7386-733-342 Investment Plans
Investment plans are schemes that individuals use to grow their wealth over time. There are various types of investment schemes available in the market such as market linked schemes and traditional guaranteed return schemes to earn returns on your investment to meet your goals.
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What exactly does an investment plan entail?
Investment plans are financial products that provide an opportunity to build wealth for the future. By investing for the long term based on financial goals, individuals can achieve their objectives with ease. In India, there are numerous investment plans, schemes, and funds available for periodic investment.
These plans enable systematic investment across various financial products and help investors accumulate wealth through disciplined investing. The choice of investment options depends on factors such as risk profile, investment tenure, and financial goals.
Types of Investment Plans in India
In India, there are many investment options available for individuals to save and grow their money. Some of the popular investment options are:
Unit Linked Insurance Plan
A Unit Linked Insurance Plan (ULIP) is a combination of insurance and investment. It involves the deduction of a portion of premiums as insurance, while the remainder is invested in the market. The investment can be made in bonds, equity, debts, market funds, or hybrid, based on the investor's preference.
The plan provides transparency regarding the investment of funds, which can be tracked and evaluated as Net Asset Value (NAV). ULIP offers coverage as well as investment options. On maturity, the investor receives a survival benefit, depending on the prevailing unit prices. In case of the investor's demise, the nominee receives the sum assured as a death benefit.
Endowment Plans
Endowment plans are a type of life insurance that offer both life coverage and an investment option. They allow policyholders to save regularly over a specific period and get a lump sum amount at the end of the policy term. If the policyholder passes away during the policy term, their family receives financial support in the form of the sum assured. Endowment plans can also earn additional bonuses based on the insurance provider's profits.
Public Provident Fund (PPF)
PPF is a government-backed investment option that allows individuals to invest a minimum of Rs. 500 to Rs. 1.5 lakh either in a lump sum or on a monthly basis.
National Savings Certificate (NSC)
NSC is another government-offered investment option that can be purchased from any post office in India. The minimum investment amount is Rs. 100 and it offers tax benefits under section 80C of the Income Tax Act.
Mutual Funds
Mutual funds offer an option to invest in various funds based on an individual's goals and risk appetite. These are managed by professional asset management and the units purchased and sold are based on the net asset value.
National Pension Scheme (NPS)
NPS is a retirement-focused investment option that was initially designed for government employees but is now extended to non-government employees as well.
Fixed Deposits
Fixed deposits offer a fixed rate of interest and are a traditional investment option. The rate of interest varies from bank to bank.
Senior Citizen Savings Scheme (SCSS):
SCSS is an investment tool designed for people aged above 60 years with a maximum investment limit of Rs. 15 lakh.
Capital Guarantee Plan
This plan is similar to the ULIP plan under which a part of the investment is invested in insurance, another in debt for capital protection, and remaining towards equity. The major focus of this scheme is to safeguard investors' money from any losses. The premium paying term of this plan is 15 years and tenure is 5 years.
Benefits of Investment Plans
Investing in an investment plan can offer various benefits to your financial portfolio:
Ensure the financial security of your loved ones:
By investing in an investment plan, you can safeguard your loved ones' financial future in case of any unfortunate event. The investment plan provides a sum assured either as a lump sum or in the form of regular payments to your family members upon your demise. Moreover, the plan offers returns and life coverage until the maturity of the invested amount.
Goal-based planning:
Investing in an investment plan helps you save money to achieve your financial goals, such as a wedding, child's education, or retirement. There are plenty of investment options available to meet your short, medium, or long-term goals.
Wealth creation:
Choosing the right investment plan can help you amass wealth over the long term. Disciplined and periodic investments in high-return plans can multiply your investments and build a strong financial corpus. The power of compounding can help accelerate the earning or growth potential of your investments..
Tax benefits:
Several investment options, such as PPF, insurance, and others, offer tax benefits under section 80C of the Income Tax Act, 1961, which helps you accumulate wealth while saving on taxes. Additionally, the returns from these plans are tax-free under section 10(10D).
Flexibility:
As an investor, you have the flexibility to choose from a wide range of investment plans based on your risk profile, financial goals, and tenure.
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How You Can Choose Best Investment Plan?
If you know the steps to choose an investment plan, then the process can be relatively straightforward. Here are some key factors to consider:
Assess your financial goals and requirements
Before choosing an investment plan, it's important to consider your financial goals and requirements. What are you investing for? Is it for short-term or long-term goals? Understanding your objectives will help you identify the best investment plan to suit your needs.
