Tips to Choose the Best Investment Plan

An investment plan helps you meet your financial goals such as education, home purchase, etc. So if you have been spending your time choosing the best investment plan for yourself and your family, there are some things that you need to take care of. Choosing the best investment plan can be quite challenging given the existence of numerous alternatives. Each plan comes with distinct features and benefits, making your selection that much tougher. In case you’re having a hard time finding the best investment plan for you, read this page wherein you can know some of the most important things to consider before selecting the plan.

So, What to Consider Before Choosing the Best Investment Plan?

The market is flush with such investment plans – mutual funds, stocks, unit-linked, money back, retirement plans. However, considering the following holds the key to a fruitful investment journey.

Keep in Mind your Needs and Goals

The first and foremost thing you should consider while choosing an investment plan is to check whether it is capable of meeting your goals and needs. Once you have a clear idea of what you expect from the plan, it becomes easy to look for the investment plan.

How Long Do You Want to Invest for?

Your investment horizon also dictates the investment type that will suit you. If you are in for the long haul, investing in ULIPs that put your money in stocks will make sense. Short-term investors would rather want to put their money in fixed deposits, endowment plans, etc.

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How Much Investment Risk Tolerance Do You Have?

It all boils down to your investment risk tolerance. If you can afford greater investment risks, there’s none better than trusting the money-raising power of equities to do so. Investing in a disciplined manner can compound your invested capital to significant highs over time.

You can invest either directly or through mutual funds/ULIPs. Successful direct investments will require in-depth market expertise, which if you don’t have, leaves you with the other two options. Both are professionally managed by fund managers. Where ULIPs score over mutual funds is the life insurance cover the former provides to its policyholders, which is not the case with the latter.

So, see your priorities and choose the right equity investment option for you. Those with a low-risk appetite should consider investing in fixed deposits and debt instruments such as bonds, debentures, etc. You can invest in these instruments through mutual funds and ULIPs too.

Explore options

Search for the investment plans, compare their offers and see which one is affordable and provides more benefits. You can compare plans based on the following factors –

Type of funds – In ULIPs, you get a list of funds – equity, debt and hybrid – to choose from. The fund you choose would put your money in a myriad of financial instruments. As told above, equity funds would suit the ones with a high-risk appetite. Debt funds would go in sync with investors with a low-risk appetite. Those with their risk appetites in between can opt for hybrid funds.

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Death and maturity benefit – Compare the death and maturity benefit offers of different plans and see which will be more beneficial for you.

Investment options – There are varied ways to invest your money such as automatic allocation based on the market up and downs, STP, etc.

Are There Any Bonuses?

The insurance company provides bonuses under insurance cum investment plans as a reward for long-term investments. This is available after a certain period of coverage. You can even get a simple reversionary bonus and terminal bonus either on maturity or death, whichever occurs earlier.

Check for Liquidity

Check whether the investment plans allow you to meet your liquidity needs. Mutual funds, except the close-ended ones and tax-saver variants, always allow you to do so. But if you’ve set your sights on insurance-cum investment plans, you will need to contend with a lock-in period before the withdrawal. A partial withdrawal facility is available after a lock-in period of three or five years depending on the insurer. This way, you can withdraw money without stopping your investments. Whereas, if you surrender the policy, you lose all the policy benefits. In case of surrender, a higher amount will be available to you compared to the withdrawal amount. So, the choice is yours.

Check What You’ll Pay and Get in Return

You can start investing in either mutual funds, ULIPs, endowment or other investment plans monthly. While mutual funds will have monthly SIPs, others will have premiums. As mutual funds don’t come with a life cover, the only thing you can get from it is the prevailing investment value. That would also be the case with other investment plans, with an exception of the sum assured payment to the nominee of the policyholders should the latter die during the policy term. The sum assured can be as much as INR 1-2 crore.

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