Investment means the creation of financial assets or instruments with the objective of revenue generation over a period of time. The main aim of an investment is to get your funds to grow to enhance your wealth and financial security. Investments allow you to increase your wealth over a period of time and help you achieve long-term financial goals, like planning retirement, purchasing a house, ensuring children’s higher education, etc. Also, we all know that with the passage of time, the buying capacity decreases because of inflation; hence, investment opportunities help get returns higher than the rate of inflation to increase your wealth.
Different Investment Options in India
Provided below are the different types of investment options available in India:
- Unit Linked Insurance Plans
These plans are a combination of both insurance and investment in a single plan. This means a part of the premium is assigned towards the life coverage, and the leftover premium can be invested in the selected funds, i.e. equity, debt, etc. This allocation can be changed as per the latest market conditions and trends or your investment objectives.Â
These plans are considered to be the best investment strategy as they can give the best results in terms of wealth creation by investing in the capital markets. Also, the insurance component provides financial security to the family members.Â
Under this plan, you can avail yourself of a tax exemption of a maximum of INR 1.5 lakhs on the premium paid towards the policy. On the other hand, the death benefit received is exempt from tax as per section 10 (10D).
- Public Provident Fund
This is a long-term savings plan designed by the Indian government that helps achieve financial objectives. It provides assured returns with an investment strategy at low risk. This plan can be opted by those who want to invest an amount between INR 500 to INR 1.5 per annum. Also, the interest is exempt from taxes under section 80C of the Income Tax Act of 1961.
- Mutual Funds
Under this plan, you can invest in the funds that suit your financial objectives. This means, as we know, that equities are market-linked and provide better returns, and on the other hand, debts reap a fixed income with low risk. Hybrid funds offer a balance between the two.Â
- Stocks
They are the financial products that offer you a fractional ownership of the company along with high returns. The stock prices are market-related and thus are considered to be high-risk instruments with higher returns.Â
- Bonds
They are the debt instruments which are issued by the borrowers to raise money from investors in exchange for money lent for a specific period of time. Government-issued bonds, or those issued by corporations or municipalities, are considered to be safer compared to other investments.
- Term Plan
Term Plan Insurance offers financial security to the family members of the insured in your absence for a specified duration as you have chosen. It provides vast coverage at a low premium, which can further be enhanced at a minimal cost. The riders are as mentioned below:
- Critical Illness Rider
- Accidental Death Benefit Rider
- Waiver of Premium due to Permanent Disability Rider
- Terminal Illness Rider
- National Pension Scheme
Under this plan, a part of your funds is allocated to equities, which can be used at the time of retirement to provide social security.
- Endowment Plan
These plans are meant to provide dual benefits, i.e. insurance and savings, which lets you save and provide financial security to the family members with the help of insurance. With these plans, get guaranteed returns and customisable premium options available.Â
- Money Back Plan
These plans provide life coverage along with the returns on maturity that you have paid to achieve your financial goals. Also, the additional riders can be opted for at a minimal cost.
- Child Plan
It allows you to secure your children’s future by making monthly or annual payments to get benefits on maturity. These maturity benefits can be used to educate children, plan a wedding, plan a new business venture, etc.
- Retirement Plan
They are primarily of two types:
- Savings Plan
Under this plan, save the amount regularly and get a massive amount at the time of your retirement. Invest the amount during the period when you earn and get regular income post-retirement.Â
- Annuity Plan
Here, you are required to invest in a lump sum to get a fixed, regular income immediately or at a later stage. The income received can be used to maintain the present lifestyle or to fulfil your post-retirement dreams.
- Fixed Deposit
Here, you are required to deposit a fixed amount for a pre-determined tenure in a bank or NBFC to get the pre-determined amount at maturity. The investors here receive the principal amount along with the compound interest. They are considered to be low-risk investments with guaranteed returns.
- Post Office Savings Scheme
It offers many deposit options to low-risk investors, which helps to build a financial corpus to achieve financial goals in case of emergencies. These are tax-saving investments, eligible to get a deduction in income tax maximum up to INR 1.5 lakhs u/s 80C. Different options available are:
- Post Office Savings Account
- Post Office Time Deposit Account (TD)
- Post Office Monthly Income Scheme Account (MIS)
Conclusion
Investment is a crucial decision that helps to achieve your financial goals, as relying merely on savings is not enough. One is required to invest in the appropriate investments to grow and nurture their funds. Also, you can beat the impact of inflation by generating returns against inflation. It allows you to secure your retirement and makes you more disciplined.
