What Are The 4 Types of Investments?

Investment is putting in your hard-earned money to buy assets that will eventually increase in value over a period of time and offer great returns. There are many kinds of investments available in the market in which the investors can put their money. But how to decide which investment is best suited for them?

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It is important to note that, an investor needs to understand their appetite before investing in any kind of investment plan or scheme. Here are the top 4 types of investments that rarely disappoint the investor, if invested wisely.

Why Invest?

Investment is creating an extra cushioning of income that will help you secure your retirement as well as during any financial crisis. In today’s world, apart from your regular income and savings, it is extremely necessary to make some extra investments to secure the future of yourself and your family. Investments should be made wisely keeping in mind future requirements and only after the in-depth knowledge of the product you are going to invest in. All kinds of investments are available in the market, so it is necessary to choose what is best for you.

4 Types of Investments

  1. Unit Link Investment Plan (ULIP)

    Unit Link Investment Plans or ULIPs serve 2 purposes in a single purchase, that is, investment and insurance. The main purpose behind ULIP is to offer their investors life cover along with the opportunity to create wealth. ULIPs are one of the best kind of investment these days as it lets the investor achieve life goals systematically.

    Highlights of Unit Link Investment Plans

    Parameters

    Unit Linked Investment Plans

    Type of Instrument

    Return on investment + Insurance coverage benefit

    Investment Type

    Investment of funds to be made in the equity market, debt market, or both

    Tax Benefit

    Under Section 80C and 10(10D) of the Income Tax Act, 1961

    Switching Option

    A limited number of switches are available

    Life Cover

    Available for the family of the investor

    Lock-in Period

    Yes, it has a 5 year lock-in period

    Investment Regulated By

    IRDAI

    Death Benefit

    Yes, paid to the nominee in case of untimely demise

    Fund Management Charges

    1.35%

  2. Systematic investment plan (SIP)

    Systematic Investment Plans or SIPs, as the name suggests, are a way of systematically investing in your future. In a SIP, the investor invests a small amount regularly which helps in saving a good amount in the long run along with inculcation of a habit of investing regularly.

    Reasons to Invest in Systematic Investment Plan

    Some of the top reasons why an investor, be it new to investing or old, should go for SIPs as their investment option:

    1. Small Investment Amounts

      SIP investments are pocket-friendly as small and regular investments are required to carry forward the SIP investment. Generally, the minimum amount for a SIP is Rs. 500 and can be Rs. 100 for selective SIPs as well. A low amount of investment makes it purchasable for all classes of society.

    2. Invest in Multiple SIPs

      One can invest in more than 1 SIP at a time. An investor can opt for multiple SIPs at a time which increases the probability of future gains rather than putting all their money in just 1. It is important to keep in mind that even the division of money should be made wisely for better future results.

    3. Flexibility

      An investor can opt in and out of a SIP anytime they want to, making SIPs flexible in nature. Note that some companies charge a 1% exit load if opted out before 1 year.

    Top SIP Plans for 2022

    Fund Name

    Monthly Investment 

    1 Year Returns

    3 years Return

    5 years Return

    Axis Bluechip Fund 

    5000

    52.52%

    20.79%

    18.16%

    Axis Focused 25 Fund

    5000

    61.91%

    20.94%

    19.03%

    DSP Equity Fund

    5000

    31.90%

    14.69%

    14.36%

    Franklin India Focused equity Fund

    5000

    80.39%

    22.68%

    15.78%

    HDFC Balance Advantage Fund 

    5000

    55.65%

    14.39%

    13.47%

    ICICI Prudential Bluechip Fund

    5000

    59.24%

    19.41%

    15.69%

    Kotak Standard Multicap Fund

    5000

    48.94%

    14.15%

    12.51%

    Motilal Oswal Focused 25 Fund

    5000

    40.77%

    20.01%

    14.34%

    Nippon India large Cap Fund

    5000

    69.69%

    15.55%

    14.48%

    TATA India Consumer Fund 

    5000

    49.09%

    26.81%

    19.06%

    Disclaimer: Policybazaar does not endorse, rate, or recommend any particular insurer or insurance product offered by an insurer. The tax benefit is subject to changes in tax laws. *Standard T&C Apply

  3. Public Provident Fund (PPF)

    One of the most popular investment schemes, the Public Provident Fund (PPF) is famous for its flexible nature. A famous savings plus investment plan, PPF was launched with the aim to promote small investments by providing reasonable returns.

    Currently, the interest rate of PPF is 7.1% and it offers a tax exemption of up to Rs. 1.5 lakhs per annum.

    1. Highlights of Public Provident Funds

      Parameters

      Public Provident Fund

      Rate of Interest

      7.1% (Q1 FY 2021-22)

      Age of Entry

      15 Years

      Entry Amount Paid

      Rs.100/-

      Minimum Deposit

      Rs.500/-

      Maximum Deposit

      Rs.1,50,000/-

      Tax Benefit

      Rs.1,50,000/-

      Maturity

      15 years

      Premature Cancellation

      After 5 financial years

      Nomination

      Yes

      Loan

      Yes

    2. Eligibility Conditions

      • Public Provident Fund account can be opened by any Indian resident above the age of 18

      • The account can be opened on behalf of minor as well

      • PPF account can be operational online as well

      • Premature withdrawals can be made but with some regulations

      • Aadhar card needs to be linked with the bank account to open a PPF account

      • It comes with a lock-in period of 15 years

      • Partial withdrawals can be made starting from the 7th year

  4. National Pension Scheme (NPS)

    National Pension Scheme, launched by the Government of India is administered and regulated under the (PFRDA) Pension Fund Regulatory and Development Authority. NPS is one of the best government-backed schemes that create a financial corpus for investors even after retirement. An individual between the age of 18 years to 60 years can opt for the National Pension Scheme Account.

    There are 2 types of accounts an investor can opt for under the National Pension Scheme:

    National Pension Scheme

    Tier I

    Tier II

    Eligibility

    Any Indian citizen between 18 & 65 years of age

    Members of Tier-I only

    Lock-in Period

    Till the age of 60 years

    NIL

    Minimum deposits to be made in a year

    1

    Not necessary to deposit yearly

    Minimum opening account balance

    Rs 500

    Rs 1,000

    Minimum contribution

    Rs 500

    Rs 250

    Minimum amount deposited every year

    Rs. 6000

    NIL

    Fund management charge

    Same as Tier-II

    Same as Tier-I

    Tax benefits

    Tax exemption of Rs. 1.5 lakhs under Section 80CCD (1)

    No tax benefit

    Up to Rs.50,000 as deductions are allowed under Section 80CCD 1(B)

Wrapping it up!

There is a famous quote by an American economist Benjamin Graham that says, “The best way to measure your investing success is not by whether you’re beating the market but by whether you’ve put in place a financial plan and a behavioral discipline that are likely to get you where you want to go.”

Every investor should study the market as well as understand their appetite clearly before making any future investments.

Invest wisely!

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