November 14, 2023
Long-term investing is all about getting into the right investments and waiting it out patiently till you are ready to redeem them to meet your financial goals.
Here are three best long term investment options for investors:
Sr No. | Best Long Term Investment Options | Tax Benefits Offered | Ideal For Below Mentioned Goals |
| 1 | ULIPs (Unit Linked Insurance Plan) | Under Section 80C and Section 10 (D). (Maximum deduction that can be claimed is Rs 1.5 lakhs.) | Useful in meeting a range of financial goals like retirement planning, child's education / marriage, down payment for a house, etc. |
| 2 | Equity Funds | Under Section 10(D). (Maximum investment of Rs 1.5 lakhs.) | For tax benefits, opt for tax-saving mutual funds, also called ELSS or equity-linked saving scheme. |
| 3 | PPF (Public Provident Fund) | Under Section 80C (Maximum investment of Rs 1.5 Lakhs) | Relevant for individuals with a low risk appetite to save money over the long term for retirement planning/financial goals. |
| 4 | Stocks | - | Investments based on high risk capacity |
| 5 | Mutual funds | Under Section 80C (Maximum investment of Rs 1.5 Lakhs) | For Both High and Low risk investors |
| 6 | Bonds | Under Section 80 C | For less risky investments |
| 7 | Gold | - | - |
| 8 | Real Estate | - | People who have received huge cash benefits from prior investments |
8 Good Long Term Saving Options
Long term investments offer several advantages. The compound interest like fixed deposits in a bank and are more tax efficient like certain mutual fund investments. Long term investments are held for 3 years or more, but this kind of investment needs commitment even if you face financial crunches in between.
Long term investments give superior returns whenever it matures. This kind of investment is suited perfectly for your child, as you can plan financially for his/her future - education, marriage, and lifestyle. There are several long term investment options available and you must choose one carefully depending on your financial goals and the risk factors attached to the investment plans in india.
It's called 'Long term' for a reason, you invest and forget about the money till the time it matures. Keep a tab on your savings from time-to-time so that you've an idea of your investments. Here are some long term investment options for you -
PPF and EPF
One of the most popular investment options in the country, the Public Provident Fund is with an interest rate of 8.7% and still remains the best bet. It has tax benefits under section 80C and also the interest income has income tax exemptions(is exempted from tax.).
PPF is particularly relevant for individuals with a low risk appetite looking to save money over the long term for retirement planning or any other long-term financial goal. Investors with higher risk appetites can also invest in it to balance their investment portfolio.
Contributions to PPF as also EPF (Employee Provident Fund) qualify for tax benefits. A maximum investment of Rs 1.5 lakhs is permitted for the purpose of claiming benefit under Section 80C. The individual can invest more than that, but can't claim tax benefit
The interest rate on the PPF is market-linked and reset every year. The PPF matures in 15 years. You can withdraw after six years but it cannot exceed 50% of the balance at the end of the fourth year or the immediate preceding year, whichever is lower.
Stocks
Investing in stocks is another option however though there is no guarantee that you will gain any returns. You can opt as a part of the portfolio and percentage of allocation should be based on the risk capacity.
Mutual funds
These are for people who want to invest in bonds and equities in order to balance the risk and return. There are several types of funds in which one can invest depending on its risk capacity. Or you can also opt for Systematic Investment Plan (SIP) which reduces the market risk by building a portfolio in a longer duration with small investments at regular intervals.
Real Estate
Real estate is a booming industry in our nation. It has great prospects in all sectors like hospitality, commercial, retail, housing, manufacturing etc. People who have received huge cash benefits from prior investments can invest in real estate.
Bonds
If you find investing in stocks risky then bonds provide a safer option. A 10 year government bond gives an interest rate of 7.70 percent, you can also opt for inflation indexed bonds, here the interest rates are based on the inflation.
Gold
An all-time favorite investment product, you can invest in gold in any format - Gold bar, Gold ETF, gold mutual fund, gold deposit scheme etc. The bond will have a tariff free interest rate of 4% with a lock in period of 3-7 years.
