Investment Plan

Investment planning is a significant part of financial planning. When we talk about investment planning or the right investment plans to invest, three words come to mind - intimidating, overwhelming, and scary. For a ‘regular Joe’ this question seems perpetual.

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What is Investment Plan?

Investment plans are financial products that provide an opportunity to create wealth for the future and meet the financial goals by investing periodically in different investment plans, funds, and schemes. Investment plans also help to inculcate the habit of disciplined investment among investors so that they can accumulate wealth in the long-term and achieve their future financial objectives. 

Some of these best investment plans in India enables us to invest our hard-earned money in various money market products in a systematic way to achieve financial objectives. Investment plans offer the mich needed benefit of maximizing the savings through long-term disciplined investment and wealth creation for the future. The primary step towards having an investment plan is to access the financial needs and risk profile and then choose an appropriate plan. Some of the top investment options in India include.

  • 1. Unit Linked Investment Plans (ULIPs)

  • 2. Public Provident Fund

  • 3. Monthly Income Plan

  • 4. Mutual Funds

  • 5. Senior Citizen Savings Scheme

  • 6. Sukanya Samriddhi Yojana

  • 7. Tax Savings Fixed Deposits

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Types of Investment Plan

Before making any investment make sure that you do proper research and choose the investment plan, which offers long-term sustainable returns, capital appreciation, and tax-saving benefits. It is paramount to consider the risk associated with the investment before choosing the best investment plan with high return. In an investment plan, the risk can be evaluated as the probability or possibility of the asset either going into a loss or performing below expectations. Based on the risk factor, here we have categorized different investment plans.

  • Low-risk Investment

    Investors with a low-risk appetite who wants less or no volatility in the investment portfolio choose to invest in low-risk investment options. These investment plans tend to provide a reliable and stable growth of capital with minimum losses or minimum risk involved. Even though these investments usually offer guaranteed returns, the investors may need to lock-in their investment for the long-term to earn a substantial return. Let’s take a look at some of the best low-risk investment options.

    • Public Provident Fund: The Public Provident Fund is another investment avenue, which is preferred and opulent choice for most of the investors. The highlight of a PPF is that it has a tenure of 15 years, and the effect of the tax-free interest quiet big specifically in the coming years. Now, as the sovereign guarantee backs the principal investment and eared interest therefore investing in a PPF is safe. Moreover, the interest rate on the PPF is generally reviewed at every quarter by the government.

    • Senior Citizen Savings Scheme: A Senior Citizen Savings Scheme is surely the preferred choice of almost every retiree and an investment plan, which is on every retiree’s investment portfolio. It is a scheme specifically designed for the senior citizens and can easily be availed from any of the banks or the post offices for anyone who is 60 years of age and above. The scheme is available for 5 years, which can also be extended for up to 3 years only when the same gets matured.

      Besides, one can easily open more than one account and Rs 15 lakh is the limit for upper investment. When it comes to the interest rate it is completely taxable and paid on a quarterly base on the premise of the revisions and subject to review. However, if once the investment has been done in the scheme the rate of interest will be the same until the scheme matures. The senior citizen can also claim Rs 50,000 as claim deduction in one financial year within section 80TTB with the earned interest from the scheme.

    • National Pension Scheme: Next, the investment option is the National Pension Scheme, which truly focuses upon the long-term retirement and is duly managed through the Pension Fund Regulatory and Development Authority. Earlier the minimal yearly contribution towards an NPS for a tier-1 account was Rs 6,000, which has been changed and currently is Rs 1,000 for the account to remain active. It is an amalgamation of liquid funds, corporate bonds, government funds, fixed deposits, and others. On the premise of the risk appetite, the investor can likely decide the amount of money that should be invested in the NIP via NPS.

    • Pradhan Mantri Vaya Vandan Yojana: The Pradhan Mantri Vaya Vandan Yojana has been specifically designed for the senior citizens who are 60 years of age and above as that they can be provided with an assured return every year of 7.4%. This scheme provides the income of pension, which is payable easily on an annual, half-annually, quarterly, and monthly as opted. The maximum amount of the pension is Rs 9,250 and the minimum amount is Rs 1,000 each month.
       
      The amount that can be invested in the scheme can go up to a maximum of Rs 15 lakh and the period of the scheme are 10 years. The invested sum is payable to the senior citizen at the time of maturity, however, in case, the senior citizen passes away, the sum will be paid to the beneficiary/ nominee. This scheme is accessible until 2023, March 31.

    • Bank Fixed Deposits: Investing in a bank fixed deposit is always a secured and the most preferred choice for the investors in India. From February 04, 2020, the depositor of a bank will be insured up to a sum of Rs 5 lakh maximum for the principal and the amount of interest within the rules of DIGC. Before, the coverage was Rs 1 lakh for the principal and the amount of interest. As per the requirement, one could opt for the tenure that could vary from month to month, quarterly, annually or cumulative interest alternative in them. Now, the earned interest rate will be added to the income, which is taxable as per the tax slab.

