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What is an Investment Plan? - Definition

Investment Plans are financial products designed to help you accumulate wealth over time, enabling you to achieve your financial goals. Investment Plans invest your money in various assets based on your risk profile, time horizon and offer returns that are utilized to meet various goals, such as purchasing a home, funding children’s education, or planning for retirement.

What are the different types of Investment Plans available in India?

  1. Public Provident Fund: Public Provident Fund is a low-risk, long-term savings scheme backed by the Government of India. Public Provident Fund currently offers interest at the rate of 7.1%, which is tax-free, and makes it an attractive investment option. The Plan has a tenure of 15 years where you can contribute between Rs500 to Rs1.5 lakh annually and can be extended in a block of 5 years.
  2. Employees Provident Fund (EPF): Employees Provident Fund, launched by Employees Provident Fund Organisation (EPFO) is a retirement scheme available to salaried employees in India. The EPF provides a pension to organised sector employees once they retire after the age of 58 years. Under the scheme, the Employer and Employee, both contribute 12% of the Employee’s basic salary to the EPF Account. The entire share of an employee’s contribution goes towards EPF while 8.33% of the employer’s contribution goes towards EPS (Employees’ Pension Scheme), and the remaining 3.67% goes towards EPF contribution per month. Contributions to EPF Account are tax-deductible under Section 80C of the Income Tax Act, 1961. Currently, the EPF provides guaranteed return on your investment at an interest rate of 8.25% pa.
  3. Voluntary Provident Fund: Voluntary Provident Fund is an optional and a voluntary fund contribution over and above his EPF Fund Contribution. An Employee can contribute a maximum of 100% of his Basic Salary + Dearness Allowance towards his Voluntary Provident Fund and the fund earns the same interest rate as an EPF Fund. The Base tenure of a VPF is 5 years. Employers and Employees are under no obligation to VPF fund.
  4. ULIPs: A Unit Linked Insurance Plan combines the benefits of Insurance and Wealth Creation. A part of the ULIP Premium is invested in various market linked securities such as Stocks, Bond etc while the remaining part is invested in offering Life Coverage. You can invest in various types of funds including hybrid, equity, debt, etc. depending on your risk capacity. The Returns from ULIP vary based on Market Fluctuations.
  5. Mutual Funds: One can also invest one’s money in a mutual fund scheme which offers high returns than other options. You have the flexibility to invest in an Equity, Debt or a Hybrid Fund depending on your Risk Appetite.
  6. Direct Equity: If you are knowledgeable about stock markets, you can invest money directly into equities and thus save on Fund Management Expenses of a Mutual Fund. Equities offer amongst the highest returns and beat inflation over the long term.
  7. Real Estate: One can also invest money in Residential or Commercial Real Estate which also offers attractive returns.
  8. Fixed Deposit: Fixed Deposits are also a very attractive investment option as they offer guaranteed returns along with the option of receiving interest on a monthly, quarterly or annual basis. Fixed Deposits are suitable for people who are not looking to take high risk and instead prefer the safety of their capital.
  9. Gold: Investing in Gold is a time-tested strategy of earning decent returns which provides a hedge against inflation. Also, Gold offers good liquidity and does not require extensive market knowledge to invest in.
  10. Bonds: Bonds are another low-risk option that you can invest in. Bonds provide a fixed income which can be used as a source of cash flow. You can invest in Government Bonds or Corporate Bonds depending on your risk appetite.
  11. Life Insurance: Many Life Insurance Policies offer a savings component as well as an Insurance Component. One can invest in a Savings Plan or an Endowment Plan which helps in growing your corpus as well as providing Life Insurance Coverage.
  12. Senior Citizen Savings Scheme (SCSS): The Senior Citizen Savings Scheme is a government back savings scheme for individuals aged 60 years and above. The Tenure of Senior Citizen Savings Scheme is 5 years which is further extendable by 3 years Currently SCSS offers an interest rate of 8.2% p.a. which makes it an attractive option for Senior Citizens
  13. National Pension Scheme: National Pension Scheme is an Indian Government Pension Scheme which provides pension benefits to all Indian Citizens. The Scheme is regulated by the Pension Funds Regulatory and Development Authority (PFRDA) under the PFRDA Act, 2013. National Pension Scheme is a Voluntary Contribution which invests in market-linked securities. Contributions made by subscribers are pooled into a Pension Fund which are invested by Professional Fund Managers into Market linked securities such as Stocks, Bonds, Debentures etc. The Contributions continue to grow till retirement. The Subscribers have the flexibility to decide the asset classes in which to invest their funds
  14. Atal Pension Yojana: Atal Pension Yojana, a pension scheme launched by the Indian Government in 2015, provides pension benefits to people in the unorganised sector. The Scheme is controlled by the Pension Funds Regulatory and Development Authority (PFRDA) and provides a steady stream of income to all Indian Citizens after the age of 60 years. The scheme is focused on people working in the unorganised sector such as domestic helps, drivers, delivery boys etc. The Pension Amount received is proportional to the age and contributions made by the person and Beneficiaries receive the benefits in the form of monthly payments
  15. National Savings Certificate: A National Savings Certificate is a fixed income investment scheme which encourages small and mid-investors to invest by offering a fixed rate of return. Currently National Savings Certificate offer a rate of return 7.7% pa. You can start investing in National Savings Certificate with an amount of as low as Rs100 from your nearest local post office.
  16. Kisan Vikas Patra: Kisan Vikas Patra provides fixed rate of return to investors. The Scheme was launched by the Government of India in 1988 with an objective to promote long-term financial savings. Kisan Vikas Patra has a Tenure of 113 months.
  17. Sukanya Samriddhi Scheme: Sukanya Samriddhi Yojana is a government backed scheme launched in 2015. A Guardian can open a Sukanya Samriddhi Savings Account for a Girl Child. This scheme is aimed at promoting welfare and child education of girls. Currently, Sukanya Samriddhi Account offers an interest rate of 8.2% p.a. This scheme also offers tax benefits under section 80C of the Income Tax Act, 1961.

