It is important for every small business owner to keep the personal finances and business finances separate so that when required they can invest in some of the schemes for their personal requirements.
But all of the investment schemes come with some risk. Therefore, before you select any of the investment schemes it is better to study all of the risks that are associated with it. Even though some schemes carry high risk, they generate higher returns while some have low risk and generate lower returns.
Top schemes every small business owner can invest in:
FDs are the safest investment option for a small business owner. You deposit a fixed amount of money for a specified period of time and earn the interest which is at a fixed rate of return. Most of the banks and financial institutions offer FDs with returns starting at 7% rate of interest.
You can invest as low as Rs. 25,000 and have the option to choose the tenor. Fixed deposit investments are offered from 7 days to 10 years and if you need to withdraw the money urgently, you can easily do that by paying a minimum penalty. The frequency of paying interests can range from monthly to yearly.
National Saving certificate
NSC is a scheme which is backed up by the government with guarantees returns along with tax savings. The interest rates are decided by the government and are reviewed quarterly but do not change during the tenor once you have made an investment. A minimum of Rs. 500 can be made in NSC and there is no maximum limit.
Another advantage is that you can claim the tax deductions up to Rs. 1,50,000, the only thing to remember is that the interest earned on NSC is taxable, so it is important that you add the interest accumulated on NSC to your total income when you file the tax return.
Personal Provident Fund
Personal Provident Fund or PPF is a long-term scheme by the government and is completely tax-free. The amount of money which is deposited in PPF is available as a deduction and the earned interest is also not taxable. It can be opened in a bank or post office where you invest the money for 15 years, which can extend up to more 5 years. The minimum yearly investment is Rs. 500 and the maximum can go up to Rs. 1,50,000.
Equity Linked Savings Scheme
Equity Linked Savings Scheme or ELSS is a tax-saving mutual fund that allows a deduction up to Rs. 1,50,000.An investment in ELSS can be made from Rs. 500 and there is no limit on investment in these funds. The lock-in period is of 3 years. Higher returns can be earned by investing in ELSS since all the investments will be made in the equity market but there is a risk involved in investing in equity.
If you want to benefit from equities and debts, investing in mutual funds is also a good option, it helps you to balance risk and return as per your preference. But it is safer if you invest in the share market through mutual funds rather than making a direct investment in the stock market. You can also start with a systematic investment plan (SIP) which is the safest way to invest in mutual funds which helps you earn better returns.
Although all options are good, it is wise to choose a combination of these investment schemes to spread the risk and earn higher returns.
If you need a small business loan, Gromor Finance has a simple online process and gives unsecured small business loans at affordable interest rates.