8 Important Things to Remember While Investing in a Savings Investment Plan
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8 Things to Help You Select a Savings Investment plan

Savings Investment plan is important in order to achieve your short-term and long-term goals. Click here to know the factors involved while selecting a money saving plan on Kotak Life!

  • Jun 20, 2019
  • 5,464 Views

To achieve your short-term and long-term goals, it is important to invest in a savings plan. You can choose from various schemes and instruments available in India. However, it is important to carry out thorough market research and understand the features of the plan before making a decision.

Here are 8 factors that will help you choose the right savings plan for your financial needs.

Savings plans help you earn good returns over the long term. These plans can help you prepare for achieving life goals, save for that dream car or a destination wedding. Well, the last one might be too much, but why not? The right investments can help you achieve financial goals at the right time.

Now, if you are tempted to get one right away, hold your horses. You can keep the following factors in mind before choosing a savings investment plan that is best for you.

Your goals

Set long-term and short-term financial goals. It will bring in a lot of clarity and help you choose the right investment plan. Your goals will help you decide on the plan you need to buy. The process might sound tedious now, but it will pay later.

You can keep looking for a plan that helps you achieve your short and long-term goals. Prioritize these goals, and you will know what you need to do next. But wait, now that you have the goals in place, let’s go to the next step.

The balance between risk and reward

Now that you know that you want to buy a house or that dream car let’s help you go ahead and judge the risk and rewards.

When you choose an investment product, you need to invest very carefully and maintain a balance between the risk and reward associated with the same. Consider your risk appetite when you choose a plan. Risk appetite determines your ability to invest in taking financial risks. For example, if you are willing to invest more for more returns without hurting your financial stability, your risk appetite is high. If you have many financial commitments and cannot afford to lose money, you have a low-risk appetite.

Liquidity

Your savings plan should have adequate liquidity to satisfy your needs. You need to ensure that the plan provides funds to you in times of emergency. Consider your liquidity requirement before you choose a plan. For example, if you cannot withdraw funds in the case of an emergency, the aim of investing is lost.

If you are looking for short-term goals, liquidity should be your first factor to consider.

Understand the tax deduction offered

When you make a savings investment, consider the tax benefit offered by the investment product. Various investment products, such as life insurance and health insurance, offer a tax benefit. Investing in such products will not only reduce your tax amount but will also protect you in case of a medical emergency.

Look out for the diversity aspect

Your money-saving plan should not be restricted to one investment product. You will have to diversify your investment to reduce the risk associated with the same. Consider all the investment options which serve your purpose and diversify the investment. One of the major reasons to diversify your investments is that they help in coping up with market crashes and recession-type situations.

Performance of the plan

It is important to review your portfolio at least once a year in order to make necessary changes as and when required. Once you make an investment, you should not simply forget about the same. Review the portfolio regularly and then take necessary action to maximize your profits.

Check the charges

You should keep inflation in mind while investing in a savings plan. If the inflation is lower than the rates of return offered by the investment plan you choose, invest in it now. Real wealth would be produced by the investment. There won’t be any genuine wealth growth or capital accumulation if the inflation rate exceeds the rate of return.

Terms and conditions

This is a very important thing to remember when you buy a plan. Ask all the necessary questions before choosing a plan. Investment plans are complex as there are various terms and conditions attached to them. Hence, buy a plan only when you are well aware of what it is offering. Clear your doubts about the plan before you put your money into it.

Making an investment requires market research and an understanding of different plans. To make the right investment decision, you need to consider your financial goals and then look at the available alternatives for you. Making the right investment will help your wealth grow over a period of time.

FAQs

1. What are investment funds offered under the Investment Plan?

Well-known investing alternatives include mutual funds, the Public Provident Fund, corporate and government bonds, exchange-traded funds, and the National Pension Scheme. The returns offered, level of risk, tenure, taxation, and whether the returns are guaranteed or market-linked are all different for each of them.

2.What is the safest investment with the highest return?

  • High-yield savings accounts
  • Short-term certificates of deposit
  • Money market funds
  • Corporate bonds
  • Dividend-paying stocks

3.What is Risk Appetite?

Risk appetite is the amount of risk that a company is willing to take on in order to achieve its goals before taking steps to lessen the risk. It represents a balance between the threats that change invariably brings and the possible rewards of innovation.

4.When should you consider liquidity while choosing a savings plan?

When investing, liquidity is crucial to access the capital you accumulate. You may become cash-poor if all of your assets are invested in long-term or highly illiquid securities. Your ability to invest money into a new investment opportunity may be considerably reduced as a result.

Invest in savings plan today and improve all your tomorrows!


5.What to look for when choosing a savings account?

Here are five things to consider while choosing the right savings plan

  • Interest rate
  • Fees and charges
  • Accessing your money
  • Opening deposit
  • Government guarantee

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