Investment plans are wealth creation products that can help you achieve your long-term and short-term financial goals through systematic investments. Investing right can help you grow your money to secure your financial future and fulfil your dreams. Different products offer different benefits and risks. Therefore, it is important to understand the various investment plans before selecting one.

What are investment plans?

Investment plans are financial products that help you build wealth over time by providing you with returns. These returns can be used to fulfil your financial goals and dreams.

Factors to consider while choosing investment plans

Here are some of the key things to keep in mind while choosing an investment plan:

Understanding your financial goals

Financial goals can be categorised into short-term, medium-term and long-term objectives. Each type of goal requires a distinct investment strategy and timeline. Understanding your goals enables you to select the best investment plan aligned with them.

Evaluate your risk tolerance

Investment plans carry inherent market risk. It is important to ensure that the risk associated with a particular investment aligns with your risk appetite. Risk-averse individuals may prefer conservative investments, while those with a higher risk appetite may like to take on more volatility for potentially better returns.

Choosing the appropriate investment duration

When selecting investment plans, you must keep the duration of the investment and the timeline of your goals in mind. Many investments come with a fixed maturity and lock-in periods. Additionally, some may offer low volatility and be suitable for the short term, while others may deliver better returns over the long term.

Conduct your research

With so many financial products in the market, it becomes imperative to research well. Make sure to understand the risk and return profile of each investment category, the issuing entity of the investment (insurers, corporates or government), the investment amount limits and the investment frequency among other factors.

Diversification

When selecting investment plans, it is essential to ensure diversification of assets. Diversification refers to investing your money in multiple asset classes to safeguard your investments from market volatility. Diversifying your investments across assets helps ensure that not all your investments are affected in the same way during market movements.

Advice from professionals

Getting professional advice can help you select the best investment plan in India. Professionals, such as insurance agents and financial advisors, can help you make an informed choice with comprehensive research and analysis. Advisors evaluate your goals and risk appetite before suggesting investment options. They also solve queries and doubts to ensure you make well-reasoned decisions.

Charges

There are several charges associated with investments. These fees can impact your returns from the investment. Therefore, you must consider their impact on your overall earnings.

Tax implications

Investment plans and their returns are taxed as per existing laws subject to The Income Tax Act, 1961. Based on the provisions of the act, you can claim deductions on some investments. The rules of the act also decide how your earnings from different investments are taxed. Make sure you understand the taxability of the plans you invest in to maximise your returns and optimise your tax implications.

Market conditions

Market conditions can determine your investment choices. Inflation, interest rate hikes, investor sentiment and other factors can affect your investments differently. You must understand these factors to capitalise on available opportunities.

Past performance

While past performance does not guarantee future returns, it can offer valuable insights into an investment's ability to withstand volatility. You can look at historical performance of different investment plans to assess how an investment has performed in various market conditions and gain a better understanding of each plan's potential risks and rewards.

Consistently monitor and adjust

Your financial goals may evolve over time. Additionally, the performance of your investment plans will also differ, bringing an imbalance in your portfolio's asset allocation. Monitoring and adjusting your portfolio strategy to reflect these changes can help you stay on track with achieving your goals.

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Benefits of investment plans

Investment plans can offer you a host of benefits. Some of these have been discussed below:

Growth of your money

Investing helps you grow your money. When you invest your money right, it grows in value and provides you with returns that increase your overall income and enable you to achieve your financial goals.

Financial independence

Investing in the right plan can ensure you stay financially prepared to meet your needs and fulfil your dreams. This provides you with financial independence and the freedom to live your life on your own terms.

Life cover⁵

Some investment plans, such as ULIPs, offer a life cover⁵ that protects your loved ones in case of an unfortunate event.

Tax² benefits

Depending on the plan you choose, you may receive tax² benefits that increase the overall returns from the plan. For example, you can claim a tax² deduction for the premiums you pay towards your life insurance plan under Sections 80C and 80D of the Income Tax Act, 1961 depending on the investment plan you choose. The amount you receive from the plan is also tax-free² under Section 10(10D) of the Income Tax Act, 1961 depending on the type of plan you choose.

Types of investment plans in India

Below are some of the investment plans available in India:

• Unit Linked Insurance Plans (ULIPs)
• Savings/endowment plans
• Retirement plans
• Public Provident Funds (PPF)
• Tax-saving fixed deposits

Unit Linked Investment Plans (ULIPs)

A ULIP is a financial instrument that comes with the dual benefit of investment in the capital market and financial protection through a life cover⁵. Typically, these plans offer investment opportunities through equity, debt and balanced (hybrid) funds making them appropriate for investors of all kinds of risk appetite. ULIPs are long-term investment products offering a healthy market-linked capital growth over a 10 to 15 year horizon. The ICICI Pru Signature Plan is a good ULIP offering useful benefits, such as systematic withdrawals¹, wealth boosters^*, tax benefits², unlimited free fund switches, and more.

Savings/Endowment Plans

Endowment plans are life insurance policies that combine savings and protection and offer the benefit of both through a single instrument. These plans provide risk-free savings in a systematic manner along with a life cover⁵. The returns on these policies are not market-linked. They come with a fixed policy tenure. For assured returns, you should go for a plan like the ICICI Pru Guaranteed Income for Tomorrow Plan. This plan offers you guaranteed³ benefits in the form of a lump sum or regular payment as per your choice, making it a suitable option for risk-free savings.

³ T&C apply

Retirement plans

Retirement plans help you stay financially independent during your retirement. These plans are primarily of two types:

Retirement savings plans - These plans help you save for your retirement. They help you contribute regularly during your earning years and provide you with a large amount at the time of your retirement. You can consider investing in a retirement savings plan if you want to start saving for your retirement in your early years

Retirement annuity plans - These plans provide you with a guaranteed^{^} regular income during your retirement in exchange for a lump sum investment. You can choose to receive the income immediately or at a later age. You can consider investing in a retirement annuity plan if you are in your 50s and nearing retirement

^{^}T&Cs apply

Public Provident Fund (PPF)

PPF is also a retirement investment option that offers high returns at minimal risk. A PPF can help you systematically invest small amounts for big goals. It is a low-risk investment plan that you can consider for long-term goals, such as retirement. You can invest up to ₹ 1.5 lakh every year. A PPF can be opened in a bank or post office by all Indian citizens. It offers tax² benefits under the Income Tax Act, 1961.

Tax Saving Fixed Deposit (FD)

A tax-saving fixed deposit is an investment plan in India that lets you save a fixed amount decided at the time of the purchase of the plan. The investment in tax-savings fixed deposits will be for a pre-decided duration when the plan is purchased. These FDs offer tax² benefits under Section 80C of up to ₹ 1.5 lakh per annum.

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Conclusion

Investment plans can help you create wealth, but it is important to understand how each instrument can benefit you as per your financial goals and future needs. Understanding the various investment options and being up to date with their benefits, interest rates, and features can help you pick a plan that aligns with your goals and offers you the best possible returns.

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