Investing in long-term schemes, which require you to invest for at least 5 years, offers many benefits. Not only do they allow you to compound dividends and multiply your gains, but they also give you leeway to judge the market and make a sound financial plan that will last you through the years. Long-term investments also give you scope to make mistakes and correct them without suffering a crippling financial loss. Long-term investment schemes are also great for people who want to make investments that are low-involvement. Short-term investments need to be monitored closely, almost daily, while long-term investments don't require this kind of attention.
As per the Department of Revenue, investments that are listed as stocks or mutual funds are long term if the tenor is more than a year. For any other kind of investment, this period is three years. However, generally, people consider the best short term investment options in India for those who are retired or considering retirement five years as a long-term investment.
Now that you just how beneficial long-term investments are, look at the various investment plans with high returns in India.
While gold doesn't offer monthly dividends, what it does help you do is preserve your wealth. This may be for yourself or generations after you. Given how inflation is constantly on the rise, investing in gold is an excellent long-term investment option. While the currency's value may be on a downward slope, if you invest it in gold now, you can benefit from its increase in value over time. If you're a beginner to investments, this can make for a good start.
Public Provident Funds (PPFs)
It may seem like PPFs aren't a great investment option, especially since the interest rate has been reduced to 7.9%, a 40-year low. But, since the income accrued from it is tax-free, it remains a great long-term investment option. This is because while other investment options may offer a higher rate of interest, the post-tax amount you receive is likely to be much lesser than that offered by your PPF. If you're looking to build a financial cushion for yourself at retirement, PPFs are a sound investment option.
Investing in mutual funds is excellent if you're in it for the long run, especially equity mutual fund schemes. You can invest as little as Rs. 1,000 and diversify your investment portfolio. This helps significantly reduce your risk. If you're looking at mutual funds as a long-term investment, it is essential to ensure that you pick a good mutual fund.
Think of it this way, even if a great author pens a few poorly-written essays, on the whole, he'll be viewed as an excellent wordsmith. Picking a good mutual fund works similarly. There may be some lean periods that are beyond your control, but on the whole, you'll reap gains at the end of the long term.
There's no denying that investing in stocks is a good investment option. However, examine data on stocks, and you will find that if you invest in them for the short run, the chances of you making a loss are higher. But, if you hold on to stocks for a long period of time, it will help you make a neat profit at the end of the period. This is because the gains overshadow the odd loss.
Fixed deposits are a favourable long-term investment option for many because of their security. Since an FD is not dependent on market fluctuations, it offers assured returns. While fixed deposits are of two types—bank FDs and company FDs—the latter offers a much higher rate of interest. Other major benefits of company FDs are that they are tax-free if the income accrued from them is less than Rs. 5,000 per year, and they also offer more flexibility with regard to tenor. To calculate the gains you can accrue from this long-term investment, use an FD calculator.
Additional Read: FD or MIS: Who wins the investment battle?
Usually, the value of real estate is always on the rise. This is why it is considered to be a good long-term investment. Not only can you lease it out and boost your monthly income, if you develop the property, you can sell it for a much higher price rather quickly. Additionally, if you purchase affordable real estate in areas that are sure to be developed, say near an upcoming airport, the value of your property will spike in due course of time.
When viewing bonds as a long-term investment option, you must pay close attention to the duration. Needless to say, short-term bonds are extremely volatile and pose a greater risk, so a duration of around 10 years is ideal. It will secure greater returns while safeguarding you from risky market fluctuations.
Additionally, when you invest in bonds, you are investing in debt instead of equity. The latter is what you invest in when you choose stocks. So if the company goes bankrupt, bond owners or debtholders will be given priority over stockholders.
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