Invest smart today for a better tomorrow
Long term investment plans are where you invest your funds for a fairly long duration of time. In such plans, your money is spread over a long period in order to meet your long term financial goals. The long term period varies from case to case, in some cases generally 5 years is considered as a long term investment, whereas, in some cases, it goes beyond 10 years.
It is important to remember the two essential components of building long term investment plans – insurance and investment. These components should be kept separate and not be mixed in order to achieve different financial objectives. While investments aim to grow your savings, insurance aims at providing a financial shield to you and your loved ones.
Long term investments are done by an individual investor in order to meet his/her long term goals and any future expenses. Some of these long term goals can be like:
If you make your investments wisely, you will achieve a sense of security along with earning higher potential returns in the long run. The main reasons to invest your money in investment plans for a longer time horizon are:
The following are some of the various long term investment options available in the market for an individual investor:
These are instruments that pool in funds from various investors and spread them as investments across various stocks, debt or fixed-income securities, money market securities, among others. Mutual funds have gained wide popularity over the past few years and they continue to gain the attention of various individual investors.
The 3 broad categories of mutual funds are:
Since equity mutual funds are linked to equities, they tend to carry a higher degree of risk as compared to debt mutual funds. However, they are also said to offer the investor a higher potential return if the amount is invested for a long time horizon.
For an investor who wants to keep the investments safe, debt mutual funds are a better option.
If you want to take advantage of high potential returns from mutual funds, you need to invest your money for a long time horizon.
The mutual fund options in the market allow an investor to either make a lumpsum contribution or regular small contributions. SIP i.e., Systematic Investment Plan is a good option for an investor to invest in mutual funds by not overburdening his/her budget.
Investment in pieces of gold jewelry has been a traditional way of investing for numerous people across the globe. There are several ways by which one can invest in gold apart from jewelry pieces. Gold ETFs, Gold Bars, Gold Coins are some examples. Gold has retained its value over many ages, and the prices of gold have been rising high for the past few years. Individual investors find gold a suitable option to put their funds in because it tends to yield good returns.
Being a popular investment vehicle over the ages, gold has proved to be handy at various times, especially during financially stressful times.
No matter which form of gold you choose as an investor, it will certainly add value to your investment portfolio. It also helps in bringing diversification to your portfolio. However, an important thing to keep in mind is the market timing so that you can buy gold when the prices are low.
Most of us wish to buy our own house or own our own piece of land which we can use to build our home, nobody wishes to get in the hassle of making those monthly rent payments. If you plan your investments in a proper manner, you can invest your accumulated savings in the real estate sector. However, this requires you to be extremely careful when it comes to choosing the option. This is because there is a huge investment involved when we consider the real estate sector.
Additionally, you need to be extremely patient when it comes to the fluctuation of the prices in this sector. You can either have a property that appreciates in no time or have a property that takes quite a few years to appreciate in value.
When you consider investing in this option, you need to plan things well in advance in a systematic manner in order to get good returns considering the huge amount of funds involved.
A bond, in simple terms, is an instrument by which the government and corporations borrow money from time to time.
As an investor, you invest your money and the borrower pays you a fixed rate of interest depending on the tenure of the bond. While investing in bonds, you are considered to be a lender, unlike equity you are not given any stake in the corporation.
Generally, bonds are issued for a fixed period after which they are redeemed. Long term bonds’ investment is also a good opportunity for an investor to earn good returns on their investment plans.
Before considering this option, you should remember that investment in shares or stocks involves a great deal of patience and a high degree of risk if you want your money to grow. You should be careful before you move forward to invest your money in stocks as you can either earn a lot or lose it all. You should be well informed about the market and the risk associated with it. You should grow your knowledge and do proper research.
The Bottom Line
As an investor, your investment plans should involved diversity rather than sticking to the same age-old investment options. This helps in spreading your risk evenly and maximizing your returns while minimizing the risk involved.