5 Things to Remember Before Investing in Long Term Savings Plans

Here are 5 important things to consider when investing in a long-term savings plan:

1. Alignment with your goals

   The first and most important thing to consider while investing in a long-term savings plan is your financial goals. Be sure of the fact that this investment option is in alignment with your long-term financial goals. With a long-term savings plan, the tenure of investment is going to be prolonged. Thus, you need to understand that your money will be in a fixed, non-liquid form. It is crucial to stay invested to reap huge benefits at the time of maturity.
   One of the commonly heard situations with people starting to invest is a lack of goals. Goal setting is a crucial task that steers the directions in which your investments must go. If you still have not set your goals, this is the time to sit down and think about your financial future.
   Set long and short-term goals and make investments based on those goals. Though this process will require a lot of endeavours, it will be highly beneficial in the long run.
   

2. Liquidity

   Liquidity can be a concern when it comes to a long-term savings plan. You need to take into consideration the liquidity factor at two different phases of investing in a long-term savings plan. Primarily, while you are still investing and secondly when the savings plan is maturing.
   Keeping in mind your individual and family requirements, you need to ensure that the target savings plan provides adequate liquidity to you in case of an emergency and other urgent requirements.
   

3. Tax benefits and deductions

   A majority of long-term savings plans come with an additional benefit of tax deductions. Tax benefits can be a driving factor behind investing but should not be the sole priority. You need to ensure that your financial goals are met, along with enjoying tax deductions on the same. Products like health and life insurance come with greater advantage of tax deductions that help bringing down your tax slab. Before you invest in a savings plan, make sure you understand all the tax benefits it has to offer.
   

4. Factoring in the risk

   Whenever there is a discussion about investment, the risk is inevitable. Be it market risk, inflation risk, concentration risk and so on, your money is subject to some type of risk while being invested. It is important to conduct a detailed risk assessment and determine the measures that can be taken to hedge against it. A major percentage of risk can be hedged against or balanced with other investments and diligent investing.
   

5. Portfolio diversification

   Portfolio diversification is one of the most talked-about, but least understood words in the investing world. A well-diversified portfolio is the one that has investments across different industries and sectors in such a manner that changes in one do not affect the other.
   

Although it is difficult to make investments in complete silos, you can achieve a great deal of diversification in your portfolio by spreading your investments across different domains. A lot many times, diversification is misunderstood with overspreading your investments. It is crucial to understand that there are only limited industries and sectors in the investment world that work unaffected by each other. If you keep expanding and over-invest, you will end up nullifying the whole concept of diversification.

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