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. 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 do not 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 tenure 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 does not 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 are a beginner to investments, this can make for a good start.
Public Provident Funds (PPFs)
It may seem like PPFs are not a great investment option, especially since the interest rate has been reduced to 7.10%. 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 are looking to build a financial cushion for yourself at retirement, PPFs are a sound investment option.
Investing in mutual funds is excellent if you are 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 are 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 will 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 will reap gains at the end of the long-term.
There is 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 FD and company FD—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. They also offer more flexibility with regard to tenure. To calculate the gains you can accrue from this long-term investment, use an FD interest calculator.
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 debt holders will be given priority over stockholders.
National Pension System (NPS)
The National Pension System (NPS) is a government-backed retirement savings scheme that provides an excellent opportunity for long-term wealth creation. It offers a mix of equity (Tier I) and debt (Tier II) investment options, allowing you to choose the allocation that suits your risk tolerance. Contributions to NPS are eligible for tax deductions under Section 80C and 80CCD, making it a tax-efficient way to save for retirement.
Unit-Linked Insurance Plans (ULIPs)
ULIPs are insurance-cum-investment products that offer both life cover and investment opportunities. In India, ULIPs provide a wide range of fund options, including equity, debt, and balanced funds. They offer the potential for high returns over the long term. Additionally, ULIPs provide tax benefits for maturity proceeds, making them attractive for those seeking insurance coverage alongside wealth creation.
National Savings Certificates (NSC)
National Savings Certificates are a government-backed fixed-income investment option with a fixed maturity period. They provide a guaranteed return and are considered low-risk investments. NSCs offer competitive interest rates and are eligible for tax benefits under Section 80C. They are an ideal choice for conservative investors looking for long-term savings.
Post Office Time Deposit
Post Office Time Deposits are fixed-term savings accounts offered by India Post. They provide fixed interest rates and flexibility in choosing the tenure. Post Office Time Deposits come with government backing, ensuring the safety of your principal amount. They are suitable for long-term goals and offer different maturity periods to align with your investment horizon.
Debt Funds for Medium Term
Debt mutual funds are a suitable option for medium-term investment goals. They primarily invest in fixed-income securities like bonds and offer stable returns with lower volatility compared to equities. Debt funds come in various categories, such as short-term, medium-term, and long-term, allowing you to select one that matches your investment horizon.
Hybrid funds, also known as balanced funds, offer a balanced mix of equity and debt investments. They are suitable for long-term investors seeking a balanced approach to risk and returns. Hybrid funds provide diversification across asset classes and are managed by professional fund managers to optimize returns over time.
In conclusion, the Indian financial market offers a range of investment options to cater to various long-term financial goals. When considering these investment ideas, it's essential to assess your risk tolerance, investment horizon, and financial objectives. Diversifying your portfolio across these options can help you achieve higher returns while minimizing risk. Consulting with a financial advisor can assist you in creating a personalized investment strategy aligned with your long-term goals.