What are Long Term Investment Options?

What are Long Term Investment Options?

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Find answers to all your long-term investment questions here.

TLDR Points

  • Long-term investments go beyond five years.
  • These are perfect for goals like retirement, buying a new home, or planning your child’s future.
  • Some long-term investments in India include PPF, equity mutual funds, and bonds.

How ‘long’ is ‘long-term’? Can long-term investments even out short-term market volatility? These are a few questions we hope to address and the benefits of each type of long-term investment. We will also help you with what kind of a mindset and goals would ensure a successful investment.

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Best long-term investment options in India

Thirty years from today, we have no idea what the world will look like, so why consider a long-term investment? The answer is simple – to overcome uncertainty. It is what makes a long-term investment a good idea. One thing that will stay the same in the next decades is our dependence on cash in one form or another. The availability of money will dictate whether you live comfortably or not. How do you ensure that you will have access to funds in your distant future whenever you need them? Here are some of the long-term investment options you can consider that will meet your life goals.

Unit linked insurance plans

If you have children, are planning to have kids in the future, or even just considering zipping around in a brand-new smart vehicle 30 years from today a ULIP might be a good idea. The asset allocation is either in debt or equity funds. It offers market-linked returns, provides a degree of protection through insurance, and is a long-term investment option that has proven quite successful in the past. While the idea is to stay invested in the long-term many ULlPs offer options where an amount can be withdrawn after specified amounts of time to meet urgent financial needs. With ULIPs, you can switch between equity and debt funds based on your needs and risk appetite. For example, if you foresee downward market movements in the future, you can transfer your investment to debt funds. On the other hand, let’s say you had planned your child’s wedding through ULIPs, but the fund’s earnings are falling short. You can switch to equity funds for higher returns.

Equity funds

There is no way to predict what the future holds, but past performance is visible to all. People who invested in mutual funds in the past are reaping the rewards today. So why equity funds? Though many are great for the medium term, like an ELSS (equity-Linked Savings Scheme - it has a 3-year lock-in period), a few large-cap equity funds are ideal for more than ten years. The most significant advantage of an ELSS is the tax deductions under Section 80C that help you lower your taxable income. While you may have to pay taxes on long-term capital gains for all mutual funds, the returns are potentially high. Moreover, highly experienced fund managers can help you mitigate risks. Which, in turn, ensures that your investments are safe and yet rewarding.

Public Provident fund

If you do not like taking too many risks with your money but still want to benefit from good interest rates, then a Public Provident Fund (PPF) is a good idea. The central government sets the rate of interest, and it is compounded annually. Money that you invest in the PPF stays locked away for 15 years, after which it can be withdrawn. PPF is a great long-term investment because the interest earned and the amount earned at maturity are entirely tax-free. There is added security as well, as the government backs the savings scheme. Tax benefits under Section 80C make investing in a PPF more attractive.

Bonds

Interested in providing a loan to the government with a guaranteed return on investment? Then bonds are for you! These bonds are issued by either the central or state governments. The bonds purchased help them develop infrastructure and have guaranteed interest earnings for investors. The payment of both the interest and the principal is also specified clearly at the outset to making them great long-term investment options. The term selected can vary between 5 and 40 years, and investors may have the opportunity to choose between a fixed return or a floating return paid out semi-annually. In most instances, a fixed rate is issued by the government. Sovereign gold bonds provide guaranteed, tax-free interest on investment in gold, without the investor having to buy the gold physically.

Conclusion

A long-term investment is a good idea to make up for uncertainty. With the right planning and clear goals in mind, long-term investments can be rewarding in many ways. Think of it as a gift to yourself in the future. If you dream of a comfortable retirement thirty years from now, or just getting a head-start on paying off college tuition for your young child, the time to choose a long-term investment is now!

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