Which is the Best Investment Plan in India for Middle Class?

Which is the Best Investment Plan in India for Middle Class

Middle class is vulnerable to financial crisis, get an answer to which is the best investment plan in India for middle class to ensure safety & wealth.

Mostly the discussion on investment plans is about mutual funds, stocks, and cryptos.

However, we should not limit investment planning only to this. 

Investment planning should also include investments done for dealing with emergencies, and health crises or for short-term goals.

When the discussion is about the middle-class investment planning becomes more important since the middle class usually does not have surplus cash flow that can be used in a crisis.

Who is the middle class?

According to the definition, middle-class households are those whose annual income is between 2 Lakhs to 10 Lakhs per annum.

The middle class usually has 1-2 income sources and has to plan for different life circumstances from this limited source.

Investment planning should be comprehensive enough to include every type of investment like savings accounts, fixed deposits, insurance, stocks, mutual funds, and other risky assets.

In this article, we will not limit our discussion to mutual funds & stocks but will try to make emergencies, health insurance & short-term goals also part of investment planning.

We will talk about the combination of different investment plans and try to understand which is the best investment plan in India for the Middle class.

Let’s start.

#1. Investment Plan For Safety

A household with a family income of 2 Lakhs to 10 Lakhs is highly vulnerable to financial crises due to sudden health emergencies or the death of the earning member of the family.

Here is the report on how health expenses forced 55 million people into poverty.

It becomes very important for the middle class to do some investments towards securing themselves from rising medical expenditures in India.

Health Insurance

Investment plan for safety

The first step towards family safety would be to invest in health insurance.

You might say this is insurance not investment.

I look at it as an investment to save my future expenses on health.

Insurance usually gives a negative feeling in Indian families, as thinking about something bad but if you take it as an investment it would make it sound positive.

Anyways it is an investment to save you from heavy health expenses.

Investing in health insurance is important because

#1. Medical care is becoming expensive.

#2. Ensures the safety of the family.

#3. Protect savings in case of medical need.

#4. A cashless facility ensures there is no delay in treatment due to the unavailability of cash.

#5. Employer medical claims are not enough

#6. Lead to better financial planning

>> Read More on Health Insurance

Term Insurance

Investment plan for safety

Another important investment to ensure the safety of your family is buying term/ life insurance.

Here I would like to clarify that I am not talking about ULIP or LIC plans with guaranteed maturity returns.

The sole purpose of term/ life insurance should be to support the family financially in case of sudden death and not to earn returns.

There has been a tradition in our families to purchase LIC to save tax or to earn fixed returns on maturity after 15-20 years.

This mindset needs to break now and we need to understand at least after the bitter experience of this pandemic that investing in life insurance is a more serious business than just earning returns.

To buy health or term insurance you can consider Ditto Insurance or Policy Bazaar which I have personally used.

The best part of these portals is you get a free call to discuss your need and a curated list of options you can choose from based on your need.

#2. Investment Plan For Emergencies

Investment plan for emergencies

Emergencies do not knock on the door before arriving.

The middle class is not very immune to financial emergencies, the most recent example has been COVID-19.

Various industries from aviation to hospitality have been hit very badly.

Even before the pandemic companies like Jet Airways shut down leading to overnight job losses.

The 2008 US crisis lead to over 5 lakh job losses in 3 months, the IT sector was badly hurt and a lot of professionals lost their jobs.

Job losses, businesses shutting down, and some family crises can drastically hit the well-being of a middle-class family.

Therefore investing in an emergency fund is the best plan for the middle class in India.

You might be having questions like

Why an emergency fund is important?

How much to invest in an emergency fund?

How to create an emergency fund?

Where to invest for emergencies?

All these questions and more are answered here at Emergency Fund In India – What COVID-19 Taught Us

#3. Investment Plan For Wealth Creation

Wealth creation requires you to have more risk-taking capacity.

All the above investments we made for safety and emergencies will help in improving risk appetite.

Once family safety and emergencies are taken care you can put a major part of your savings to create wealth.

Risks in wealth creation can be reduced by increasing the period of the investment.

The longer time you spend on these assets more the chances of generating good returns.

Now let’s look at the best investment options for the middle class for wealth creation.

#1. Index Mutual Funds

If you are someone who wants to avoid huge risks but benefit from India’s growth can take exposure to Index Mutual Funds.

Since Index funds consist of big bluechip companies in India, the risk is very low and you can expect returns of 12 – 15% which can make you wealthy in 15 – 20 years duration.

Another benefit of investing in index funds is a low expense ratio because these are passively managed funds.

You do not have to do a lot of research on which index fund to select just select the one with the lowest expense ratio and you are done. 

Everyone who is looking to make wealth in long term but cannot get involved in stock picking and active investing should at least do Index investing.

Every middle-class individual who can save any amount after meeting necessary expenses and has a working life of more than 15-20 years should at least do index investing.

#2. Active Mutual Funds

Another option to create long-term wealth is through investing in active mutual funds.

Active mutual funds are known as active because mutual fund managers actively do buy/ sell the stocks based on their research.

A good fund manager with expertise and skills can provide better returns than passively managed index funds.

However, here is the negative point if you cannot select the right fund with good fund manager returns can even go below index funds.

So you need to take some effort and research the fund before investing.

And since there is the active involvement of the research team the expense ratio of active mutual funds is on the higher side.

>> Read More on How To Invest In Mutual Funds For Beginners In India

#3. Direct Stocks

The stock market has created immense wealth for a lot of investors.

Investing into direct stock increased exponentially following the bull run of 2020. 

The number of Demat accounts doubled in the last 3 years thanks to awareness created by finance influencers.

Millennials have realized that traditional investing will not help to generate inflation-beating returns anymore.

However, making money from the stock market requires a lot of patients and temperament and it is not everyone’s cup of tea. 

Better to understand your risk appetite and indulge in direct stock investment only when you are an aggressive investor.

You can learn more about How to do a Fundamental Analysis of a Company

#4. Cryptos

Crypto has emerged as an asset class in recent times.

This can be termed the riskiest asset class to invest in.

Bitcoin the most prominent cryptocurrency has generated an annual return of 1576% and a total return of 18,912% between 2010 – 2021.

This rosy picture cannot override the fact that cryptos are the most volatile investment because of regularity speculations, greed & fear of traders.

Crypto investing should be a complete no-no if you cannot see your investments going to 0.

Cryptos are a high-risk high-reward asset class and if you want to play this game then avoid investing more than 5-10% of your portfolio.

We have many options for wealth creation, however best investment plan for wealth creation would be to do a combination of these investments.

Invest most in which you are most comfortable and least in which interests you but do not have confidence and avoid the one in which you neither have interest nor confidence.

One example of such an investment plan would be

  • Index Fund: 50%
  • Direct Stock: 45%
  • Cryptos: 5%

Similarly, you can decide which is the best investment plan for yourself.


The answer to which is the best investment plan in India for middle class cannot be straightforward since every individual’s income & risk appetite is different.

However, I hope you would have got an idea of how you can work out the best investment plan for yourself.

Just sit down with paper and pen and start putting down your plan and things will clear out slowly.

I would recommend that Investment Plan For Safety and Investment Plan For Emergencies should be mandatory for every middle-class family.

An investment Plan For Wealth Creation should be a combination of various investments depending on your risk capacity.

Do let me know how this article helped you and for any more queries please do comment below.

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