    • Gold: Having gold as adornments have its interests, for example, wellbeing and significant expense. Moreover, making charges is applicable, which is regularly extended between 6-14 % of the price of gold, which can easily move as high as 25% if there should arise an occurrence of extraordinary structures. For the individuals who might need to purchase gold coins, there's as yet a choice. Numerous banks sell gold coins these days. A substitute method of claiming gold is employing paper gold. Interest in paper gold is more practical and should be possible through gold ETFs. Such a venture (purchasing and selling) occurs on the stock trade that is BSE or NSE with gold as the basic resource. Putting resources into Sovereign Gold Bonds is the other alternative to claim paper-gold. A speculator can likewise contribute through mutual funds of gold.

    • Sukanya Samriddhi Yojana:This plan is specifically developed to secure the financial future of the girl child. Since its launch, the plan has gained huge popularity as one of the best investment plans in India for the girl child. As a government-backed investment option, this scheme offers safe and guaranteed returns to the investors. The SSY has a tenure of 21years or until the marriage of the girl child after 18 years of age. The current interest rate offered by the scheme is 7.6% compounded annually. From the perspective of tax benefit, SSY is designed as an exempt, exempt, exempt (EEE) investment. This means that the contribution made towards the scheme, the interest earned on the contributed amount, and maturity proceeds are all tax exempted under the applicable sections of the Income Tax Act.

    • RBI Taxable Bonds: Some time back the Reserve Bank of India used to raise 7.75 % savings bonds that were taxable as an investment avenue. However, from May 29, 2020, the Central bank stopped the issuance of such bonds. These securities were propelled by supplanting the recent 8 % Savings (Taxable) Bonds 2003 with the 7.75 % Savings (Taxable) Bonds with impact from January 10, 2018. These bonds had a period of 7 years. The Central Bank with impact from July 1, 2020, has propelled Floating Rate Savings Bond, 2020 (Taxable).
      The greatest contrast between prior 7.75% reserve funds securities and recently propelled gliding rate security is that the loan cost on the recently propelled investment funds security is liable to reset in at regular intervals. In the 7.75% securities, the financing cost was fixed for the whole span of the venture. Right now, the securities are offering a financing cost of 7.15%. The principal reset on the loan cost is expected on January 1, 2021.

  • High-Risk Investment

    High-risk investment plans are suitable for investors who have a high-risk appetite and whose main focus is to have long-term capital growth. Mostly high-risk investment plans include substantial fluctuations, however, the chances to create a huge possible return in the long-term are also very high. Let’s take a look at the high-risk investment plans available in the market.

    • Debt Mutual Funds:Any investor who wishes for study returns should consider investing in debt mutual funds. When compared to equity funds it is less volatile, which means that the risk is less. Moreover, debt mutual funds essentially invest in securities that will generate fixed interest such as treasury bills, corporate bonds, commercial paper, government securities, and money market tools. However, this does not mean that it is risk-free; it has certain risk factors such as the credit and interest rate risk. Therefore, a detailed study is a must before an investor makes his mind for the investment.

    • Direct Equity:Well, when it comes to investing in stocks, it might not just be a preferred choice of the individuals so easily. Besides, investing in a stock is an art and you need to be good at picking up the right stock. Likewise, ten timing is yet another important aspect when it comes to investing in stocks. On the brighter side in regards to the long-term, equity delivers high when compared to other classes of assets that are inflation-adjusted. Likewise, the chances of losing all the capital are slight on a higher side until the investor goes for the method of stop-loss so that the loss can be curtailed. Under stop-loss, to sell order at a certain cost an advance order is placed. And to a certain extent, the risk is reduced so that one can diversify in all sectors and capitalizations of the market. In case one wishes to invest in direct equity, a Demat account is a must besides the bank permits the 3 in 1 account opening.

    • Equity Mutual Funds:As for equity mutual funds, the investment is predominantly done in equity stocks. With the present mutual fund regulations and Securities and Exchange Board of India (SEBI), when it comes to a scheme based on equity mutual fund, it is important that the investor holds 60 % of the assets in regards to the equity and likewise equity-related tools. The equity mutual fund can be managed both passively and actively. When it comes to a traded fund that is active, the returns essentially depend upon the manger of the funds' ability to generate the returns. The equity schemes are segregated on the premise of the capitalization of the marker or even the areas where one wishes to invest. Moreover, it is also segmented on the premise wherein the stocks are invested in Indian companies that are domestic or the investment is done in the stocks of overseas companies that are international.

