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How To Invest In Guaranteed Return Plans For Higher Returns And Financial Security?

You can have the security of the future with guaranteed return plans as opposed to a high-risk, high-reward strategy. Read ahead to know how.

  • 4,086 Views | Updated on: May 24, 2024

In an uncertain world, protecting your family’s financial future is essential if you want to navigate the challenging times in your life without suffering any setbacks. When a tiny but deadly virus struck the financial sector, uprooting millions of lives and significantly threatening the financial future of many, the COVID-19 pandemic brought this issue to light.

Key takeaways

Types of guaranteed return plans for higher returns are

  • Unit-Linked Insurance Plans
  • Senior Citizen Savings Scheme
  • National Pension Scheme
  • Post Office Schemes
  • Endowment Insurance Plans

Amid all the uncertainty, most people crave future certainty. For instance, a new parent could wish to make sure that whatever uncertainty arises in the future does not affect their child’s aspirations for their life. One must make investments now if one wants to finance future requirements. It might be challenging to achieve this level of confidence in investments, but that is where a guaranteed returns plan saves the day.

What are Guaranteed Return Plans?

Guaranteed return plans are for those with clear, non-negotiable life goals at predetermined points in their lives. Knowing how much money you will make when the plan matures will help you plan ahead. The best guaranteed return plan can help assist you in planning for and achieving objectives such as retirement, children’s education or marriage, or even purchasing a car or a property. Here are the top 5 ways to get guaranteed returns for your financial future.

Unit-Linked Investment Plans

It is a type of life insurance that offers the insured risk protection and the advantage of investment profits. Most investors have now frequently chosen to invest in ULIP plans in recent years. It provides the ideal balance of affordable life insurance and market-linked investments. A portion of the ULIP premium, which is one of the greatest investment plans currently available, is invested in market-linked instruments, such as stock, debt, and bonds, to generate the best investment plan with high returns and build wealth over the long term.

Senior Citizen Savings Scheme

This is another alternative for a top investment plan that is backed by the government and is intended especially for Indian citizens over the age of 60. The plan matures five years after the account is opened and is extendable once for a maximum of three more years. The plan guarantees its customers guaranteed returns to meet the needs of senior folks.

The Senior Citizen Savings Scheme investment plan is a reliable long-term investment choice that provides investors with security and several other advantages. Any person over the age of 60 can access the plan through nationwide accredited banks and post offices. Additionally, those who chose to retire voluntarily or into superannuation at the age of 55 to 60 are also eligible to invest in this program.

National Pension Scheme

Investors in the scheme have two investment options: automatic and active. The fund’s active option allows investors to select and risk-take in assets as they see fit, as opposed to the auto option, which automatically invests money in various assets. Following this plan, investors can make regular contributions to their NPS account.

As a guaranteed return plan, NPS can assist a person in gaining returns similar to a standard annuity and securing their quality of life after retirement.

Post Office Schemes

Regarding post office savings-investment plans, there are various choices. They produce a lower rate of returns while having various tenures, tax advantages, and interest rates. However, under these schemes, your money will always be safe and risk-free. For long-term investors who are not particularly concerned with large returns, post office schemes are ideal.

Endowment Insurance Plans

Endowment plans are typically offered by insurance companies and combine the advantages of life insurance with a modified guaranteed savings plan. These agreements are made to offer lump-sum maturity benefits at the conclusion of the policy’s term or upon the life insured’s passing.

Standard policy lengths are 10, 15, and 20 years, and some plans additionally offer guaranteed payouts against the total insured at crucial life stages.

The insurer can also announce yearly incentives in some circumstances, although these bonuses do not compound. As a result, the return on investment is typically low, but these plans do provide consistent returns.

Investment Options for Long-term Goals

Whether you are saving for retirement, your child’s education, or buying a home, having a well-thought-out investment plan can help you build wealth and reach your objectives. It is now time to explore various investment options that are suitable for long-term goals, emphasizing the importance of diversification, risk management, and consistent contributions.

