Home / Money / Personal Finance /  How to use your appraisal to secure your future: Top investment strategies
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Appraisal time is here! It brings cheers to the salaried class who wait eagerly to see a hike in their in-hand salary. It is also important this year as inflation has hit an all-time high, and people fear price increases are outpacing wage growth. So as people get more money in their hands to spend, it would help them to counter the high rate of inflation. However, along with more money, comes more tax as well. So, to avoid paying more taxes due to salary hikes, you should invest in tax-saving instruments first.

Vikas Singhania, CEO TradeSmart says people should prioritize expanding their investment portfolio and investing in stocks, PPFs, and NPS to build wealth over time.

“Appraisals are like a festival that calls for celebration in the life of every salaried employee each year. However, one must also prioritize expanding their investment portfolio at this juncture. For those looking at building wealth for the short term and long term goals, it is important that they invest this salary raise in instruments like stocks, ETFs, PPFs, or NPS to build wealth over time," said Vikas Singhania.

He added that this amount can also be used to pay off any ongoing liabilities of an individual like education loans, home loans, or personal loans.

While investing this money, one must also ensure that their investment plan is tax-efficient.

“One thing that needs attention is salary hikes can also attract more taxes. Therefore, while investing this money, one must also ensure that their investment plan is tax-efficient so that they can avail benefits tax-saving benefits from the instruments they invest in. A 30-70 ratio of non-tax saving and tax-saving instruments should help build a good portfolio," said Singhania.

Archit Gupta, Founder & CEO of Clear said conservative investors can invest in the government-backed Public Provident Fund (PPF) or the National Savings Certificate (NSC). It offers a higher interest rate than bank fixed deposits and is more tax-efficient. 

For aggressive investors, Gupta advised Equity Linked Savings Schemes or ELSS.

“Aggressive investors can look at Equity Linked Savings Schemes or ELSS, which invests at least 80% of its assets in equity and equity-linked instruments," said Archit Gupta. 

If you have exhausted the Section 80C tax limit, you can invest additional amounts from a salary hike in the National Pension System (NPS), Gupta suggested.

Archit Gupta said that salaried employees can invest in the Voluntary Provident Fund (VPF) in addition to compulsory Employee Provident Fund (EPF) contributions. 

So, before deciding on the investment tool, you must consider the tax efficiency of investments. Also. you must check the lock-in period of the investments that qualify for the Section 80C tax benefits. 

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