Best Long-Term Investment Strategies & Products

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Long-Term Investments

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.

Why Long-Term Investment?

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 nay long-term financial goal. To ensure a comfortable life afterwards 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 long-term rewards. It generally includes- equity investments, ULIPS, etc.  But riskier investment options give a change to recover from the marker risks as you stay invested for a longer duration. It may go down by 20% in the next 3 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 long-term you need to give yourself a chance to overcome the short-term dips, in order to get the desired returns.

Common Long-Term Financial Goals or Objectives?

There can be several reasons/goals to invest 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
  • Retirement Planning

‘’One of the major advantages of making long term investments 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. And if you take a loan to meet your long-term goals you have to usually pay interest 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:’’

Long-Term Investment Products to Invest In 2020

You can start planning to invest for the long term in the following investment plans that will help you boost your wealth with time:

    • Public Provident Fund ( PPF Account)
    • Mutual Funds
    • Fixed Deposits
    • ULIPS
    • National Pension Scheme
    • Gold ETFs

Public Provident Fund (PPF) 

One of the most 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 as one of the safest and most tax-efficient investment schemes in India. You get fixed returns on maturity and there is no risk involved. For the Quarter 1 of 2019-2020, the PPF interest rate is 8 percent per annum.

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 U/s 80 C of during a financial year.

Mutual Funds

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 all the 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 the risk involved is high. As per the trend, it is good investment option for more than 5 years i.e. long-term. A perfect investment plan if you a high-risk appetite. You can invest in ELSS funds that offer tax saving 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 a period of time and utilize the benefit of compounding.

The returns are subjected to market risk but the key is to stay invested for long-term more than 5 or ten years or 15 years you can get substantially high returns that can be further utilized to meet your financial goals.

Fixed Deposits

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.

ULIPs

The full form of ULIIPS 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 80 C. 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.

National Pension Scheme (NPS)

NPS is a government of India initiative to help people invest in different market-linked instruments like debt and equities. You can save for long term and avail tax benefits under section 80 C. 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 golden years of your life without any financial stress. Please remember that the final pension would depend on the returns generated from your investments.

In a Nutshell

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 investor’s experiences to arrive at a final conclusion. This way you will be able to make informed investment and get returns that can help you meet your outlined goals.