Determine your investment horizon
Investment plans come with different tenures, so you need to determine how long you are willing to invest. This will help you choose an investment plan that aligns with your goals and offers the desired returns.
Seek investment plans with a balance of investment and insurance coverage
Consider investment plans that provide a mix of investment and insurance coverage that aligns with your financial goals. A balanced investment plan can offer you long-term returns while also providing financial security to you and your loved ones.
Diversify your investments
Diversification is key to minimizing investment risk. Do not put all your money in a single investment product. Instead, invest in a range of financial products to diversify your investment portfolio and reduce risk.
Read and understand the terms and conditions
Before investing in any financial product, it's important to read and understand the terms and conditions. This includes the fees, charges, and other conditions associated with the investment plan.
Review your investments regularly
It's important to regularly review your investments to ensure that you are on track to meet your financial goals. This will allow you to make necessary adjustments to your investment plan to ensure that your financial objectives will be met within the desired investment horizon.
Riders that can be opted with Investment Plans
Investment plans have the option to add riders to the policies. These riders expand the policy coverage beyond the basic sum assured, and are available because the investment plan also includes death risk coverage.
Some common riders available are:
Accidental Death Riders:
If the policyholder dies due to an accident, the insurance company will pay the sum assured along with the rider benefit to the nominee.
Accidental & Total Permanent Disability Rider:
If the policyholder suffers total permanent disability due to an accident, the insurance company provides the rider benefit to the life insured.
Critical Illness Rider:
If the life insured is diagnosed with a major critical illness such as heart attack, cancer, stroke, kidney failure, or paralysis, the insurance company pays the rider benefit.
Waiver of Premium:
In a vanilla term insurance policy, if the life insured suffers a disability that makes them unable to pay future premiums, the policy terminates. However, this rider waives future premiums in such cases.
Accelerated Death Benefit Rider:
If the life insured is diagnosed with a terminal illness like cancer, leukemia, AIDS, or Ebola, the insurance company pays a part of the sum assured in advance and the rest to the nominee.
Frequently Asked Question
Ans. ULIPs provide both life insurance cover and investment opportunities. While earlier the charges were high, post-2010 ULIPs have undergone changes, especially in terms of charges, with premiums now being utilized for investing. The lock-in period has also increased from 3 to 5 years. ULIPs offer a wide range of investment opportunities based on the investor's risk appetite, including equity, debt, bond, money market, or hybrid products. They also provide flexibility to change premium payment terms, sum assured, and payment frequency. Additionally, you can customize your plan with riders.
It's important to note that ULIPs should be considered as a long-term investment, with at least 10 or more years in mind.
Ans. you're looking to quickly grow your money through investment plans, the rate of return you can expect will depend on the specific plan you choose and how long you're willing to invest your money. If your main goal is to see rapid capital growth, investing in equity mutual funds may be a smart choice. Keep in mind, though, that these types of funds typically come with a higher level of risk due to the potential for market volatility in the short term. As such, you'll need to have a high-risk tolerance to pursue this strategy.
Ans. Unit Linked Insurance Plans (ULIPs): A type of insurance plan that offers both investment and insurance benefits. The premium paid by the policyholder is invested in a range of financial instruments such as stocks, bonds, or money market instruments. Mutual Funds: A pool of funds collected from multiple investors, invested in a diversified portfolio of stocks, bonds, or other securities, managed by a professional fund manager. Traditional Investment Plans: Investment options such as Fixed Deposits (FDs), Public Provident Fund (PPF), National Pension Scheme (NPS), and other similar instruments that offer guaranteed returns or a fixed rate of interest over a predetermined period. Stocks or Equities: Shares of a company bought by an investor in the stock market with the expectation of capital appreciation and/or dividend income.
Ans. : There are several
short-term investment options in India that offer varying degrees of returns and risk. Among them, ULIPs and traditional investment plans like savings accounts, fixed deposits, Equity Linked Saving Scheme (ELSS), recurring deposits (RD), mutual funds, and money back plans are popular.
If you are looking to invest for one-year, recurring deposits are considered to be a good option. These plans require you to pay a fixed amount of money on a monthly basis and provide you with interest on the amount invested.
For investments of more than one year, equity mutual funds and fixed maturity plans are considered to be good choices. These plans offer high returns and are more tax-efficient compared to other options.
Investment Plans
Investment plans are schemes that individuals use to grow their wealth over time. There are various types of investment schemes available in the market such as market linked schemes and traditional guaranteed return schemes to earn returns on your investment to meet your goals.
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