Investment options to consider when saving for a long term

Long term investment options are a substantial amount of money invested for long periods. These investments include real estate, bonds, stocks, and gold. Investments for more than three years are considered a long term investment. For long term investment options, it is essential to fund investment and insurance. Investments are made to grow your money, whereas, insurance provides you and your loved ones with financial security.

Long term investments are made to meet financial milestones like buying a house, retirement savings, education, and marriage of children. Investing will provide higher returns and security. Objectives of these options are financial freedom and money growth. Here are a few investment options available for the longer term:

Public Provident Fund (PPF): This is the safest and most common long term option for investment in India. After maturity, the fixed rate of returns assured with zero risks. A PPF account is opened at the bank or a local post office.

From January 2019 to March 2019, the interest rate is updated to 8% per annum. Provident Funds have a 15 years lock-in period. Partial withdrawal is available after five years of investment. The maturity amount with the interest returns is tax-free.

The annual deposit amount is INR 500 to INR 1.5 lakhs per year. There has been a drop in interest rates that have led to considering other investments.

Mutual Funds: These funds pool savings for investors in stocks, and financial securities. This long term investment option has gained popularity over the past few years. With mutual funds, your money is invested in stocks by SEBI.

This long term investment option has three categories:

Debt Mutual Funds

Equity Mutual Funds

Hybrid Funds

Debt Mutual Funds invested in regular income securities and debt instruments. Equity Mutual Funds invested in stocks. And the Hybrid Funds are invested in stocks and regular income securities.

Investments in stocks are high returns with high risk. For low-risk mutual funds, debt mutual funds are the safe option. For higher yields, mutual funds need to be invested for a longer period. The invested amount can vary from small instalments to a large amount.

Gold Investments: This type of option with gold jewellery is a traditional way for people to invest in India. Other gold investments are Gold Deposit Schemes, Gold Mutual Funds or Gold ETFs. The price of gold is continually rising for a few years. Investing in gold has high returns. Gold adds value to your financial savings, but it is important to buy gold when the market price is low.

Real Estate: This is the go-to long term options of investment after stocks because they are high returns with a high risk. This investment includes owning a piece of land or a house. Monthly rent can be invested into the instalment payment to own a piece of real estate. With a well-planned investment, your money is secured in real estate.

Real estate is a significant investment but choosing the right option is essential. Planning will assure you high returns. Real estate investments are not ideal for investors looking for immediate profits. A real estate is an excellent asset to own.

Long term investment options in real estate are ideal for homeowners who are willing to rent out the property. With this type of investment, the buying price needs to be low enough for the rent to serve as returns. Rental real estate investment comes with management. But this can be made easier by hiring a real estate company to manage your real estate.

Exchange-Traded Fund (ETFs): ETFs are also investments builds into shares and bonds. This long term option of investment is managed This investment has the most significant companies in each industry. ETFs are invested in small-cap and mid-cap shares.

ETFs are similar to mutual funds, but they are much cheaper than mutual funds. Mutual funds charge an extra load fee ranged from 1% to 3% of the invested amount, whereas ETFs do not charge an additional load fee. But it includes a trading fee to the broker. Usually, the broker’s fees cost about $5 to $10 with a big brokerage firm.

A single share basis can be purchased with ETFs. Therefore, ETFs are ideal for those with low capital investment. But, mutual funds have a minimum investment amount.

Long term Bonds: These investments are an instrument for the government and companies to borrow money. These bonds last longer than ten years. Usually, they have an investment period of 20 years and 30 years. The borrowed invested money has a fixed rate of interest paid by the borrower. The bond’s interest rate depends on the investment terms and capital amount. The bonds are paid off after the investment period. Bonds with long term maturity bonds have a higher return in comparison to short-term bonds. This option also has the tax benefit with section 80C.

National Pension Scheme (NPS): This is a pension scheme that is government approved by the Pension Fund Regulatory and Development. With this investment, a lump sum is secured a lump your retirement. An NPS account can be started at the age of 18 years to 65 years. This pension scheme is mandatory for state and central government employees. There are two types of NPS accounts:

Tier I Account: This type of account has a few restrictions on withdrawal from your NPS account. The minimum annual payment is INR 1000.

Tier II Account: This type of account allows withdrawals from your NPS account with no restrictions. The minimum annual payment is INR 250.

Post Office Saving Scheme (POSS): The post office has many savings schemes ideal for those who require fixed returns. This long term investment option has zero risks with good returns. The various types of post office savings scheme are:

Monthly Income Scheme (MIS)

National Saving Scheme (NSS)

National Savings Certificate (NSC)

Kisan Vikas Patra (KVP)

Recurring Deposit Scheme

These savings schemes are ideal for investors who prefer low-risk investments with guaranteed decent returns.