How and Where to Invest for Good Long Term Returns

Written by : Knowledge Centre Team

2021-02-26

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To have a strong and secure hold on the finances in the future, investment is a must. And the best and effective way to invest is over the long-term period. Given the current economy and its impact on every sector, it is important to focus more on effective investment and saving plans that provide long-term returns.

Most investors rely on long term investing in growing their wealth. By Investing in the long term, people can reach their financial goals and have a tremendous increase in their financial security. Investors these days have many ways to invest their money and take risks compatible with their risk profile for increasing their wealth and security. Many companies provide safe options and potential returns for stocks, mutual funds, or Exchange Traded Funds (ETF's). But it might not be easy for everyone to find a plan that comes with high returns and has less risk involved as well.

Investment options for long term returns

For any Investment, some instruments are necessary before finalizing any plan or option. Some risk will always be there, but the return will become high as well. So below mentioned points display necessary information for getting good long-term returns.

Many people may have doubts regarding choosing the best investment plan or options in India. Every investor is looking for plans that give maximum returns in a specific period with the less possible risk involved. For choosing a long-term option, a person should check the risk they can take, finance goals, security, and total liquidity requirements. Regular investors always look for the best investment plans in India to multiply their wealth.

Unit Linked Insurance Plans (ULIPs)

People who are looking for highly flexible investment plans with tax benefits must consider the Unit Linked Insurance Plans. This plan provides all the necessary investment options like balanced funds, equity, and debt and assures to keep the invested funds growing at a secure and steady rate, providing options to invest for the long term but having a safety priority of funds for the family.

For providing a long-term return, ULIP extends to both concepts of insurance and investment. Insurance companies provide ULIP that give advantages to multiply wealth and increase security. This plan is linked to market investment products, providing investors the opportunities to make a profit from the capital market.

This plan provides high chances for long term returns and a long term investment benefit. The ULIP investment plan incorporates several different funds for investment. Insurance companies like Canara HSBC Life Insurance provide options for categories of funds like equity, debt, and balanced debts. Being the best investment plan in India, ULIP is classified into different types of investment, fund alternatives, and death benefits.

Type (1)

This plan returns a higher value of the funds as death compensation or benefit to the applicant on the death of the insurance carrier.
Type (2)

This plan type assures to pay the amount as decided, including the value of the fund as death compensation or benefit to the applicant on the death of the holder.

The main reason to invest in ULIPs is that it provides maximum return value at any given risk involved. They provide life protection, give the investor's family financial stability, help accomplish long term return and financial goals, and provide tax benefits by diminishing the tax.

Mutual Funds

Many investors have several questions and dilemmas regarding mutual funds. They might be considered as they are linked to the market. If a person has no idea or experience regarding the market, they can go for mutual funds' investments and receive much higher returns than some other investment options.

Being a market-related investment, monetary funds are invested in various financial instruments like stocks, debt, equity, market funds, etc., where the returns received are as per the position and performance of the market. They are classified into equity, debt, and hybrid funds.

Equity mutual funds

These investment plans are considered market-linked securities that invest 64% of their equity assets and provide higher ROI by investing in various companies' shares with diverse market capitalizations. Equity mutual funds provide high returns. Thus the risk involved is also higher as risk, and returns are proportionate to each other. Therefore, investors willing to take high risk, long term investments and seeking tax saving investment should invest in equity mutual funds.
Debt mutual funds

These funds invest in instruments such as securities, bonds with corporate, commercial paper, and other financial market instruments, where an investment is made with fixed interests. Therefore, it is efficient for investors who are looking for less risk. The tenure of this investment is from three to four years.
Hybrid Mutual Funds

These funds invest in various investment securities like bonds and stocks. They are, therefore, ideal for beginners or appropriate for those having a hold in the portfolio for diversification. The asset distribution for hybrid funds can be either fixed or can change some duration.

Public Provident Fund (PPF)

This investment plan is backed by the government, allowing investors to make risk free investment for the long term. Every quarter the PPF's interest rate is modified and paid by the government. The current revised interest for the quarter is 7.9%. Under the Public Provident Fund account, the maturity period is of Fifteen years. But in PPF, the amount can be withdrawn partially after six years. Therefore, these investment plans are well suited for investors seeking long-term investors' plans and would like a tax rebate.

National Pension System (NPS)

For people who are planning for an investment that provides good retirement with higher returns than other schemes, the National Pension System can be a good option. Being a government-backed scheme, these investment plans allow investors to invest in numerous money instruments like debts and equities.

The amount of pension is decided upon the returns of the investments made. This scheme is open for people between the age of eighteen to sixty with an extension of seventy years. Investors can withdraw the preferred amount after three years of opening the NPS account. Thus, NPS is an ideal plan for investors seeking long term returns.

Some retirement plans are offered by various banks in India with benefits of returns of mortality charges, loyalty additions, boost wealth in the future, liquidity option, and settlement options. Although retirement plans differ from individual to individual, several factors remain the same such as lifestyle, income, risk involvement, and tenure. These retirement plans are long-term, giving flexibility and encouraging saving at the allowed cost.

Reasons to invest for long term returns

In these times, investment is made for having a secured future and having savings in hand. Money that is left idle is termed as a waste of the asset. Thus, to multiply and build wealth, huge investors choose to invest regularly. It becomes necessary to choose a plan that provides future benefits with the help of companies that regularly implement plans for individuals who are looking to double their wealth.

Things to consider for long term returns

Investment tenure

As known, long-term investment is where a person invests their money for a long period. Since the investment period has longer tenure, to meet financial goals, many things must be known to every investor. Generally, an investment done for 3 years or more is considered a long-term investment. Sometimes the tenure for long-term investment can go beyond 10 years.
Components for long term plans

An important thing to remember is that the two components, investment, and insurance, are essential for creating a long term investment plan. They should not be mixed, as they are set to achieve different financial goals for different people.
Risk involvement

Another aspect in investing for the long term to get a high return is the high risk involved. Safe options like the certificate of deposit tend to generate less return, while investment options involving medium risk like bonds have a higher return, and going for the high risk involved stocks will give a much higher return. The best way to lower the risk involved is by holding the investments for a longer period.

This is why regular and high yielding investors choose long investments to multiply their wealth. Increasing the investment period will certainly make people aware of fluctuations in the market and how to overcome them. It is recommended for an investor who keeps their money in the market to keep it there for at least three to five years.

It is always said that returns and risk are proportional to each other, meaning high risk gives high chances of returns. Investments are classified into two categories of financial and non-financial assets in India. Choosing a long-term investment plan not only helps the person to reach financial goals but gives support for finances in the future to live a secured life.

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