Un­like their par­ents, mil­len­ni­als have a dif­fer­ent in­vest­ment plan

Mint ST - - MAR­KETS AND FI­NANCE -

zon takes care of any volatil­ity in the mar­ket, en­sur­ing you reap the ben­e­fit of real re­turns—re­turn after ad­just­ing for in­fla­tion. Given that most mil­len­ni­als have a longterm hori­zon, ELSS works well. In­vest­ment in ELSS qual­i­fies for tax de­duc­tion un­der Sec­tion 80C. Prospects of higher re­turns and a low lock-in pe­riod of three years for claim­ing tax de­duc­tion make it a must-have in your tax-sav­ing bas­ket of in­stru­ments.

One can­not, how­ever, ig­nore the risk ap­petite of an in­di­vid­ual. This is where the com­fort of Pub­lic Prov­i­dent Fund (PPF) comes into play. Good for those with a low risk ap­petite, PPF cur­rently of­fers 8% re­turns per an­num. In­vest­ments in PPF of­fer tax de­duc­tion un­der Sec­tion 80C and ma­tu­rity pro­ceeds or with­drawal from PPF is tax-free. This is a long-term in­vest­ment prod­uct with a ten­ure of 15 years, ex­tend­able in blocks of five years. While it’s one of the best tax-sav­ing in­stru­ments in the debt cat­e­gory, your money gets locked in for long pe­ri­ods, though par­tial with­drawal is al­lowed after a few years in some con­di­tions. Pick this prod­uct only after your eq­uity in­vest­ments are made, but don’t ig­nore your as­set al­lo­ca­tion. You needn’t ex­haust ₹1.5 lakh in PPF alone if that means a debt-heavy port­fo­lio. Your as­set al­lo­ca­tion should be eq­uity-heavy.

For re­tire­ment in­vest­ments, mil­len­ni­als can con­sider the Na­tional Pen­sion Sys­tem (NPS)—A con­trib­u­tory scheme wherein you need to an­nu­itize at least 40% of the cor­pus for reg­u­lar pen­sion after the age of 60. Con­tri­bu­tions get tax ben­e­fit un­der Sec­tion 80C. How­ever, if you have ex­hausted your 80C limit of ₹1.5 lakh and are still look­ing to save more tax, then Sec­tion 80CCD (1B), which was in­tro­duced in as­sess­ment year 2016-17, of­fers an ad­di­tional de­duc­tion of up to ₹50,000 for in­vest­ments in NPS. You have the choice to in­vest both in eq­uity and debt, but eq­uity in­vest­ments are capped at 75%. Ad­di­tional stand-alone tax ben­e­fit (un­der 80CCD (1B) and low cost make NPS a must­buy prod­uct. Like other prod­ucts, di­ver­si­fi­ca­tion is key.

AB­HI­JIT BHATLEKAR/MINT

Eq­uity is the ideal as­set class for chas­ing re­turns and a long-term hori­zon takes care of mar­ket volatil­ity.

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