Why is Investing Important?
Investing your money is essential to achieving your future financial goals. In today’s world, you cannot rely merely on your savings to fulfil your long-term financial objectives. You need to invest your money in appropriate instruments so that they can grow and accumulate into a large corpus over time.
Furthermore, investing allows you to nullify the impact of inflation by generating inflation-beating returns. You can also benefit from the power of compounding by investing in a long-term savings plan. Even small investments made regularly can consolidate into a large pool of funds after, say, 20 to 30 years and help you meet your various financial goals, such as funding your child’s marriage, building your retirement corpus, etc.
Apart from that, making regular investments instils financial discipline in you as you learn the habit of setting aside a particular amount every month or every year for investing.
A savings plan such as Public Provident Fund (PPF), National Pension Scheme (NPS), Equity Linked Savings Scheme (ELSS), and Unit Linked Insurance Plans (ULIPs), even allows you to reduce your tax outgo.
Popular Investment Options in India
All investment vehicles can broadly be classified into two segments – Growth-oriented investment vehicles and fixed-income investment vehicles. It’s vital to choose the right option for yourself as per your investment profile.
While growth-oriented instruments can help you gain high returns on your investments, they also involve a fair deal of risks. On the other hand, fixed-income instruments provide stability and security to your investments in exchange for comparatively lower returns.
Below are some popular investment vehicles where you can invest your money:
- Life insurance plans
Though life insurance plans are mainly meant to provide financial security for you and your family members, they can also act as investment instruments. There are two types of life insurance plans available in the market – term insurance plans and return of premium plans.
While term insurance plans are pure protection plans with no investment component, the return of premium plans allow you to grow your capital as well. Some examples of such plans include endowment plans and Unit-linked insurance plans (ULIPs).
- Stocks and equities
Stocks and equities are one of the most common growth-oriented investment avenues, and they can help you grow your money by multiple times over a short to a medium interval of time. However, they are high-risk instruments and can quickly degrade your money as well. Therefore, you need to be very careful and diligent while investing in these instruments.
- Mutual funds
Mutual funds are another popular investment avenue for medium to long-term investors. Mutual funds are comparatively less risky than stocks since professional fund managers manage them. You can select from a pool of debt and equity mutual funds to create a portfolio that suits your financial goals and risk appetite.
- Government-sponsored savings plans
There are many Government-sponsored savings plan where you can invest your money to gain decent returns. These plans offer substantial capital appreciation along with investment security and are mainly beneficial for creating long-term corpus. A few examples of such a savings plan includes Public Provident Fund (PPF), Employee Provident Fund (EPF), and National Pension Scheme (NPS).
- Fixed Deposits
Fixed deposits are one of the most common and most traditional fixed-income investment avenues. They are mainly preferred by risk-averse investors who do not mind gaining limited returns in exchange for wealth security. Fixed deposits are offered by banks and non-banking financial institutions and come with various short to long-term tenures.
Bonds are debt investment instruments that traditionally come with a fixed rate of interest. When you invest in a bond issued by a company, you are basically lending your money to that company in exchange for periodic interest payouts. Bonds are issued by private corporations, municipalities, and government agencies.
- Real Estate
Real estates are another popular investment option for High Net-worth Individuals (HNIs). It involves purchasing residential or commercial properties with the aim of capital appreciation or regular income generation through rent. However, unlike other investment avenues, real estates are highly illiquid, and you need a significant amount of wealth and time to invest in them.
Another popular instrument to invest your money in is various commodities or raw materials, such as oil, metal, gold, rubber, and agro products. Investing in commodities allows you to hedge against inflation. Prices of these products tend to rise in the future (mainly due to inflation), and hence, you can gain good returns by investing in them.
- Senior citizens savings schemes
These are special investment instruments that are tailor-made for retirees and senior citizens. These avenues are offered by various banks, NBFCs, and post offices in India and come with fixed returns that are fully taxable. The returns are payable on a monthly, quarterly, half-yearly, or annual basis.
With so many types of investment and savings plans available in India, you might find it challenging to choose between them. However, by considering some crucial factors such as your age, monthly income, long-term financial goals, investment horizon, and risk appetite, you might be able to make a better decision.
PNB MetLife offers many life insurance plans and long-term savings plans that can help you meet your financial goals. Browse through our investment plans and pick a suitable one for yourself!
The aforesaid article presents the view of an independent writer who is an expert on financial and insurance matters. PNB MetLife India Insurance Co. Ltd. doesn’t influence or support views of the writer of the article in any way. The article is informative in nature and PNB MetLife and/ or the writer of the article shall not be responsible for any direct/ indirect loss or liability or medical complications incurred by the reader for taking any decisions based on the contents and information given in article. Please consult your financial advisor/ insurance advisor/ health advisor before making any decision.
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