An investment is any asset purchased with the goal of appreciation or generating income. A long-term investment, is typically any investment that is held for a period of five years or more. With long-term investments, investors can afford to take risks in return for greater returns as investing for longer periods of time helps combat the volatility that often accompanies riskier investments. The best investment options are ones that are a good combination of risk and return.
Long-term investments generally yield higher rates of return and are a great way to beat inflation and build wealth. There are a number of saving goals for which long-term investments are ideal and help build a good corpus that you can withdraw from periodically or in lump-sum. These saving goals include retirement, wedding, education, etc.
Long-term investments include mutual funds, stocks, FDs, EPF, NPS, ULIPs, etc. These are great if you don’t have immediate need for your invested funds and are looking for investments that will help grow your money multifold.
Investment decisions are personal decisions that are heavily influenced by a number of factors such as your personal circumstances, risk tolerance levels, investment goals, market conditions, etc. Here are some important factors to consider before making any investment decision to ensure that you are choosing the best investment options that are tailored to your needs and goals.
An important factor to consider when making any investment is the investment time horizon. This also gives you an idea about the desired liquidity levels, risk tolerance, etc. A general rule of thumb is that if you’re willing to stay invested for longer periods of time, i.e, have a longer time horizon, you are well-positioned to take risks that will offer you greater returns. If you can afford to stay invested in the market for longer periods of time, ideal investment choices for you are mutual funds, equities, FDs, etc.
Another important factor to consider when investing is your risk appetite. Generally, people who have high liquidity requirements, dependents and immediate financial goals tend to have lesser risk tolerance. If you have high levels of risk tolerance, you should consider investing in securities such as mutual funds, equities, ULIPs, etc. However, if you have lower risk tolerance levels, your ideal investments would be FDs, Post Office Savings, RDs, PPF, etc.
Generally, long-term investments can combat the risk of volatility that comes with making market-linked investments. However, it’s important to take into consideration things such as historical data, economic conditions to make informed investment decisions.
There are a number of kinds of financial instruments that you can invest in based on your goals and objectives. Let’s look at some of the best investment options available in the Indian market.
A mutual fund is an investment instrument that consists of a portfolio of equities, debt instruments, bonds and other securities. A mutual fund is almost always professionally managed. A mutual fund is an extremely versatile form of investment that offers you different risk and liquidity options. As for long-term investments, you can opt for equity mutual funds that offer higher returns than debt or gold mutual funds.
A fixed deposit is a financial instrument that allows you to park your funds with a bank or NBFC for a specified period of time at a specific rate of interest. An FD is one of the best investment options available to individuals looking to only take a negligible amount of risk in return for consistent returns. Current FD rates range between 3.25% to 7.75%. Additionally, you can also choose between a lump sum payout or regular interest payouts depending on your requirements.
National Pension System (NPS) is a voluntary, defined contribution retirement savings scheme that is designed to allow its subscribers to make optimal investment decisions regarding their future through systematic savings during their professional life. Under NPS, individual savings are pooled into a pension fund which is then invested by professional fund managers into the diversified portfolios which consist of government bonds, bills, corporate debentures and shares.
ULIP, also known as Unit Linked Insurance Plan is an insurance plan that offers its subscribers the dual benefit of both long-term investment options and a life cover. Your contribution towards a ULIP is divided into two parts- a portion of it goes towards your life insurance cover and the other portion is invested into a fund of your choice.
You may choose between equity funds, debt funds or a combination of both, depending on your financial goals, risk appetite and other relevant factors. Generally, the life cover offered by the insurance company is at least 10 times your premium contribution and at times, can even go up to 40 times your premium contribution. Many ULIPs also allow free partial withdrawals which makes ULIPs one of best investment options for anyone looking to make long-term investments with considerable liquidity levels.
There are a number of long-term investment options available in the Indian market for every kind of investor. However, the plethora of options available can cause a lot of dilemmas. Here’s a comprehensive list of the best investment options available in India and their key features to help you choose the best investment option.
Best Investment Options | ||||
Investment Options | Time Horizon | Ideal For | Risk Involved | Returns |
Bank Fixed Deposits | Short to Long-term | Investors who prefer safety of capital and assured returns | Negligible | Dependent upon current FD rates |
Mutual Funds | Medium to Long-term | Long-term investors with higher medium to high risk tolerance levels | Medium-High | Dependent upon the type of mutual fund |
RBI Bond | Usually 7 years | Investors who prefer safety of capital and assured returns | Negligible | Around 7.75% p.a |
Unit Linked Insurance Plan (ULIP) | Has a lock-in period of 5 years | Long-term investors with medium to high risk tolerance levels | Variable, depends on your fund choice | Market-linked |
NPS | Till retirement | Long-term investors | Medium to High | Hovers around 9-12%, market-linked |
PPFs | 15 years | Long-term investors | Risk-free | 7.1% |
Guaranteed Saving Schemes | 10 to 20 years | Long-term risk-averse investors | Low-risk | 6-7% |
Long-term investments are crucial to building wealth and ensuring financial wellbeing, which is why it’s important to exercise due diligence before making any investment decision, particularly long-term one. The best investment option is one that is right for your personal and financial circumstances, risk appetite and financial goals.
Share
Tweet
