Investing and saving is crucial for self-employed parents as they need to be vigilant in their efforts to provide a secure financial cushion for their children.
A self-employed individual is self-dependent and thus responsible for the well-being of their business.
Whatever the economic health of self-employed parents, they need to create a continuous culture of investing in the right assets for future financial stability and growth.
There are several investment options for self-employed parents that will ensure desired wealth creation and keep their financial health safe and sound.
Both short-term and long-term investments are important as the former will help in asset creation or a child’s education in the early years and the latter in post-retirement or higher education of children.
Investment options for self-employed
1. Fixed deposits
Fixed deposits are good investment options offered by banks, NBFCs, and post offices at minimum risk. A fixed sum is deposited as a one-time investment for a fixed tenure at a fixed interest rate.
The banks are offering a current interest rate between 5% to 7.5%.
Investors can choose a normal FD which is taxable or a tax-saving fixed deposit, which saves taxes up to 1.5 lakhs under Section 80C of the Income Tax Act 1961.
2. Mutual funds
Mutual funds are one of the best investment options for self-employed parents as they are structured and professionally managed. The investor does not have to spend time on research.
Instead, several investors pool their money, and the fund manager reinvests this amount in several instruments like debt, equity or liquid assets, etc.
The investor has the option of investing a lump sum amount in mutual funds or starting a SIP (systematic investment plan) if they want to opt for periodic investments.
A trustworthy app like Edufund gives access to 4000+ direct mutual funds to investors. The associated financial experts, with the help of a SIP calculator and scientific fund tracker, suggest the best funds and ensure better returns in the safest possible environment.
It is also possible to invest in international mutual funds through the app and receive returns in dollars.
3. Real estate
Real estate is a good investment option as the value is bound to increase and yield a good return with time.
Purchase the factory or office space that you are using instead of renting because it is feasible to pay EMI rather than the rent.
The self-employed individual can use the property to raise capital or for mortgages when needed. The aim of investing in real estate should not just be buying property instead getting a resale value if required.
Additional read: Investment strategies in Volatile market
4. Government schemes
The Government of India offers safe investment options with fixed returns under some of the government schemes.
- PPF – PPF or the Personal Provident Fund, is a saving scheme where the investor invests annually or monthly for 15 years. It offers fixed returns and tax benefits to the investor.
- PMJJBY –Pradhan Mantri Jeevan Jyoti Bima Yojana is a life insurance scheme available to investors at a low cost.
- NPS – The National Pension Scheme is a safe and secure post-office scheme where investors deposit a fixed amount for a fixed interval.
- Sovereign gold bond schemes – This government scheme is both a safe and high earner where the investor can invest in gold without owning the gold personally.
5. Shares and equities
Shares and equities are investment options for self-employed parents who are ready to take a substantial risk with their investments.
It is advisable to be careful in investments and take risks only on a predetermined permissible amount. Choose the shares and equities that will yield safe and highest possible returns.
6. US stocks and ETFs
Self-employed parents can invest in US stocks and ETFs from India to create wealth.
The Edufund App is a reliable means to create wealth because it allows investors to choose from 1400+ US ETFs and become a part of global companies like Google, Netflix, Apple, and Amazon.
The simple and transparent app also helps in fractional investing, where investors can buy top shares that will yield a higher percentage of returns in dollars at zero brokerage.
7. Commodities
Commodities in financial terms refer to oil, gas, silver, gold, grains, etc. investors interested in commodities have to invest in a futuristic price of the product.
As the commodity market is inversely related to the stock market, it is often used by investors as a hedge against inflation and also against stock market risk.
Conclusion
Choosing the right investment options for self-employed parents at the right age is a necessity as they do not have the luxury of a pension to manage expenses during later years.
A well-defined financial plan and a diversified portfolio will prove a blessing as it provides significant accessibility and flexibility to tap into the savings when needed.
