Saving money is a good habit, as it allows you to build a large corpus of funds in the long run. If you think wisely, you can grow your savings by putting your funds in an ideal investment plan that can help you reap good returns on investment. The amount you invest at regular intervals will eventually grow into a considerably larger sum, helping you to meet your future financial aspirations. However, you will have to consider many factors before investing your hard-earned money in an investment plan. Here are a few essential tips that you must remember:
- Opt for a long-term investment plan
If you want to build your wealth with the help of an investment plan, you must remain invested with a long-term perspective. Staying invested for a longer tenure allows your investment to grow exponentially with the help of compounding. Equity-Linked Saving Scheme (ELSS) and equity-based Unit-Linked Insurance Plan (ULIP) are two popular investment options that can help you earn high returns.
The rate of return for ELSS and ULIP depends on the equity market’s performance. However, ULIP has the edge over ELSS, as it offers tax-free long-term capital gains, making it an ideal tax saving investment. Moreover, with ULIP, you have the facility of switching among different types of funds, which ELSS does not permit. One of the significant benefits of staying invested in an equity-oriented ULIP for the long-term is that you can cover the loss due to the market’s bearish trend. The market will give you many opportunities to maximize your returns on investments.
- Monitor your investments at regular intervals
If you are planning to invest in ULIP, do note that one portion of your investment is used for life insurance, while the remaining amount gets invested in equity or debt funds. The units of the funds are purchased on a Net Asset Value (NAV). ULIP provides the flexibility of shifting the investment from equity to debt funds or vice-versa based on the market conditions. The units of equity or debt funds are bought or sold based on their current NAV when you move from one fund to another.
The NAV of your funds will vary daily. Therefore, it becomes essential to review your funds’ performance. If the NAV of your funds is high, the value of your accrued units is more. Analyzing your investments frequently enables you to identify the fund that is performing well. It also helps you know which funds are faring poorly. Therefore, you can decide when to switch from one fund to another and capitalize on your investment.
- Compare different financial products before investing
Life insurance investment is a necessity today. There are numerous life insurance plans available in the market. Thus, selecting the ideal policy becomes essential. You need to compare the features and benefits of various life insurance investment policies to finalize on the best plan. Most insurance companies display the top-performing products and their year-on-year growth data. Thus, it becomes easier to review various insurance plans and choose an appropriate one that aligns with your financial goals. Also, compare the premium of online investment plans with the policies that you buy offline.
The premiums for online plans will be significantly lower, as many insurance companies are offering various discounts on online products. Out of the different insurance plans available in the market, investing in ULIP is advisable. ULIP is a type of insurance plan that offers the dual benefits of life coverage and allows you to earn attractive returns if you invest sensibly in the capital market.
- Automate your premium payment
Today, you can automate the payments of premiums through Electronic Clearing Service (ECS). This method deducts the premium directly from your bank account on a particular date, as determined with the insurer while finalizing the policy’s terms. The Reserve Bank of India (RBI) approves this method. ECS is one of the safest and convenient ways to pay your premiums.
Life insurance will safeguard the financial future of your family when you are not around. Investing in ULIP is recommended, as it is the only insurance plan that offers a blend of life cover and lucrative returns in a single policy.