A friend of mine asked for some good investment ideas, but he put the condition that I give him just three options. He didn’t want an information overload and certainly didn’t want to deal with any more jargon than he had to.
With that in mind, these are the three things I told him to buy and I thought it would make an interesting post here too, so here goes.
Tax Free Bonds
For people in the 30% tax bracket – tax free bonds are an attractive debt option because many of these have interest rates of close to 8% and if you don’t have to pay tax on that then that becomes a very good post tax yield.
I’m not putting a number to the after tax yield because that is open to debate and if you haven’t seen the post on the comparison between SBI fixed deposits and tax free bonds, then that will be a useful read.
Fixed Maturity Plans
FMPs are more tax efficient than fixed deposits and these can also be used as part of your fixed income portfolio to enhance your returns, especially if you are in the higher tax brackets.
These will be shorter term than the tax free bonds, and will only be available for investment during their NFO period as they are close ended funds.
Anyone reading this blog for any length of time will know that I’m biased towards equities and there is no way that I can talk about investments without talking about equities. However, for someone who has never been in equities, it is important to understand the volatility and the lack of guarantee that comes along with it.
I told my friend that the 80C part of his investments can go in a ELSS fund and that’s a good way to get started in equities.
Are three options enough?
He wanted three and I gave him three keeping in mind his high tax bracket and an inclination to keep things simple, but I honestly don’t think three options are enough.
I’m fairly sure he’s not going to take this advice and I find it hard to see how anyone else can implement this plan either especially if you are reading this blog and know the many many other investing options available.
That being said, if you could invest in just three things – what would those be?