Here are the top three personal finance instruments that you should know of.
Innovation in personal finance makes our lives easier and allows us better choices regarding investments, spending, and savings. Personal finance is rapidly changing with time. In the past few years, we have witnessed the growth of UPI, e-wallets, Sovereign Gold Bond, and many more personal finance instruments in India.
Here are the top three personal finance instruments that you should know of.
Buy Now Pay Later (BNPL)
To offer easy access to a credit facility, lending institutions now offer a loan called Buy Now Pay Later (BNPL). Most leading online shopping apps and portals now offer BNPLs as a payment option to their customers. BNPL adoption has exploded in the pandemic, and it is expected to continue to grow at a rapid rate.
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Currently, it is typically used for a limited number of online shopping experiences, but it is likely to expand to more online and offline experiences. Customers need to be aware of the charges—interest rate and penalties—while availing BNPLs and always ensure timely payment to keep costs at bay and their credit score strong.
Cryptocurrency
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In the 2022 Union Budget, Finance Minister Nirmala Sitharaman introduced a 30 percent tax on digital assets. With this move, the government has cleared fears about cryptocurrency being banned by the country. Cryptocurrency has seen surging adoption rates in India despite apprehensions such as lack of regulation and market-linked volatility. In 2018, the RBI had banned crypto trade in India.
However, a Supreme Court judgement in 2020 set aside the central bank’s order. After this, crypto transactions grew manifold, and several new crypto assets have launched. Investors in India consider cryptocurrencies as a medium to earn higher returns. However, a few uncertainties loom on the horizon. The government still needs to decide on its legality through the pending cryptocurrency bill. Regulation may provide clarity and safety nets to investors.
Silver ETFs
For Indians, gold and silver hold both financial and emotional value, but owning and selling them have challenges. Like gold, you now have one more asset class to diversify your investment portfolio with in 2022. In November 2021, the Securities and Exchange Board of India (SEBI) allowed mutual fund companies to introduce Silver Exchange-traded Fund (ETFs) in the Indian market.
Investors will no longer need to hold physical silver in physical form as the ETF will allow them to trade the metal in Demat form. Silver ETFs will invest 95% of their assets into silver. The ETFs will be benchmarked to the spot price of silver decided by the London Bullion Market Association (LBMA). There will be no exit load on silver ETFs. Several companies have already introduced their silver ETFs, while others are lined up.
Dematerialised silver is easier to buy and sell. There’s no tax, no storage concerns, no doubts over purity.
New investors may note that silver is more volatile than gold and hence their exposure to this metal needs to be calibrated as per their returns expectation and risk appetite.
