You have the money to invest, but don’t know where to invest it? Don’t worry; you are not alone!
Figuring out ways to invest your hard-earned money can indeed be overwhelming. And with the abundance of smart investment plans available in this digital age, the surplus information often becomes a real challenge.
But, remember that just like regularly putting money away every month is the key to build wealth, identifying the right investment options is likewise essential, especially, to be in a much stronger financial position down the road.
To help you with this, therefore, we have created a list of smart investment plans (long-term and medium-term) which you can look at while savings for your financial goals.
Long Term Investment Plans
Unit-linked insurance plans (ULIPs) provide you with dual benefits — insurance plus investment. In ULIPs, you get the flexibility to invest in different funds like equity, balanced and debt, based on your risk appetite. Moreover, you can switch between these funds as per the changing market conditions or your goals.
As the lock-in period in ULIPs is of five years, they are the best option to fund your long-term goals, like child’s higher education, buying a house, retirement planning etc.
Additionally, insurers like Max Life Insurance allow partial withdrawal facility, wherein after the lock-in period, you can withdraw from your ULIP plan. And in the event of the untimely demise of the life insured, a lump sum amount is paid to the beneficiaries.
Most importantly, ULIPs prove to be one of the best investment plans for tax benefit. Here’s why:
- Premium paid gets a tax deduction up to Rs. 1.5 lakhs per annum (Section 80C)
- Death benefits and maturity benefits are entirely tax-free (Section 10 10(D)
Thus, ULIPs are EEE (Exempt-Exempt-Exempt) investment options where your entire corpus at maturity is tax-free.
Public Provident Fund (PPF) is one of the most traditional long-term investment options in India. This government-run scheme aims to accumulate savings by providing reasonable interest rates and tax benefits. Currently, it offers an attractive interest rate of 8 percent, the returns from which are fully exempted from income tax.
As the minimum investment tenure is 15 years, the main objective of this investment type is to create long-term savings, such as retirement corpus. However, due to this fixed tenure, PFF does not qualify as a liquid investment.
National Pension Scheme is a pension scheme managed by the ‘Pension Fund Regulatory and Development Authority (PFRDA). Initially, when NPS was launched in 2004, it was open only for government employees, but later in 2009, it was made available to all sections.
This scheme offers two approaches to invest:
- Active choice: Where investors can themselves select the allocation percentage in assets classes
- Auto choice: Where funds are automatically allocated amongst various asset classes in a pre-defined manner based on investors age
One can start investing in the National Pension Scheme at an early age of 18 years, maximum up to 65 years.
4. Endowment Plans
Endowment plans are life insurance products which couple the benefits of life cover and savings. They help you save regularly over a specific period so that you get a lump sum amount on maturity. And in case of unexpected demise of the insured, the sum assured (plus the bonus, if any) is paid to the beneficiaries.
Endowment plans are smart investment options for people who have a regular flow of income, including salaried individuals, professionals, and businesspeople. Moreover, those who wish to secure themselves and their family’s post-retirement or those who want to meet financial needs such as funding children's higher education or marriage can also invest in endowment plans.
Medium-Term Investment Plans
1. Fixed Deposit
A bank fixed deposit is a safe choice for short to medium-term investing as it comes with different tenures — 7 days, 14 days, 30 days, 45 days, 1 year and even up to 10 years. On maturity, FDs can be renewed and hence, funds can be reinvested.
Moreover, when you invest in FD, you are insured up to a maximum of Rs. 1 lakh for both principal and interest, under DICGC rules. You can opt for monthly, quarterly, half-yearly, yearly or cumulative interest option as per your needs. The interest rate for FDs is usually between 7 to 8 percent.
2. Recurring Deposit
Recurring deposit is a handy option for those who do not wish to invest a lump sum amount but instead want to save regularly for a short-term. Here, one can invest at a regular interval, for 6, 9 or 12 months and receive a lump sum amount upon maturity. RDs, usually have lower interest rates than FDs.
3. Savings Account
For risk-averse investors, a savings account is the best short term investment option. Features like zero risk and high liquidity make savings account the preferred choices of many. You can get ready cash, anytime, anywhere, thanks to facilities like net banking and ATM cards. The interest rate for savings accounts typically range from 4 to 6 percent (as per bank rules) and are credited quarterly or annually into your account.
The equity-linked saving scheme comes with a minimum lock-in period of three years. This makes it a good option for medium-term investing. The earning potential in this scheme is very high; however, being an equity-linked scheme, the risk involved is also high.
ELSS is qualified for tax deduction under Section 80C up to a maximum of Rs. 1.5 lakhs. Also, the minimum investment amount is Rs. 500.
Now, you don't have to contemplate any longer on issues like where to invest. If you are hoping to put your cash in medium and long-term plans, the options referenced above could be your best choice!