Investment Plans Guide
Dive into a wealth of information on various investment products, all presented in an easy-to-understand format. Whether you are a novice or seasoned investor, our guide will help you navigate the complexities of the financial world and empower you to make informed decisions for a secure financial future.
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23 year old Shalini has started her career after completing her education a year back. Her father has advised her to start investing soon so that she can reap the benefits of her investment in different stages of her life ahead.
Being her first job, Shalini is earning enough to sustain in a metro city away from her family meeting all her needs. Despite that she is eager to start with some investment. She has divided her salary into parts and is expecting to invest one part, while she would use the rest of her salary on her monthly expenses.
Shalini is looking for a good option to invest now. But she is not sure which policy would be best for her as she doesn't understand most of the plans. There are many people like Shalini who may not have clarity about investment plans and their benefits.
Only when you have a clear understanding of different plans and how to choose the right plan, can you benefit from an investment better. So, what are investment plans? How do you expand your money with the help of an investment plan? Let's find out!
A right investment plan is a platform to create or multiply wealth over a certain duration of time. They offer the best option to plan out methodical financial goals to grow your hard earned money effectively.
There are several types of investment plans available in India that provide the investor with an opportunity to increase their money. Investors can invest in such plans offering guaranteed returns. However, the only thing required is to choose the right plan to gain accordingly.
In this post, we are offering a precise guide to help Shalini and everyone like her to understand the meaning and benefits of various investment insurance plans so that you can choose from the one that suits you best.
Coming back to Shalini, she started looking for plans and their information so that she can choose one that is cost-effective and beneficial too. However, the availability of so many options is making her confused. Hence, Shalini calls her father to get further information. Being from the banking background, her father is well-versed with the insurance sector and can guide her better.
Guide to Investment
The first thing that Shalini's father suggested was a step by step guide to investment:
When you make an investment plan, it doesn't simply mean to put your money in a policy. You need to act as per the present financial condition of the market and your investment goals. Other important things to consider are risk involved in the plan and if you are ready to take the risk. Also, the time period of the investment plan.
Here are some tips that act as your guide to investment:
Evaluate your financial condition
This means evaluating your current expenses to confirm how much money you can set aside for investment. You may use a budget to ensure your income you are earning presently and your monthly expenses. Also, you must save a percent of the income for emergency purposes.
Next, identify your investment goals
The next important thing is to have clarity on the reason and purpose of making an investment. You should know why and for how long you need to invest so that your actual purpose is solved.
How much risk do you want to take and for how long?
This is another crucial aspect and the plan you choose depends on this factor. So, you must analyze how much risk you can take and till what duration, to be able to choose your plan better.
Have you decided on what and where to Invest?
This is the final step where you need to confirm the plan or plans that you are willing to invest in such as stocks, mutual funds, bonds, etc.
Monitor investment
Finally, don't just invest and forget about it. Rather, keep a regular track on what is happening to your fund. Check how the investment is proceeding and if you require rebalancing it.
Types of Investment Plans
You can now buy and renew motor insurance online in just a few simple steps, saving time and costs. You can visit the website of the insurance company or an aggregator website to buy a motor insurance policy.
ULIP
Unit-Linked Insurance Policy or ULIP is an insurance cover that also offers the benefit of investment. This long-term plan is regarded as one of the best investment options with a variable return of interest. With ULIP you can protect the future of your loved ones, ensure a secure future for your child in terms of education as well as create a return on your investment. Hence, ULIP allows you to buy all such securities in one plan. The best thing about ULIP is that it divides your investment in two different parts. One of it is used for insurance purposes, while the other is used for investment in different financial instruments like stock, bonds etc. ULIP allows the investor the liberty to choose the investment options in multiple funds. It also allows the investor to switch between funds and move from risky options to safe investments. These are easy to manage funds that financially secure the family of the investor with insurance coverage.
Endowment plans
It is a kind of life insurance investment cover that protects the insured for a particular time period till the plan matures. If the policyholder outlives the plan till maturity, he/she gets a lump sum amount plus bonus by the insurer. However, if the insured dies through the term of the policy, the nominee gets the sum assured as compensation. This investment plan combines the benefits of savings and life coverage. Thus, an endowment plan helps the insured to create a wealth that can be used to meet his/her future financial goals.
Money-back plan
A money back plan pays out the entire sum insured to the policyholder evenly throughout the policy duration till the person survives. This dispersal of sum assured is done after the completion of a particular term period of policy, such as 5 years in most plans. The best part of a money back policy is that you get guaranteed income throughout the policy duration which can be used to meet your monetary needs during different stages of life. This also strengthens your financial security. Like Endowment plans, money-back policies serve the dual purpose of Investment and Insurance coverage. It also allows the benefits of add-ons.
