Do Long Term Investments Ensure Better Returns?

The BSE Sensex surged 1.87 per cent or 665.44 points while NSE Nifty rose 1.68 per cent or 179.15 points on January 31, 2019. People who invested ten years ago, at a time when the economy was grappling with the effects of a massive recession, and waited patiently for the money to grow, reaped the highest profits by this surge. As the world battles another crisis, your long term investments can be your glimmer of hope, protecting your future goals and preparing you for exigencies, for a secure life ahead.

Benefits of long term Investment?

  • Less worries about a volatile market-

The relations between time and volatility forms the foundation of long term investments. The investments made for longer durations tend to be less volatile than the ones made for shorter periods. As a result, it allows you to sail through low market periods.

  • Cost-effective-

As you are not an active trader, there is a significant reduction in commission costs as well as other management costs. In addition, long term gains balance out the minute cost that might have been encountered during your investment period.

  • Power of compounding-

By the ability to reinvest the profits you make overtime to further generate more profits Is one of the best features of long term investment. Taking advantage of compounding you can significantly multiply your wealth.

  • Rupee cost averaging-

By buying low and selling high, long term investments allow you to take advantage of rupee cost averaging to improve overall gains even in the backdrop of volatile markets.

Where to invest money?

Now that you have an idea about long term investment benefits, here are some of the investment options that you can consider to yield you substantial returns.

  • ULIPs or Unit Linked Insurance Plans-

ULIPs are great long term investment options that can be used for wealth creation. The corpus can be directed towards fulfilling financial goals such your child’s education and marriage, retirement, down payment on house loans, etc. Apart from offering a scope of entering the equity-linked investment market, ULIP also functions as a life insurance cover. Depending on your capacity to take risks, you can invest in either equity-related funds or debt-related funds, or opt for combination of both the funds. They also have tax benefits that can be claimed under Section 80 C of the Income Tax Act.

  • Equity Funds-

ELSS or Equity Linked Saving Schemes are tax saving schemes that also serve the purpose of long term wealth creation. These diversified equity-based mutual funds have a lock-in period of minimum three years and can earn decent returns on the corpus accumulated. These equity instruments are eligible for tax claim under Section 80 C.

  • PPF or Public Provident Fund

This long term investment plan is suitable for individuals who have a low-risk appetite. With annual compounding and an interest rate of 7.1 per cent, the Public Provident Fund offers the scope of saving money to meet financial goals in the future. The lock-in period for PPF is 15 years, and it is eligible for relief under 80 C.

  • NPS or National Pension System

The National Pension System or NPS is a long term investment option with a lock-in period till retirement and an interest rate of 12-14 per cent. It is portable, well regulated and has the dual benefits of compounding and low cost of maintenance.

Long term tax saving investments let you stay focussed on your long-term goals. Check out the various investment options and opt for an investment strategy that lets you sail through the market bumps while allowing your money to grow and compound so that you are future-ready today!