Types of Investment Plan In India

Earn While You Sleep With This Passive Income

Passive income is a good way to make money while you sleep. But before we jump into how this works, what exactly qualifies as passive income? Passive income is a stream of earnings that is generated on autopilot—meaning it doesn’t require your constant effort to create, so once you’ve got the machine up and running, you can kick back and relax. Interest earned on savings accounts and cash-back rewards from credit cards often falls into this category.

Investment plans are one of the most common avenues for creating passive income. Investments can be defined as assets that have built-in earnings potential by generating returns in the form of interest, dividends, or rent when owned by a particular entity (usually someone who has purchased it). This article will teach you about the best investment plan along with some tips for investing wisely.

What is an Investment Plan?

There are a number of different types of financial plans you can use to help meet your life goals. But what exactly is the difference between an investment plan and a life insurance policy? An investment plan is designed to help clients build wealth, while a life insurance policy provides for your family when you pass away.

The only problem is that an investment plan does not provide protection for your loved ones in case of death or disability. Having both an investment plan and some form of life insurance means you have a comprehensive financial plan that covers all your bases, giving you peace of mind. Let’s take a look at the various types of investment plans available in India:

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Unit Linked Insurance Plans

A Unit Linked Insurance Plan (ULIP) is a type of investment plan that offers you the dual benefit of life insurance and market-linked returns. It offers you both debt and equity options and gives you the freedom to choose your preferred asset allocation.

Additionally, it has a cost-effective structure, which allows for a higher proportion of your money to be invested in the market. The amount invested by you into ULIP is exempt from tax under section 80C. Under Section 10 (10D), any maturity proceeds or death benefits received from ULIP are fully exempt from tax provided certain conditions are met.

Additionally, ULIPs offer certain additional benefits like top-up premium payments and partial withdrawals. ULIPs are not only tax efficient but also give you flexibility in investing your money according to your risk appetite.

Monthly Income Plans

A monthly income plan is a type of defined contribution pension plan. It provides you with a regular income for retirement. It can also be used to provide you with an income before retirement, but should really be reserved only for very special circumstances, such as when your main source of earnings has dried up or when a family member has become severely disabled and needs constant care.

Most plans have a guaranteed rate of return, although some don’t. Most also have a fixed term, so that you would know exactly how long the money is planned to last if it was your main source of retirement income. Some plans however have no fixed term and these are suitable for people who want to leave the money untouched and have it grow over time.

Some plans have a minimum investment requirement while others have no maximum limits on how much you can invest in them.

Public Provident Funds

PPF has been growing in popularity among Indians since its inception as an initiative by the government in 1958. A precursor of India’s tax-free bond market, PPF was designed specifically for individuals who don’t have much access to external capital but want to save for retirement or further education funds.

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While stocks are volatile and could drop 50% in a day, an effective way of long-term accumulation is through index funds that track indexes such as Sensex or Nifty. These funds won’t fluctuate too much overtime but will increase their returns by tracking the index they’re invested in.

Mutual Funds

Investors can earn passive income from Mutual funds by putting their money into a fund that is invested in stocks and bonds. The diversification of the fund allows investors to spread their risk across multiple investments, and it also allows them to invest in different asset classes without having to research and buy them individually.

A mutual fund is managed by a professional fund manager who actively monitors and trades the holdings within the fund based on market conditions, economic changes, and other factors that might affect performance. Mutual funds are more regulated than ETFs but have a higher expense ratio because they are actively managed.

Sukanya Samriddhi Account

Sukanya Samriddhi Account is a savings scheme operated by the Government of India. The account is for the girl child and was launched in 2015 by Prime Minister Narendra Modi. The account can be opened for a girl child until she turns 10 years old. The account can be opened at any post office or authorized commercial bank.

The minimum deposit allowed in a financial year is Rs 1,000 and the maximum is Rs 1,50,000. You can opt for monthly installments of Rs 250 and above, or make lump sum investments in multiples of Rs 100.

Senior Citizen Savings Scheme

If you’re 60 years of age or older, you can open a Senior Citizen Savings Scheme (SCSS) at any public sector bank. If you want to invest in the SCSS, your account must be opened within one month of receipt of retirement benefits. This can include retirement benefits from provident funds, superannuation funds, and contributions from the gratuity fund.

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The minimum investment amount is Rs. 1,000 and the maximum deposit is Rs. 15 lakh. The interest rate is currently 8.6% per year (compounded quarterly). For an additional interest rate of 0.5% per year on a deposit amount exceeding Rs. 15 lakhs, you should invest in this scheme via a post office savings account.

Tax Savings Fixed Deposits

Tax saving fixed deposits offer the benefit of tax exemption under Section 80C on the interest earned. You can invest a certain amount of money for five years and save tax, thereby increasing your overall returns. However, there is a maximum limit of Rs 1.5 lakhs which can be invested, so you need to remember that.

Also, these are not very lucrative investment plans because the interest rates on them are lower than regular FDs or other investment plans. The rate of interest is also fixed for the entire tenure and does not change with market conditions.

Conclusion

We hope you’ve found this guide helpful. Personal finance is one of the most important things you can do in your life, so it’s vital that you get it right. If you want to invest in the best investment plan, consider your current financial situation, how much time you have available, and your health and age. After all, these are the things that will make a huge difference to your decision about whether to invest for the future now or save for later on.

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