Stocks

Investing in stocks has been a popular choice for long-term investors seeking capital appreciation. By purchasing shares of publicly traded companies, you become a partial owner and have the potential to benefit from their growth and profitability. Stocks offer the advantage of liquidity and the potential for higher returns, but they also carry a higher level of risk. It is important to research and select well-established companies with a strong track record and consider diversifying your portfolio across different industries.

Bonds

Bonds are debt instruments issued by governments, municipalities, or corporations to raise capital. They offer fixed interest payments and return the principal amount at maturity. Bonds are considered less risky than stocks and can provide a steady income stream. While they may offer lower returns, they serve as a valuable tool for diversification and mitigating portfolio volatility. Government bonds, corporate bonds, and municipal bonds are the main types to consider.

Mutual Funds

Mutual funds pool money from multiple investors to invest in a diversified portfolio of stocks, bonds, or other assets. They are managed by professional fund managers who make investment decisions on behalf of the investors. Mutual funds offer diversification, professional expertise, and the ability to invest relatively small amounts of money. They come in various categories, such as equity funds, bond funds, index funds, and target-date funds, allowing investors to align their investments with specific goals.

Real Estate

Investing in real estate can be an effective long-term strategy for wealth creation. Whether it is residential, commercial, or rental properties, real estate investments have the potential to appreciate over time and generate rental income. Real estate investments can provide a hedge against inflation and offer tax benefits, such as depreciation deductions. However, they require careful analysis, market research, and a significant upfront investment.

Retirement Accounts

Maximizing contributions to retirement accounts should be a priority for long-term financial planning. These accounts offer tax advantages and can significantly boost your retirement savings. Take advantage of the power of compounding and start contributing early to secure a comfortable retirement.

Investment Options for Short-term Goals

While traditional savings accounts may offer security, they often fall short when it comes to generating significant returns. Read ahead to explore various investment options specifically tailored to short-term goals, enabling you to make informed decisions and optimize your financial growth.

Savings Accounts

Having a savings account is among the simplest and safest methods to access your money. Although there is some income potential, liquidity is the key driver here. Banks only provide returns on savings accounts of 4% to 7% maximum.

Liquid Assets

These mutual funds of a certain type invest in short-term government bonds and certificates of deposit. These investments are safe, so you are free to enter and depart whenever you choose. As the redemption takes around 2 days, try to avoid putting all of your emergency savings in them.

Investors can use liquid funds to store cash for a duration of one day up to 90 days or even longer. Among other things, liquid funds invest in call money and other money market securities. It seldom happens for liquid funds to see a decline in Net Asset Value (NAV).

The dividend option or the growth option is available to investors. Taxes on dividends are about 30%. Capital gains are included in income and subject to the marginal income tax rate. Investors in the lower tax rates are better suited to choosing the growth option from a taxation perspective. However, investors in the highest tax bracket can pick either choice.

Short Term Funds

Securities with a maturity of one to three years are the focus of short-term funds. These funds are a little riskier than ultra-short-term and liquid funds since the maturity of the securities is greater. Taxes are levied similarly to other debt funds.

The minimal deposit period that banks will accept is seven days. As a result, a person wishing to park money for even a week might select a fixed deposit with a duration that suits their needs.

The interest earned on the deposit is included in income and subject to tax at the marginal rate.

While short-term mutual funds are best for investment tenures of a few months, liquid funds are appropriate for tenures of a few days. Similar to liquid funds, short-term debt funds are conservatively managed with the express purpose of preserving capital and achieving moderate capital growth.

Short-term mutual funds are comparable to liquid funds in terms of taxes.

Conclusion

There are inherent dangers in every investment strategy. Nevertheless, some provide stability more than others do, although with modest investment returns. Therefore, there are other possibilities in the row mix suited for your level of risk if your risk tolerance is not high enough to go for the equity market. Before you start investing your hard-earned money, as with other investment schemes, you must first complete your research. All that is left to say is to invest your money carefully!

- A Consumer Education Initiative series by Kotak Life

Amit Raje
Written By :
Amit Raje

Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.

Amit Raje
Reviewed By :
Prasad Pimple

Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors

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