Know the Right Investment Products to Invest in Times of COVID-19

The entire world is experiencing hardship and uncertainty due to the unprecedented COVID-19 pandemic. Currently, the whole country is amidst the biggest economic crisis of the century. The high market volatility is likely to continue until the COVID-19 reaches a manageable level. Due to the high volatility of the market, people are looking for a safe investment option that offers a guaranteed return. 

But does this mean that you should not invest in the market now? Or, you are confused to invest in the right investment product. To help you out, here we have discussed in detail the right investment products, which you might consider investing in times of COVID-19.  

Look For The Most Preferred Options

Nowadays, due to the high volatility of the market, most people want to invest in investment options that offer a guaranteed return on investment and are a safe investment product.  One of the most popular guaranteed return safe investment products is bank fixed deposits. However, bank FDs come with its own set of disadvantages. First, in bank FDs, you can save money up to a maximum of 10 years i.e. the maximum tenure of investment in FDs is of 10 years. However, you can choose to renew a fixed deposit after maturity. Second, the interest rate of bank FDs has fallen drastically in the last 6 years. The interest rate of bank FD has fallen from 8.5% p.a in the year 2014 to 5.4% p.a. in 2020, which is the lowest interest rate of all time. 

Also, the returns on bank FD deposits do not gain any tax benefit. Thus, during times like this, you must try to opt for a product, which not only offers a guaranteed return but also provide a high-interest rate on the invested amount along with the benefit of tax saving.  Based on the recent market scenario, one such investment product that offers the best returns is capital guarantee plans. 

Pure Guarantee Plans a Better Bet Amid Falling Interest Rates

As per the experts, the outbreak of coronavirus, the volatility of the equity market at the starting of the financial year, and the declined interest rates on bank FDs have resulted in risk-averse investors to invest in guaranteed plans. Guaranteed plans are non-participating products that offer guaranteed benefits to the investors after a specific tenure. Moreover, under a guaranteed plan the investors can get tax-free returns under Section 10(10D) of the Income Tax Act. These plans are best suitable for investors who have a low-risk appetite and who are willing to avail lower buy guaranteed returns.

Capital Guarantee Plans

To protect investors from experiencing losses in the current market scenario, Policybazaar has introduced an innovative solution known as capital guarantee plans (CGP). The capital guarantee solution plan is a combination of the Unit Linked Insurance Plan (ULIP) and the guaranteed return plan. Under this plan, a part of the invested amount goes into ULIPs, whereas the rest 50-60% of the amount is invested in guaranteed return plans. In case the policy tenure comes to an end, you can avail of the maturity benefit based on the market linked returns from the ULIP funds along with the returns generated on the traditional guarantee plan.  

Not only this, what makes the CGP one of the most lucrative investment options during this time is that the premium paid throughout the policy tenure is 100% guaranteed. This means that on completion of the policy tenure, the policyholder is guaranteed to get back all the premiums he paid throughout the policy term.  

For example- If you invest Rs.10,000 per month in a  capital guarantee plan for a policy tenure of 15 years and premium payment tenure of 10 years, then Rs.4000 of the premium amount will be invested in ULIP  funds, and the rest Rs.6.000 will be invested in the traditional product. After the completion of the policy tenure, you will receive a guaranteed return of Rs. 12lakh.  

Helps to Plan for a Long Term Horizon

In the capital guarantee solution plan, you can choose a policy tenure between the range of a minimum of 10 years to a maximum of 40 years. The premium payment tenure varies between 12,10,7 & 5 years.  The plan is a great investment option for investors who want to accumulate funds in the long-term or want to create a retirement fund. It comes with a retirement variant option, which is a combination of guaranteed return fixed income product and whole life ULIP. Suppose you invest Rs.5000 per month in CGP for the tenure of 10-15 years till you retire, after your retirement, you will receive a guaranteed 100% investment return and a monthly pension until you are alive. The annuity received and the guaranteed return is tax-free.  

Why It is Important to Invest During COVID-19?

The historic data suggests that the market crashes due to pandemic are followed by big-bull runs. During the outbreak of SARS  in the year 2003 between January to March, the Sensex was down by 11% and it hiked up to nearly 80% after a year. In January, this year the Sensex was at 41,945 points and due to the COVID-19 pandemic, it crashed to 25,981 points in March. The Sensex has now recovered to 38,369 points. Based on this observation it is a good time to restart or even start investing. 

10 Worst Single Day Sensex Falls

Date Change From Previous Closing Sensex
17th May 2004 -11.1% 4,505
24th Oct 2008 -10.9% 8,701
12th Mar 2020 -8.2% 32,778
21st Jan 2008 -7.4% 17,605
7th Jan 2009 -7.2% 9,587
4th Apr 2000 -7.1% 4,691
10th Oct 2008 -7.1% 10,528
18th May 2006 -6.7% 11,391
11th Nov 2008 -6.6% 9,840
24th Jul 2000 -6.2% 4,188


Wrapping it Up!

 Keeping the current scenario in mind it may not be a good idea to invest in the pure market-linked product as you may not get a profitable return if the market goes down. Thus, if you have a low-risk appetite, the capital guarantee solution plan can be a great option of investment for you as it offers a 100% guarantee on premium along with the benefit of investment return. 

Written By: PolicyBazaar - Updated: 08 January 2021
Search
Disclaimer: Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by an insurer.
Newsletter
Sign up for newsletter
Sign up our newsletter and get email about Investment Plans.
You May Also Want to Know About
Best LIC Policies For Investment in 2021
Best LIC Policies for Investment in 2021 When it comes to purchasing a life insurance plan, LIC plans are the most popular choice of customers. LIC is one of the most trusted and leading insurance provider companies in India. The company has a str...
What is Investment and What is Its Purpose?
What is Investment and What is Its Purpose? Different people possess different notions and understanding of “investment”. To start with, first of all, let’s try to get a clear understanding of what is investment and how it can be useful for ...
Post Office Monthly Income Scheme (POMIS)
Post Office Monthly Income Scheme (POMIS) Are you looking for an investment avenue which is safe and secure, earns substantial returns with a short locking period, which says no to equities and is absolutely risk free? Well then, think about inves...
SBI Life Insurance Plans in India
SBI Life Insurance Plans SBI Life Insurance, a joint venture between State Bank of India (SBI) and BNP Paribas Assurance, provides comprehensive life insurance cover at competitive prices. SBI Life Insurance provides Unit Linked Plans, Child Educa...
State Bank Of India Investment Plans
Monthly Investment Plan Monthly investments plan is a popular investment options for individuals who wants to gain a profitable investment returns and wants to achieve their short-term and long-term financial goals of life. Nowadays, monthly inves...
Close
Download the Policybazaar app
to manage all your insurance needs.
INSTALL