Here’s How Your Wealth Stage Will Affect Your Choice for Long-Term Investments

investment

There are many ways to accumulate corpus. If time is at your side, you can go for market-linked investment options like equity. Otherwise, safe investment options like bank fixed deposits, public provident fund, etc.; can help you.

Now, once you have accumulated enough corpus for yourself, the next step that you should take is to secure it. You need to for long-term investment plans, which are not only less risky but also grow your wealth. Here, traditional insurance plans can help you.

It is important to consider traditional insurance plans that carry a number of benefits. Learn about the features and benefits of investing in traditional insurance plans.

Features of Traditional Insurance Plans

Traditional insurance plans include endowment policies, whole life policies and other multiple benefits. The plan covers risk, return and safety. Considered as a risk-free investment, they offer a fixed amount of returns in the case of death of maturity of the scheme. There is the high safety of funds due to a cap on investment in equity.

Traditional participating plans are the popular types of traditional life insurance plans. These plans provide 90% share of the surplus to the policy holder, and the 10% is the share of the insurer.

In participating plans, as the investments are majority made in debts, the returns are stable. Traditional participating plans are efficient financial instruments as they give consistent returns. Moreover, they are long-term investment plans which encourage policyholders to save in a disciplined manner.

Benefits of Traditional Insurance Plans

  • The plans ensure that you receive majority of the profits and only 1/10th remains with the insurance company
  • There are higher returns on the investment.
  • It is a risk-free investment
  • Any risk of the market is borne by the insurance company
  • The plan offers tax benefits under Section 80C

Is It A Right Plan for You?

Depending on your current wealth stage, you will be able to shortlist the plan you want to invest in. Your investment decision will also depend on the portfolio held by you. Individuals looking for financial stability should opt for a traditional plan. If you are looking for consistent cash flow which will help achieves long-term investment plans, this plan is ideal for you. It will provide risk coverage and guaranteed return on the premium paid.

Even if you have only started to invest and are looking for a secure plan, this is an ideal choice. It will carry lower risk and provide guaranteed returns. If you have a number of financial goals like the education or marriage of your child, you can choose a traditional plan which will guarantee returns.

It is important to note that this plan will remain fixed until its maturity. There is no liquidity, and the portfolio also remains unknown to you. You cannot switch between the funds. Since the plan is managed by the insurer, you will have no say in the allocation of the funds. It has a restricted allocation into equity which is why the returns are regular but nominal. Those who seek protection of their capital should choose this plan.

Individuals with excess liquidity can invest in a higher risk plan which carries a high premium, and the returns vary from time to time. In that case, the returns will depend on the market and could be significantly high as well. Further, if you have invested in multiple schemes, you need to ensure that you have at least one traditional plan to maintain the consistency of the returns and reduce the overall risk of the portfolio. The traditional plan is for individuals who want to ensure the protection of their funds while availing guaranteed returns at regular intervals of time.

About Mohit Tater

Mohit is the co-founder and editor of Entrepreneurship Life, a place where entrepreneurs, start-ups, and business owners can find wide ranging information, advice, resources, and tools for starting, running, and growing their businesses.

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