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:
1. Financial goals and time period
Your financial goals and the time period you have to invest can help you decide on the right investment plan. Your goals may be long-term or short-term. Your long-term goals can include purchasing a home or living comfortably after retirement. Your short-term goals may be travelling, purchasing a car or more. A suitable investment plan can be chosen based on the time horizon of your goals. For instance, you may invest in a ULIP for long-term goals like your child’s marriage, child’s education, your retirement and more.
2. Planned future expense
You may have some planned expenses in the future for which you would want to start investing. These can be your child’s education, child’s marriage, buying a house, starting a venture or more. You can plan for each of these goals with suitable investment plans. Understanding your future expenses can help you understand your needs and find the right investment plan.
3. Present expenses
Apart from your future goals, you may want to maintain your current lifestyle or improve your standard of living in the future. For this, you may want to invest in a plan that provides you with a regular income immediately.
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.
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.
Some investment plans, such as ULIPs, offer a life cover5 that protects your loved ones in case of an unfortunate event.
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.
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 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
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.
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.
1. What are the best investment plans for high returns?
2. What are the safest investment options in India?
3. What are the best long-term investment options in India?
4. What is the best age to start investing?
5. How can I start investing in my 20s?
You should also consider investing for your future goals. Investing at an early age offers you a longer investment horizon, enabling you to earn greater returns. At a young age, your risk appetite is higher. You can consider investing in market-linked instruments such as Unit Linked Insurance Plans (ULIPs), mutual funds, shares and more.
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1 Systematic Withdrawal Plan is allowed only after the first five policy years.
2 Tax benefits under the policy are subject to conditions under Sections 80C, 10(10D), 115BAC and other provisions of the Income Tax Act, 1961. Goods and Services Tax and cesses, if any, will be charged extra by redemption of units, as per applicable rates. Tax laws are subject to amendments from time to time. Please consult your tax advisor for more details.
3 A guaranteed lump sum or regular income will be payable based on the plan option selected.
4 The Company will allocate extra units as below provided all due premiums have been paid:
|Premium Payment Term||Loyalty Additions||Wealth Boosters|
|(End Of Year 6 And 7)||(End Of Year 8 And Onwards)||(End Of Every 5th Year, Starting From The End Of 10th Policy Year)|
|5 years – 6 years||0.10%||0.10%||1%|
|7 years – 9 years||0.15%||0.30%||1%|
|10 years and above||0.10%||0.10%||2%|
5 Life Cover is the benefit payable on the death of the life assured during the policy term.
* Wealth Boosters equal to 3.25% of the average of the Fund Values including Top-up Fund Value, if any, on the last business day of the last eight policy quarters will be allocated as extra units to your policy at the end of every 5th policy year starting from the end of 10th policy year till the end of your policy term.
^ Annuity will be payable in arrears. The frequency of annuity payments can be monthly, half-yearly, quarterly or annually as chosen by the annuitant at the time of purchasing the annuity. The annuity amount chosen at policy inception is guaranteed for life.
ICICI Pru LifeTime Classic (unit-linked non-participating individual life insurance plan) - UIN: 105L155V08
ICICI Pru Guaranteed Income For Tomorrow UIN: 105N182V06
ICICI Pru Signature (unit-linked non-participating individual life insurance plan) - UIN: 105L177V05