Retirement plans
These are investment plans in India used to create a corpus for your life after retirement. Under these plans, you can save an amount to build a capital that would help you to lead a good life after retirement. The key aim of such a plan is to save enough money to help you lead a normal life by allowing a regular flow of income even after your retirement. Hence, with retirement plans you can secure your old age with stable income on a regular basis.The primary feature of a retirement plan in India is that the investor has to make regular payments in this plan until retirement or till the maturity of the plan.
Child investment plans
These are again combinations of insurance cum investment plans which secure the future of a child financially. The insurance part of the plan protects the child against any unfortunate situation in life like loss of parents. And the investment part generates sufficient capital for the child for his/her future. These plans allow flexible payouts to meet crucial milestones of the child effectively during different stages of life. There are a number of best child investment plans in India.
National Saving Certificate (NSC)
This is one of the low-risk government backed short term investment plans with high returns in India. Available at India post offices, these plans come with an assured return on investment. NSC is a fixed income investment plan available with a maturity period of 5 years and can be bought from any post office across the country.
National Pension Scheme (NPS)
This savings plan is specifically created for people willing to save for retirement. It serves people working in private jobs and those who are self-employed. It has a long period of lock-in during which the money cannot be withdrawn. It allows policyholders to withdraw money after attaining 60 years of age.Under this plan, the maturity amount is exempted from tax if you decide to convert 40 percent of the capital into annuity. The remaining 60 percent can be withdrawn as a lump sum, which is also exempted from tax.
Tax saving Mutual Funds
ELSS or Equity Linked Savings Scheme is a tax saving mutual fund and a popular investment plan for saving tax in India. Managed inertly by equity funds, this investment fund has a lock in period of 36 months during which you cannot move your ELSS savings to other investments.
Bonds
Bonds are like debt investment where the investor gives loans to different organizations seeking to borrow money. The amount is given for a specific time period at a specific interest rate and in return the investor gets a bond. The investor receives a rate of interest on the total investment.
PPF
If you are looking for long term saving plans, PPF is just the right one for you. This investment plan in India with high return comes with a triple tax deduction option, which serves as its lucrative benefit. The plan allows the investor to withdraw a partial amount after completing 5 years. The limitation with PPF is that it allows an individual to invest INR 1.5 lakh as the maximum sum in one fiscal year.
Shalini is enlightened with the information on most of the investment plans in India. But she wanted to know if there is any particular thing that she should consider while choosing a particular plan besides the returns on investment and the risk factor. Hence, her father told her to check investment plans by tenure.
Investment plans by Tenure
- This is another important thing to consider while planning investment. You need to see your particular needs for which you are investing. Depending on your need, you can buy a long-term or short-term plan.
- There are several options like Fixed deposits, Post-Office monthly income scheme etc., which serve as best investment plans for monthly income in India. So, if you need a regular monthly income you can go for such plans.
- Then there are best investment plans for 3 years in India like the Liquid funds, Short-term funds, Recurring deposits etc., which serve your purpose of short-term needs for your immediate future.
- Other plans for 5 years, 10 years, and long term plans for 15, 20 years and beyond are also available to choose from.
Now, you must be thinking what is IDV in car insurance? Let us understand what car IDV means with the example of 35-year-old Mira (Aseen's colleague), who has been driving a car for 10 years now.
Mira bought her first car with an own-damage insurance policy at a lower IDV value of the car. Fortunately, she didn't suffer any breakdown initially. But soon her brand new sedan collided on the road and suffered huge damage. She raised a claim for her policy and was hoping for a good reimbursement. But the disbursement that she got from the insurer was not sufficient to meet her damage-repair needs. This was because of the low IDV that she had chosen.
If you choose an IDV that is lower than the original price of your car, you are covering your car for a value that is lower than its worth. Thus, in this case, you would receive lower value as compensation in the event of damage, theft, or total loss of your car.
Hence, Mira recommended Aseen to go for a plan with a reasonable IDV (neither too less, nor too high) so that it would fulfill her purpose in time of need. She can even use an IDV calculator for the car to find the exact value.
Car Depreciation
With all the inputs that Shalini received from her father, her colleagues and the customer care experts at some of the insurance companies she interacted with, Shalini prepared a checklist to buy investment plans in India. Here's a look at the checklist that may help your purpose too.
With the above checklist and the information gathered, Shalini is set to get her first investment done. But she still needs to check some very vital things such as the eligibility criteria of various plans and the documents needed for them.
So, let's check them below:
So, now you know most of the things that you ought to know about investment plans before starting your journey of savings. Investment plans are very important to secure your future as well as the future of your loved ones. If you haven't started planning for investments yet, start now.
Conclusion
There are many people who still find buying insurance policies a daunting task. We hope the above guide helps you make better and informed decisions while buying or renewing your car insurance the next time.
Guidance as per Your Need
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If you have any questions on how to choose the best insurance plan, you can connect with our IRDAI certified insurance advisors.
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