    • Unit Linked Investment Plans (ULIPs):

      Unit Linked Plan,  commonly referred to as ULIP, is a type of investment plan that provides coverage wherein the money paid as premium by the investor is channelized into the stock markets. Each ULIP has a different set of funds that they invest in. Individuals who invest in the best investment plans get a certain number of units of the fund. These investments are based on the correlation of the fund value of the fund they are investing in and the premium the investors have put in.
      New age ULIPs, also called 4G ULIPs offer more flexibility in comparison to the traditional ULIPs, and at a relatively lesser cost. Moreover, the exemption of the LTCG tax in the Union Budget 2018 made ULIPs even more popular. 4G ULIP plans have low charges and almost zero charges.

      The Unit Linked Insurance Plans are amongst the best investment plans option in India in case you are looking for some coverage cum investment options. The ULIP plans give both financial security and life coverage. And one of the best investment plans, ULIPs also gives you the leverage to make direct market investments. ULIPs funds can be invested into equity funds or debt funds or both parts. The value of the debt fund or the equity fund is evaluated as Net Asset Value the criteria.

  • Medium Risk Investment

    Moderate or medium risk investment includes investment plans that offer balanced and diversified investment. Medium risk investment plans not only provide an opportunity for growth but also take care of the market volatility up to a certain level. Medium risk investment plans mostly to diversify the investment portfolio of the investors through a mix of debt and equity securities to create a stable return with the moderate risk involved. Some of the common medium risk investment plans are.

    • Monthly Income Plans

    • Hybrid-Debt Oriented Funds

    • Arbitrage Funds

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Benefits of Investment Plans

There are many benefits of incorporating investment plans in your financial portfolio. Here we have explained some of these benefits elaborately.

  • Protection to Loved ones

    Return on investments with coverage provides the dual benefit of life cover and returns. This means that if anything unfortunate happens to the insured, his/her family will receive the sum for which they were insured in addition to the fund value either as a single or in the form of monthly/quarterly/half-yearly payments. These returns help to secure the family's needs and monetary goals if they are unable to earn a living or in the unfortunate demise of the breadwinner of the family.

  • Goal-based Planning

    A goal-based investment plan is a great way for saving money for a goal - whether it is buying a house or a car, paying for children's education costs, or planning for marriage or after you retire. Investment plans which come with a long-term lock-in period help the investors to fulfill the financial goals in the long-term like a child’s marriage creating a retirement fund, etc. The ULIP plans offer alternative opportunities to invest and the investor can take a look at their historical profits to calculate his/her returns and builds financial corpus in a few years.

  • Wealth Creation

    Along with proper savings, investing in the right investment options is the best way to multiply your stagnant funds. An investment plan provides you an excellent opportunity to create wealth in the long-term by making a disciplined and periodic investment.  By gaining high returns on investment you can make your money grow with time and create a financial cushion for your loved ones.

  • Tax Benefits

    Investment plans like PPF, ULIP, ELSS, Sukanya Samriddhi Yojana, etc. not only provides an opportunity to accumulate wealth in the long-term but also offers substantial tax-saving benefits U/S80C and 10(10D) of the Income Tax Act.

  • Flexibility

    With an extensive range of investment plans available in the market today, the investors have the flexibility to choose the investment option as per their financial goals, tenure, and risk appetite.

Objectives of Investment Plans

There are various investment objectives for different investors. Here are some of the common objectives of investment plans:

  • Safety

    Every investor seeks safety while investing and safety is one of the prime objectives. There are some investment plans in the form of ULIP that offer guaranteed return possibility.

  • Income

    After safety, comes income. The safest investment plans are the ones that are likely to have a lower yield or rate of income return. The investors should inevitably take risks and sacrifice a certain degree of safety in order to earn better returns. As the returns increases, so does the peril.

  • Tax Minimization

    The investors might pursue some investments so as to leverage tax minimization as a part of their investment strategy. An investor’s anotherkey investment objective is tax saving. The investor can avail tax benefits under section 80C and section 10(10D) of the Income Tax Act, 1961.

How to Choose the Investment Plan?

You can keep these points in mind to choose the best investment plans in India.

Some of these best investment plans in India enables us to invest our hard-earned money in various money market products in a systematic way to achieve financial objectives. Investment plans offer the mich needed benefit of maximizing the savings through long-term disciplined investment and wealth creation for the future. The primary step towards having an investment plan is to access the financial needs and risk profile and then choose an appropriate plan. Some of the top investment options in India include.

  • Access your financial goals and requirements.

  • Create a strong strategy by incorporating the right investment plan plus the right insurance that brings into line with your goals.

  • Evaluate your investment tenure to achieve each goal.

  • Go through various charges applicable to different investment plans.

  • Create a diversified portfolio. This means that instead of investing in a particular investment plan invest in a mix of insurance plans and multiple investment plans.

  • Periodically review your investment plans.

*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply

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