Selecting the best places to invest money is not easy. If you feel that you will save time and can focus on life and work more it’s better to hire an advisor. The best part is that nowadays you don’t need to have someone come to you for all paperwork.
You can use online advisors and build your portfolio through them. Advisors will help you select funds, and allocate your money regularly. Always Invest Within Your Risk Appetite- The final step of the process is to start investing. Do not delay your investing. Start with whatever amount you are comfortable investing. Investments reward those who are patient and risk appetite is what defines your patience with investments.
Usually, high-risk high-reward investments take longer to materialise. So, make sure to choose your asset classes in a way that your short-term needs do not face compromise.
Investment Calculator
Our investment calculator can easily help you plan the needed financial corpus for your goals.
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My Goal
Investment Amount
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Corpus Created in {corpusYear} year
you Invest {investAmount} over {totalYear} Years
0 year
₹ 1.20Lakh
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₹ 1.20Lakh
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8 year
₹ 1.20Lakh
9 year
₹ 1.20Lakh
10 year
₹ 1.20Lakh
Hi {name}, We recommend to start investing
Desclaimer-
The above calculation and illustration of figures are indicative only and not on actual basis.
Conclusion
You should invest wisely, choosing the investment option that is in line with your short, mid, and long-term goals. Investing in the right financial instrument today will give you financial security in the future.
You will be able to beat inflation and also benefit from the power of compounding. For all-around protection, you should also invest in a term and health insurance plan. Options like ULIPs by Canara HSBC Life Insurance can also help you combine long-term wealth creation with life cover, offering a balanced solution for goal-based planning. These plans will protect you and your loved ones.
Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.
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