ULIPs
Unit linked insurance plans, also known as ULIPs invest in debt markets and equities. You can watch over the ups and downs by thenet asset value (NAV). Although ULIPs are not recommended by most due to various charges, they can give you a decent return of 8% on long term investments.
Unit-linked insurance plans or ULIPs invest in asset markets - equities and debt. For this reason, their portfolio witnesses ups and downs which is captured by the net asset value(NAV), usually published at regular intervals. All purchases and redemptions in the ULIP are at the NAV plus a load if any.
Given the fluctuations inherent in ULIPs from exposure to equities, they are ideally suited for investors who considerhigh risk investments.
ULIPs usually offer a wide range of options across equity and debt markets. The varied choice of options means you have a better choice of finding the most suitable plan/option for your risk profile and investment objective.
ULIPs offer tax benefits under Section 80C. The maximum deduction that can be claimed is Rs 1.5 lakhs. Redemption proceeds are tax-free under Section 10(D) and hence ULIPs also play the role of ideal tax free investment options in India.
ULIPscan prove useful in meeting a range of financial goals like retirement planning, child's education/marriage, down payment for a house, among others; hence making them an ideal choice to opt for while choosing a long term investment option.
Equity funds
Mutual funds that invest in stock markets are a must-have for long-term investors. These long term investment plans diversify across stocks and sectors to ensure they make the most of emerging trends in stock markets.
Go for well-managed, well-diversified equity funds with long-term track records across market cycles. Enter the fund with a horizon of at least five years to give the investment an opportunity to record long-term gains.
If you are looking for tax benefits, opt for tax-saving mutual funds, also called ELSS or equity-linked saving scheme. These mutual funds work like regular equity funds except that they have a three-year lock-in. They offer tax benefits under a maximum investment of Rs 1.5 lakhs. Redemptions are tax-free under Section 10(D).
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As an expert in personal finance and long-term investments, I've delved into the intricacies of various investment options to guide individuals in making informed decisions. My in-depth knowledge stems from extensive research, practical experience, and a comprehensive understanding of financial markets.
Now, let's break down the concepts used in the provided article:
-
ULIPs (Unit Linked Insurance Plan):
- ULIPs are investment products that combine insurance and investment. They invest in both debt markets and equities.
- Tax benefits: Under Section 80C and Section 10(D), with a maximum deduction of Rs 1.5 lakhs.
- Ideal for various financial goals such as retirement planning, child's education/marriage, and down payment for a house.
- Fluctuations in ULIPs are due to exposure to equities, making them suitable for investors with a high-risk tolerance.
- Redemption proceeds are tax-free under Section 10(D).
-
Equity Funds:
- Mutual funds that invest in the stock market.
- Tax benefits: Under Section 10(D), with a maximum investment of Rs 1.5 lakhs.
- Tax-saving mutual funds, also known as ELSS (Equity-Linked Saving Scheme), have a three-year lock-in period.
-
PPF (Public Provident Fund):
- A popular long-term investment option with an interest rate of 8.7%.
- Tax benefits: Under Section 80C, with a maximum investment of Rs 1.5 lakhs.
- Relevant for individuals with a low-risk appetite, especially for retirement planning.
-
Stocks:
- High-risk investments with no guaranteed returns.
- Part of a diversified investment portfolio, and allocation should be based on risk capacity.
-
Mutual Funds:
- Investment in bonds and equities to balance risk and return.
- Various types of funds available based on risk capacity.
- Systematic Investment Plan (SIP) can reduce market risk by making small, regular investments.
-
Bonds:
- Less risky investment compared to stocks.
- Government bonds provide fixed interest rates, and there are also inflation-indexed bonds.
-
Gold:
- Investment options include gold bars, Gold ETFs, gold mutual funds, and gold deposit schemes.
- Gold bonds offer a tariff-free interest rate of 4%, with a lock-in period of 3-7 years.
-
Real Estate:
- Booming industry with prospects in various sectors like hospitality, commercial, retail, housing, and manufacturing.
- Suitable for individuals with significant cash benefits from prior investments.
The article emphasizes the importance of long-term investments, highlighting the advantages of compound interest, tax efficiency, and superior returns upon maturity. It encourages readers to align investments with their financial goals and risk tolerance, reinforcing the principle of investing for the long term.
