How To Choose A Long-Term Saving Plan? – All you need to know

A long term savings plan is always advisable to meet financial requirements for your future goals. Also, there isn’t any age limit to start your savings plan, as any amount of savings at any age can help you overcome any unforeseen circumstances.

To invest in a long-term savings plan, you need to understand your future requirements, choose investment avenues that suit your needs, and provide the required corpus to meet your goals. Before choosing your long term savings plan, it is vital to ascertain your current family requirements and future goals.

Here are a few factors that you would need to keep in mind before selecting your long term savings plan.

Ascertain your goals: While choosing your long term savings plan, it is paramount to understand what are you saving for? Clarity on your goals helps you to understand the corpus that is needed for fulfilling these goals. Moreover, you would need to keep in mind the risk factor if you are planning to invest in market-linked products.

Availability of your products online: Keep a check if your products are available online, as this helps ease the transaction problems of transferring or withdrawing funds from your savings plan. Few plans also have an auto-debit option where money is directly deducted from your account on a specific date. Thus, removing the hassle of transferring money every month.

Liquidity options- Before investing in any plan, you need to check the liquidity options of the funds. Along with fulfilling your long-term requirements, it should have adequate liquidity to withdraw money whenever an emergency situation arises.

Tax exemption: Choose funds that allow triple tax exemption if possible, i.e., the principal amount, interest received, and the maturity amount are tax-free. Moreover, few investment options allow you to avail tax exemption up to ₹1.5 Lakh under Section 80C. If you choose a product that deducts a part of the maturity amount as taxes, then you would have to keep in account that the remaining amount suffices your needs.

Understanding your risk appetite: Every person has a different risk appetite. Some may choose to invest in high-risk, while others may choose moderate or low-risk plans. The catch here is that high-risk plans are more volatile and may give you very high returns, while low-risk funds provide you with more or less guaranteed returns with low-interest rates.

Updating investment portfolio annually– Reviewing your investment portfolios annually and making changes in your investments help increase your potential returns. You can diversify your portfolio to reduce the risks and expand the scope of returns.

Here are a few of the investment options that you can consider when investing for the long term-

Unit linked insurance plans: ULIPs provide dual benefits of insurance coverage and investment. The premiums paid for these plans are partly used to invest in market-linked products such as equities, hybrid, or debt funds, and the rest to provide insurance coverage.

Public provident fund: PPF is ideal for those who want guaranteed returns. These funds have a lock-in period of 15 years and allow tax exemption of up to ₹1.5 Lakh under Section 80C.

National pension scheme: NPS is a government-backed scheme where individuals between the age group of 18-60 years can invest. The upper age limit has been increased to 70 years now. You can choose to invest in equities, debts, or any other such products with this savings plan.

Equity linked savings scheme: ELSS, also known as tax-saving mutual funds, are ideal for high returns. The lock-in period is only 3 years. Although it entails higher risks, such risks can be mitigated by keeping your funds invested for a longer tenure.

Final word:

Savings are the only option to have financial stability in your life. Savings help you to overcome emergencies and also fulfil any major financial goals. There are several products where you can invest, but it’s always crucial to select the right product as per your needs.

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