As you already know, investing is a crucial step towards financial success. While today investors have a lot of options to explore, it is important to understand the factors that could influence their investment choices and shape their portfolio. You should focus on creating a plan that will help you accumulate wealth and build a corpus for desired financial goals.
What are Investment Plans in India?
Investment plans in India are financial products designed to grow your wealth over time. They involve allocating your money to various assets, such as stocks, bonds, mutual funds, real estate, or gold, to generate returns. The first step towards having the best investment plan is to determine your financial needs and risk profile. Then, choose an investment plan that suits your needs. Before that, understand your capabilities and requirements to pick the best investment plans.
Types of investment plans
The best investment plans can be divided based on the risk they carry. Typically, you can categorize investment plans as low-risk plans, moderate-risk plans, and high-risk plans.
Some of the most popular plans in these categories include –
- Low-Risk Investment
In these categories of investment plans, the options carry low-risk elements. This makes them suitable for risk-averse individuals. Some popular low-risk plans are –
Guaranteed savings plan
This plan will offer you the dual benefits of guaranteed returns and life insurance coverage. The plan will also offer you higher returns compared to fixed deposit schemes. Above all, you can avail yourself of tax benefits on both premium amounts and returns.
Fixed deposits
It has to be one of the best investment plans in India. Fixed deposits are not only considered safer investment options but also a decent means of generating returns on an idle corpus. You can use an online fixed deposit calculator to determine the returns you can generate on your deposit over time.
Public Provident Fund
Being a government-backed scheme, PPF is considered one of the safest investment options in India. It offers stable returns on the corpus. Notably, the contributions towards PPF are eligible for tax relief under Section 80 C. Additionally, PPF interest earnings are also tax-free. This scheme will allow you to withdraw partially from the sixth year of the scheme. If you are seeking plans to invest for the long term, you can consider this option.
National Pension Scheme
NPS is also a government-backed scheme but it is designed to help investors build a financial safety net for retirees. You should note that these schemes offer variable interest rates and allow you to diversify your portfolio. Under NPS you can invest in equity, government securities, and corporate bonds. If you invest in this scheme you can claim tax benefits under sections 80CCD(1) and 80CCD(1B). You should note that 40% of the investment corpus has to be used to buy an annuity.
Post Office Monthly Income Scheme
This monthly scheme has been designed to offer regular income. It provides interest earnings which are compounded monthly. POMIS comes with a maturity of 5 years and the maximum investment limit could vary based on whether you choose to have an individual account or a joint account.
- Medium Risk Investment
These popular investment plans have moderate levels of risk and offer ample growth potential.
Monthly Income Plans (MIPs)
This plan offers regular income and allows you to preserve your capital. To ensure limited exposure to risks, MIPs invest 70-80% in debt instruments and 20-30% in equities. Based on the composition, it offers substantial returns over time. The allocation pattern makes it suitable for individuals seeking regular income with moderate growth.
Hybrid-Debt Oriented Funds
This investment plan combines the best of debt and equity. It is suitable for those with moderate risk-taking capacity and seeking a blend between income and capital appreciation.
Arbitrage Funds
This particular investment plan will help you generate consistent returns and expose your profile to limited returns by purchasing and selling securities at different costs. This way the plan exploits the difference in cash and derivative markets. Arbitrage funds will offer you stable returns and tax benefits on the equity component.
Exchange Traded Funds (ETFs)
You can easily find ETFs on stock exchanges and route your investment through the platforms. Typically, the plan will expose your portfolio to diversified assets such as bonds, equities, and commodities. You should note that the underlying risk would depend on the associated assets.
- High-Risk Investment
The best investment plans that offer high returns also expose your portfolio to high risks. This is why they are more suited for investors with risk-taking capacity. To offset the involved risk you are recommended to focus on the long-term investment in these plans and allow your portfolio to grow.
Unit Linked Insurance Plans (ULIPs)
This popular plan has been designed to offer the best of endowment plan and investment opportunities. Historically, this investment instrument has outperformed traditional plans in returns, making it a lucrative choice for many. Ulips will offer you the flexibility to allocate a part of your premium to different investment options based on your risk profile and objectives. The rest of the premium would go towards insurance coverage. You can use an online ULIP calculator to estimate returns from this investment option and determine a suitable combination of variables.
Mutual Funds
Mutual funds are among the most popular investment options in India. Based on your financial goals and risk-taking capacity you can invest your resources into equity, hybrid, debt, or focused funds. Additionally, you can route your investment through SIP to reap the benefits of compounding power or invest in a lump sum in a popular fund scheme.
Stock Market Investments
Stocks carry high risks associated with their performance depending entirely on the performance and financial standing of the company. This makes them highly volatile and subject to market movements. Given the volatile nature of the stock, it is important to assess their fundamentals and track market performance before investing in them.
Regardless of which investment option you select, the best plan allows your portfolio to grow and generate returns. Make sure to weigh the pros and cons of investment plans carefully before investing in them.
