Author: Rajat Gupta, CA

Why is Financial Planning Important for Doctors?

Doctors are in a professional practice where they must invest a lot of money and time. It takes around 8 years’ time to become a valuable doctor. As such, they generally start earning at the age of 28-30 instead of other professionals who start earning early at the age of 23-25. Considering this, there should be proper investment planning for doctors so that they can better set out their future goals.

Best Investment Options for Doctors

Let’s discuss how doctors can invest better their funds to secure their future goals. Here are the best investment ideas for doctors:

Mutual Funds

First and the perfect idea for investment is Mutual Fund SIP. It is a regular investment plan which will grow the value of investment over the time. Mutual Funds are basically institutions who take the money from many investors and invest that money into various types of shares. These are considered as very low risk investment than shares since Mutual Fund houses are the experts in this and they do wide research over the shares in which investments are made. So, your money will grow exponentially over the years. ELSS is a best mutual fund type which provide tax deduction also under section 80C of Income Tax.

Returns: Share Market Based Returns

Tax Saving: Equity Mutual Funds are available for 80C

Public Provident Fund

Public Provident Fund is fixed income investment plan where doctors can invest their money. Its returns are tax free (i.e. interest earned on amount deposited in PPF account is tax free)​.There are many banks with whom you can open your PPF account however in any case banks act as intermediary only and your money is deposited with government. There is a lock-in-period of 15 years (i.e. you can’t withdraw your money during this period). However partial withdrawal is possible from 6th year only in special cases.

Returns: Around 7-8% p.a.

Tax Saving: Investment in PPF is allowed for 80C deduction

National Pension Scheme (NPS)

Depositing your funds in NPS, doctors can secure their post-retirement period very efficiently. You can annually invest in NPS plan and when you turned 60, you can withdraw 40% of the total corpus as lump-sum and remaining 60% will be converted into annual pension amount which you can choose for 5 years, 10 years, 15 years as per your choice. Once you invest the money into NPS, annual interest is taxable on that, but you get the tax deduction for amount you invested. 

Returns: Around 8-10% p.a.

Tax Saving: Investment is allowed for 80CCD deduction uptoRs. 1.5 lakhs and further 0.5 lakhs are allowed under 80CCD(1B). So, you can save tax on 2 lakhs by investing into it.

Initial Public Offer (IPO)

Investing in IPO can lead to high returns within a short period. You just must research about the company offering the IPO and if you invest in good growing reputed company there are chances of heavy returns and the best part of IPO is that money gets blocked only for 7 to 15 days. If you don’t get the application your money will be refunded. For Instance, Burger King’s IPO had made the investors quite wealthy since its prices reaches to 300% high from the offer price. So, do you research about the company and grow your money.

Returns: Around 20-25%

Tax Saving: Investment in IPO not eligible for tax deduction

Gold

Gold is always considered as the safest mode of investment especially in the uncertain situations like COVID when there is high volatility in the market and interest rates are low. If you compare gold today with 10 years past than you will see that it has given around 80% returns and with rising inflation, gold will increase in the future. So, why not to invest in it?

Also, you can choose to invest in gold in paper form i.e. Sovereign Gold Bond scheme regulated by government. You will get 2.5% interest p.a. (however such interest is taxable) on the amount invested along with rise in gold value. Tenure of these bonds is 8 years, but you can redeem them before maturity.  

Returns: Around 10% p.a.

Tax Saving: Investment in Gold not eligible for tax deductionbut if you sold sovereign gold bonds on maturity than you will not have to pay tax on gain on the bond value.

Getting a financial advisor may be a good idea to help you plan and diversify your investments, ensuring maximum returns. Reach out to us at hello@wakeupdoctors.org . We can get you the help you need.