Unlike their parents, millennials have a different investment plan
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.
Equity is the ideal asset class for chasing returns and a long-term horizon takes care of market volatility.