Planning to invest requires a lot of brainstorming. Should I invest in mutual funds? Should I start a PPF Account? Or should I just keep investing in FD?
Do you find yourself juggling with the above questions when it comes to selecting the best investment plans? Whether you are an experienced or novice investor there is a long-term investment strategy for everyone.
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While short-term investment is about preserving the capital, long-term investment is about wealth creation. It is about creating an investment portfolio that will provide you income in the long run, be it retirement or meeting any long-term financial goal. To ensure a comfortable life afterward, it is important to create wealth to maintain the level of income you would require in the future.
However, there is a certain level of risk that is involved in long-term investments to be able to get rewards. It generally includes- equity investments, ULIPs, etc. However, riskier investment options give a chance to recover from the market risks as you stay invested for a longer duration. It may go down by 20% in the next three or five years but eventually, it may offer double-digit returns value in the next 10 or 20 years. There is less risk involved in assets as well but the returns are fixed or either slow.
Therefore, when you are thinking about your long-term goals you need to give yourself a chance to overcome the short-term dips, to get the desired returns.
There can be several reasons or goals to invest in for the long term. Below are some of the common long-term objectives behind putting money in long-term investment plans:
Marriage of children
Children’s higher education
Buying your own house/land
One of the major advantages of investing in long-term investment plans is that the future expenses are met from the funds that you accumulate. There is no additional interest and you also get tax-saving benefits. However, in some cases, the returns can be taxable after a certain limit. Additionally, if you take a loan to meet the long-term goals, you have to usually pay interest of around 8 to 10%.
Still, wondering which investment plans are best for the long-term? Mentioned below are some of the best long-term investment options that you can consider.
You can start planning to invest for the long term in the following long-term investment plans that will help you boost your wealth with time:
Public Provident Fund (PPF Account)
National Pension Scheme
One of the traditional long-term investment strategies is PPF i.e. Public Provident Fund. Most of the elders in your family would have invested in a PPF Scheme. It is considered one of the safest and most tax-efficient investment schemes in India. You get fixed returns on maturity and there is no risk involved.
You can stay invested for 15-years as this is the lock-in period for a PPF Account. You can withdraw your funds after 15-years. However, you can withdraw partially in the 5th year (subjected to terms and conditions).
Moreover, you can claim tax benefits on your PPF contributions up to Rs.1.5 lakh under Section 80C of the Income Tax Act, 1961, during a financial year.
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When it comes to long-term wealth creation, investing in Mutual Funds is one of the best options. The investments are safe as the entire mutual funds are regulated by SEBI.
There are mainly three categories of mutual funds: equity funds, debt funds, and hybrid funds. Debt funds invest your money in corporate bonds and government securities. You can consider debt funds if you have a low-risk appetite and are okay with reasonable returns.
Equity mutual funds, on the other hand, invest your money in stocks and offer capital appreciation. The returns generated are linked to stock market movements and the risk involved is high. As per the trend, it is a good investment option for more than 5 years i.e. long-term. A perfect investment plan, if you have a high-risk appetite. You can invest in ELSS funds that offer tax savings and only have a minimum lock-in period of 3-years.
Whereas, hybrid funds are a perfect mix of both fixed income securities and equity funds, and involve the least risk. If you are a novice or beginner, you can start with hybrid mutual funds.
You can invest through SIPs in mutual funds to avoid the market risk. You can start investing with an amount as small as Rs.500 to build a corpus over some time and utilize the benefit of compounding.
The returns are subjected to market risk but the key is to stay invested for the long-term, that is, more than 5 years or 10 years or 15 years. You can get substantially high returns that can be further utilized to meet your financial goals.
Another traditional investment method is Bank Fixed Deposits. You can opt for tax-saving bank fixed deposits and save up to Rs.1.5 lakh every year on your investments. You can opt for any lock-in period and withdraw money once the lock-in period is over. The money invested is safe as there is no risk involved.
Even senior citizens can invest in bank FDs as the returns offered are higher than it is for people below 60-years. FDs make a perfect investment for those who do not want any equity exposure and are looking for safe and slow investment growth.
The full form of ULIPs is Unit Linked Investment Plans. ULIPs make a great investment plan for its dual benefit of wealth creation along with life insurance cover. Moreover, you get tax benefits under Section 80C. It is suitable if you want to stay invested for more than 5-years as it is the minimum lock-in period in ULIP plans. However, the overall risk involved is higher than Equity-linked-saving-schemes.
NPS is a government of India initiative to help people invest in different market-linked instruments like debt and equities. You can save for the long term and avail of tax benefits under section 80C. Anyone between 18 years and 60 years can invest in the National Pension Scheme (NPS). National Pension Scheme is a safer investment option than other equity-related instruments and the returns generated are higher than PPF.
However, the scheme matures once you reach 60 years of age. It is a good investment plan if you want to save for retirement and enjoy the golden years of your life without any financial stress. Please remember that the final pension would depend on the returns generated from your investments.
You can invest in any of the above-mentioned investment plans/schemes for long-term wealth creation. Before you start investing, it is important to seek advice from a financial expert that will help you maintain your financial portfolio. You can always search online, go through the market statistics, check historic returns, and also read about other investors’ experiences to conclude. This way you will be able to make informed investments and get returns that can help you meet your outlined goals.
Past 10 Year annualised returns as on 01-12-2023
^Tax benefit are for Investments made up to Rs.2.5 L/ yr and are subject to change as per tax laws.
*All savings are provided by the insurer as per the IRDAI approved insurance plan.
Tax benefit is subject to changes in tax laws. Standard T&C Apply
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