Savings and investing are extremely important activities that can help you to achieve financial freedom. It requires a lot of discipline to save money, and whoever does it regularly gets rewarded in the long run.
How to Choose an Investment
When it comes to choosing an investment, there is no one-size-fits-all solution. An investment that may be very suitable for one individual may not be right for another person at all. This may make it very difficult for you to understand which investment is best.
Also, with a plethora of investment options available in India at present, it is easy for anyone to get confused very easily. Therefore while choosing an asset for investment, you need to be smart. You can start by evaluating the various options based on the following:
- Maturity: The time frames of the short term and long term goals that you have need to be considered, and the maturity of the assets have to be chosen accordingly. For example, if buy a car in 3 years, invest in assets that mature in 3 years. Do not go for an asset which will mature in 5 years, otherwise, your money will get locked.
- Risk: Choose assets which match your risk profile, otherwise you will not get the desired results from your investment, and may lose money unnecessarily. For example, if you do not like to take risks, buy fixed deposits or bonds, and not equity.
- Returns: The returns that you will get will be commensurate with the risks that you are going to take. Don’t have any unrealistic expectation of returns if you are not willing to take the necessary risks.
- Expenses: The expenses you incur while investing reduce your returns. For example, if you earn a return of 12% and have to give away 4% in expenses, your effective rate of return becomes 8%. It is always important to keep the expenses low. For this reason, it often makes sense to avoid the investments which have high expenses attached to them.
Some Popular Investment Plans
The following are some of the assets that have given good returns in the past, continue to be the best investment plans 2020:
- Unit linked Investment plans (ULIP): These provide a combination of insurance and investment to the investor. A part of the premium that is collected from the investor is spent in paying the premium for the insurance policy and the remaining amount is invested in equity shares. The rate of return on ULIPs can be very high in the years when the equity markets perform well. Apart from this, investment in ULIPs qualifies for deductions under section 80c of the Income Tax Act well.
- Mutual Funds: Mutual Funds are ideal for people who want their investments to be managed by experts so that they do not have to worry about creating and maintaining their portfolios. Mutual Funds generally invest in either the debt markets or equity Markets and depending on the scheme chosen it may invest in both.
The investor earns when the share prices go up and from the returns are received from the debt instruments. However, it has to be remembered that the value of the equity mutual funds may fall if the share markets go down. Hence the risk involved in equity mutual Funds is quite high.
The best way to invest in a mutual fund in a disciplined way is to start a SIP investment plan 2020. Consult the various mutual fund options available on ComparePolicy.com and take the help of your financial adviser if you need help in choosing a plan.
- Equity Linked Savings Scheme (ELSS): These are a category of equity mutual funds. If you are looking for the best SIP investment plan 2020, then you should definitely consider investing in ELSS, which can get you returns as high as 12% per annum. These have a lock-in period of 3 years, which helps in building a habit of long term investment. Apart from the attractive returns that these have given in the past, the amount invested in ELSS is allowed as a deduction under section 80c of the Income Tax Act.
- Debt Funds: For those looking for good returns against a low risk, debt funds are quite attractive. These can get you much higher returns than bank fixed deposits and can give you capital protection too. These funds are attractive for those looking for the best sip investment plan 2020 and are suitable for those who are nearing their retirement age or have already retired.
- Term Insurance: These are pure Life Insurance policies which do not yield any monetary returns to the beneficiaries as long as the policyholder is alive. However, the returns from this insurance policy come in the form of protection and emotional security that the policyholder derives from knowing that his dependents will be financially secure in case he passes away. Term insurance is a must for anyone who earns since if he dies, the family will be deprived of the income. The payment made by the insurance company will provide adequate money to the dependents, till one of them starts earning again.
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So these were the best investment plans 2020 that you can look at. While considering which investment is best for you, keep these in mind.