Right Investment: We are going through one of the biggest crises of the century. The COVID-19 epidemic continues to spread across the world. If around 38 million people have been infected and more than 1 million people globally have died due to this. In addition to life and property, the global economy continues to wreak havoc with the coronavirus epidemic. Millions of people around the world have lost their jobs. The high volatility of the market is expected to continue until the corona epidemic reaches a manageable level. However, the good thing is that the stock market is open for business and it has historically seen dramatic changes in the last 8 months.
The right time to invest
For those who have been able to get their salary or maintain their income even in times of crisis, now may be a good time to invest carefully. Actually, stopping investment in the current phase will not be considered a good move, because the investment can actually be more effective when the markets are very uncertain. Due to nervousness, your investment strategy should not be affected. It is seen that the markets around the world have given excellent returns in the Post Covid Era.
Guaranteed Return Scheme
At a time when market volatility is very high, most people look for investment options that promise fixed and guaranteed returns. Bank fixed deposit is the most preferred option among the people for guaranteed returns. However, there are some drawbacks in bank fixed deposits. First of all, bank fixed deposits have a maximum lock-in period of 10 years, which means that you can renew your investment after 10 years under it. That is, you will get fixed returns for 10 years, not more than this. Second, there has been a steep decline in the interest rate of fixed deposits in the last 6 years. In 2014, the interest rate on FD has fallen from 8.5 percent per annum to around 5.4 percent in 2020. There is no certainty that the rate of interest will go up from here or it will fall further in the next few years.
The most important thing is that the returns on the bank’s fixed deposits are not eligible for tax exemption. These are some of the important reasons that in such an environment of high volatility, one should invest in schemes that give you the best interest on the amount invested, besides guaranteed returns. Also, you get tax benefits on the interest earned.
Select the right product
When a customer invests in a guaranteed non-participating product, he knows how much he is investing today, how much return he will get. For example, if you invest Rs 10,000 per month in a non-competitive product for 10 years, then you will get a return of Rs 8950 every month for the next 25 years from the 12th year. It will be 39 lakh rupees in total. You have the option to go for one-time investment or Yamanthali Income according to your needs. These schemes come with different payment terms and policy terms and promise maximum IRR.
Most importantly, returns are guaranteed for a longer time period with a maximum time period of 25 years. This means that non-participating products are baseless for those with an investment target of 5 years to 25 years. Some of the benefits of the scheme include tax benefits under 80C on the amount of investment and 10 (10D) on returns. Even customers get life cover equal to 10 times the annual premium.
In the policy market, customers can get a list of non-participating subjects. Which are based on short-term to long-term clients with different investment goals. One of the most important features of these products is that the return on investment is completely tax-free.
Disadvantages of participating products
On the other hand, participating products lack many important features. The guaranteed return on your investment in such a product is very low. The bonus given to the customers is also dependent on the performance of the company which is not very transparent. Usually, there are two types of payouts under the participating product. One is the guaranteed amount which is very low and the other is the bonus which depends on the performance of the company. Among them, excise duty is very high which comes to around 2.5-3 per cent. Actual returns are reduced due to such high excise duty. They are not guaranteed for long periods.
Examples of some of the best products
HDFC Life has a few major insurance companies offering non-participating products to consumers. Under this scheme, if a 30-year-old man invests Rs 5,000 per month with a policy term of 15 years and a pay term of 10 years, the consumer gets Rs 10.61 lakh as a lump sum at an IRR of 5.61% on maturity. will get. Similarly, Aditya can also choose to invest in Birla Capital’s guaranteed milestone plan. In which a person of 30 years can invest 5 thousand rupees a month with a policy term of 20 years and a pay term of 10 years. It will get Rs 13.94 lakh at 5.51 per cent IRR on maturity.
There are also schemes available for people who do not want to take lump sum benefits and instead want month long income. One such scheme is Bajaj Allianz Life’s Guaranteed Income Round Income. Under the scheme, in which a person of 30 years can invest 60 thousand rupees annually with a policy term of 10 years and a pay term of 10 years. He will have an annual income of Rs 76,109 for the next 10 years. Under this scheme, there is a 5% increase in the fixed income after a payment period of 10 years.
(Author: Vivek Jain, Investment, Business Unit Head, Policybazaar.com)
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