The aim of our lives can be summed up in a single word: happiness. We all owe it to ourselves to discover and unlock the key to enduring happiness. Working toward our ‘Life Goals’ through smart goal-based investments is one way to add satisfaction to our lives.
Buying a house, funding your children’s education, or securing wealth for life after retirement – any of these life goals necessitates financial support in some way. As a result, we should concentrate on accumulating resources when working for other objectives. To put it another way, we need to combine different investment strategies to build a customised financial portfolio that will help us achieve our goals.
What is an investment plan?
Investment plans are basically financial instruments that aid in the creation of long-term capital. To achieve our financial goals, we can use various investment plans in India to invest our savings into various money-market products in a controlled and periodic manner.
Overall, investment plans offer the much-needed benefit of optimising our savings by systematic, long-term investments and generating potential wealth. The first step toward getting an investment plan in India is to evaluate your risk profile and financial needs, and then choose an investment plan that meets those needs. Some of the investment options in India include:
- Unit Linked Insurance Plans (ULIPs),
- Monthly Income Plans,
- Public Provident Funds (PPF),
- Mutual funds,
- Sukanya Samriddhi Account,
- Senior Citizen Savings Scheme (SCSS),
- Tax saving Fixed Deposits.
These and other investment strategies require a thorough research before selecting investment schemes that include long-term sustainable returns, tax advantages, and capital appreciation. In India, you can choose from a variety of investment options.
Types of investments
Different investment plans are broadly classified into three categories, as depicted below:
Low-risk investment plans, as the name implies, are those with a risk level that is close to zero. In other words, low-risk investment strategies are more likely to have consistent and predictable value growth with limited losses. The following are some of the best risk-free investment options:
- Sukanya Samriddhi Yojana.
- Public Provident Fund (PPF).
- Post Office Monthly Income Schemes
- Senior Citizen Savings Scheme (SCSS).
- Tax Saving FDs.
- Sovereign Gold Bonds.
- Life Insurance.
High-risk investment plans are appropriate for investors who are primarily interested in long-term capital development, as the name implies. In the meantime, Most high-risk investment strategies experience considerable volatility, but they also have the potential to generate significant long-term returns. The following are some examples of high-risk investment plans:
- Direct equities,
- Unit Linked Insurance Plans,
- Mutual Funds.
Medium risk investment
Medium or moderate risk investments, as their name implies, are investment plans that are diversified or balanced. Investment plans with a moderate risk profile offer both the opportunity for growth and the ability to consider some market uncertainty. Most medium-risk investment plans help you diversify your investments by using a combination of equity and debt instruments to achieve consistent returns without taking on too many risks. The following are some examples of medium-risk investment plans:
- Hybrid debt-oriented funds,
- Arbitrage funds,
- Monthly Income Plans.
Things to consider while choosing the best investment plan
- Investment Objective: It is critical to comprehend the intent of the investment for which the investor is looking to make. This may be for the purpose of building a large corpus, establishing a retirement fund, or repaying an existing loan. Knowing your investment goal allows you to pinpoint the sum you want to spend and the assets that will help you achieve it.
- Investment Period: Short-term or medium- to long-term investments are both possible. Some of the short-term investment goals for which investment is made include building a fund to repay a loan, taking a foreign holiday, and so on. The short-term investment period will last up to three years. Long-term financial priorities include retirement planning and building a fund for children’s education or marriage. Debt investments are best for short-term targets, while equity investments are better for long-term investment goals. Knowing the investment period will help you select an appropriate investment plan.
- Tax Efficiency: Certain investment plans result in tax exemptions under various sections of the Income Tax Act. For example, ELSS, PPF, NPS, ULIPs and tax-saving FDs investment plans offer tax benefits. Likewise, you need to check the taxation of the returns.
- Ways to Invest: You can also look into the various investment options. The online investment methods are easy, fast, and paperless. Offline methods, on the other hand, are time-consuming and entail a great deal of paperwork. Using an online mutual fund investment site, you can invest in mutual funds.
- Investment Flexibility: Certain investment plans, such as tax-saving fixed deposits, enable you to make a one-time investment. Mutual funds that offer the SIP method of investment, on the other hand, enable investors to invest a small sum at a regular interval. This enables the investor to monitor their cash flow while still maintaining financial discipline.
Investment plans assist you in increasing capital in order to fund future life events. They assist you in saving and investing in a structured manner. However, when choosing the right plans, you must proceed cautiously. Your investment objectives, tenure, and risk profile should all be considered when selecting a plan.
Frequently asked questions (FAQ)
- Which investment scheme gives the highest return?
Investing is performed solely for the purpose of making a profit. The form of investment, the portfolio of the investment, the terms of the investment and market conditions all influence the return on investment. Some investments have set returns, while others have variable returns based on market conditions.
- What is the best investment for the next five years?
The financial market offers a variety of investment opportunities of varying risk levels and investment tenures. A five-year term is considered to be a medium-to-long-term horizon. Fixed deposits, recurring deposits, equity mutual funds, debt mutual funds, corporate bonds, government bonds, government securities such as National Savings Certificate (NSC), and other government securities with a 5-year term are available. However, in terms of return, liquidity, risk, taxation, and other factors, each of them is special.
- What is the safest investment with the best return?
Risk and profit are inextricably linked. The higher the return on an investment, the higher the risk it entails. However, there is no assurance that taking more risks would result in a higher return. Assume that an investor’s perception of risk is limited in comparison to the risk associated with a particular investment. It is preferable to prevent it in that situation.
Even if a minor shift in the portfolio has a negative impact on an investor, it indicates that the investor is unwilling to take on additional risk. Low-risk investments, such as fixed deposits, recurring deposits, debt securities such as debt funds, government bonds, and so on, are ideal for these investors.
However, not everyone is suited to low-risk investments. Before investing in any of the investments, the investment horizon, investment objectives, and liquidity must all be considered. Fixed-income investments are often subject to high taxes or TDS. As a result, before investing in these investments, investors must understand their taxation policies.