What Are The 4 Types of Investments?

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!