What are the Benefits of Investment Plans?

The Benefits of Investment Plans are as follows:

  1. Wealth Accumulation: Investment Plans help you build your corpus over time. Some Investment Plans like PPF and FDs grow your wealth steadily and without any major risk, other plans like Mutual Funds provide higher returns by taking on higher risk.
  2. Inflation Hedge: Some Investment Plans like Direct Equities and Mutual Fund provide returns higher than Inflation and thus protect you against loss of Purchasing Power.
  3. Tax Benefits: Investment Plans provide Tax Benefits under Section 80C Section 10(10D) of the Income Tax Act, 1961 allowing for tax savings.
  4. Life Coverage: Some investment plans, like Unit Linked Insurance Plans (ULIPs), offer Life Insurance coverage, providing financial security to your family members in unforeseen events.

What are the Key Factors to consider When purchasing an Investment Plans?

You should consider the following factors when purchasing an Investment Plan:

  1. Understand Your Financial Goals: It is important to classify your short-term, medium-term, and long-term financial goals which helps in choosing an appropriate Investment Plan as per your objectives.
  2. Evaluating Your Risk Tolerance: Another important factor to consider is to carefully assess the level of risk you are comfortable taking with your investments. Conservative investors should prefer low-risk options like Fixed Deposits and Bonds, while those with a higher risk appetite can opt for high-risk investments like Stocks and Mutual Funds for higher returns.
  3. Select the Appropriate Investment Duration: It is important to align your investment choices with the timeframes of your financial goals. This it is important to consider factors like lock-in periods and maturity durations associated with different investment plans.
  4. Diversification: You must spread your investments across multiple asset classes to mitigate risks associated with market volatility. Diversification helps ensure that not all your investments are affected similarly during market fluctuations.
  5. Understand Charges: You must be aware of any fees or charges associated with investment plans, as they can impact overall returns. You should carefully consider the cost structures of different plans to make cost-effective investment decisions.
  6. Tax Implications: You must familiarise yourself with the tax benefits and implications related to various investment plans. Certain investments offer Tax Benefits under specific sections of the Income Tax Act, 1961, which can enhance overall returns.
  7. Review and Adjust Portfolio: You should regularly review your investments to ensure they remain aligned with your evolving financial goals and adjust the same as needed to respond to changes in market conditions or personal circumstances.

Why should you invest in an Investment Plan?

Investment Plans grow your corpus over time by generating good returns. The Plans provide a financial cushion in case your business income stops or you get fired from your job. They are a financial safety net. Additionally, the growth of your financial corpus allows you to accomplish your various goals like funding your children’s education or marriage expenses, retirement goals etc. It is thus very important to manage your money wisely by purchasing an Investment Plan

When should you invest in an Investment Plan?

You should vest in an Investment Plan when you have stable income, clear financial goals, and a long-term horizon. Early investment maximizes returns through the Power of compounding. You should consider market conditions, risk tolerance, and liquidity needs before investing. The best time to start is as early as possible to allow a higher time period to build your wealth.

What documents are required to purchase an Investment Plan?

Following Documents are required to purchase an Investment Plan:

  1. Proof of Address like Passport, Aadhaar Card, Driving License etc.
  2. Proof of Identity like PAN Card, Aadhaar Card, Passport etc.
  3. Income Proof like Salary Slips, Income Tax Returns, Form 16 or Bank Statements etc.
  4. Medical Reports
  5. Policy Proposal Form: Properly filled and signed insurance proposal form provided by the Insurance Company.
  6. Passport Photographs

Get Best Quotes for your Investment Plans with Qian Insurance!

Investment Plans offer life coverage with the potential to generate good returns. It is important to take the advice of an experienced Insurance Broker when choosing a Savings Plan. If you wish to purchase an Investment Plan with Qian, go to Qian’s website – <www.qian.co.in> or email us at insurance@qian.co.in or call us on 022-35134695 and provide the required details. Our representative will get in touch with you and assist you with different Investment Plans based on Premiums, Features and Benefits. You can select the Plan which best suits your budget and requirements, make the premium payment and purchase the Policy. If you wish to know more about Investment Plan, you can you can email us at insurance@qian.co.in or call us on 022-35134695. We would be glad to assist you.

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