Financial planning is often misconstrued as something you do for the long term. However, many needs also need to be met in a short time. Goals like buying a home or a car can have a significant impact on your savings in the absence of a short term investment plan.
There is no defined period of short-term investments. These investments can even be for as little as seven days or as long as five years. Depending upon your urgency of funds, there are various instruments that you can choose to invest in the short term. These products are broadly categorized between yielding fixed income and market-linked return.
Fixed income investments usually range between 7 days to 12 months that include fixed deposits, post office term deposits, and company deposits. Market-linked investments, on the other hand, include mutual funds and Unit Linked Insurance Plan, to name a few.
If you are someone who is looking to invest for a future goal and does not want to take the risk of tying your finances for an extended period, then you have come to the right place. Here is how you can save for your investments and how the best ULIP plans in India can help you reach your short-term financial goals.
|Table of Contents|
|What is ULIP Plans?|
|Funds that ULIPs Invest in|
|Is ULIP Plans the best Investment option for you?|
What is ULIP Plans?
ULIP plans is a dual benefit instrument that offers insurance as well as an investment plan. When you invest in best ULIP plans, a part of your premium is used to pay for your life cover that assures your family members financial security if something happens to you. At the same time, the remaining part of your premium is invested in a unit fund that can be debt-based, equity-based, or a balance of both.
While there is no defined period for short-term investments, but considering the mandatory lock-in period of 5 years in ULIP, it can qualify as short-term. Upon maturity, these funds can be used for paying household expenditures, payment towards student loans, or to buy a car.
Some of the reasons why people are encouraged to buy the best ULIP plan in India include:
- When you invest in ULIPs, you qualify for tax benefits u/s 80C of the Income Tax Act.
- You can switch between different market-linked funds as per your risk appetite.
- You can surrender the plan anytime you like.
- Attach riders to your life cover to enhance the scope of your coverage and provide an extra layer of protection to yourself.
Despite its good return potential and helpful features, if you are still feeling confused about investing in the best ULIP plan, then here are some reasons that will help you see why it is an ideal short-term investment plan.
- Lock-in period: Compared to other high-return investment options, a ULIP plans has a relatively shorter lock-in period of 5 years. In this period, you can create wealth that can be used for several purposes and also inculcate a healthy habit of saving your money. The funds, however, can be available for withdrawal once the lock-in period is over.
- Tax exemption: The maturity amount received after five years is tax-free u/s 10(10D).
- A safe option for new investors: If you are new to the world of financial portfolio management, and want to take calculated risks, then the best ULIP plan in India is the perfect place to start. Apart from securing your loved ones against the life’s uncertainties, you are also in greater control of your investments by choosing the combination of debt and equity funds as per your risk appetite. With the diversity of funds offered by ULIPs, first-timers usually feel more confident about this market-linked investment plan.
Funds that ULIPs Invest in:
Here is a rundown of funds that best ULIP plan in India will invest in if you choose to add it to your financial portfolio:
- Equity Funds: The premium you invest in the equity market is subject to higher risk, albeit with higher return potential.
- Debt Funds: The fund manager will invest in debt instruments for you if you are risk-averse and don’t mind the low returns as far as it keeps your investment safe.
- Balanced funds: The premium that you pay is balanced between debt and equity market to minimize the risk and increase the return.
Is ULIP Plans the best Investment option for you?
Still wondering if ULIP is indeed the best short-term plan for you? The answer is yes. Read on to know why:
- Unit Linked Insurance Plans eliminate the need to juggle between multiple instruments by giving you the benefit of insurance and investment in a single plan.
- It helps you create wealth over a short period.
- You have the flexibility to switch between portfolios as per your tolerance for risk.
The best ULIP plan in India offers you the flexibility of premium payments and the ability to withdraw a part of your fund whenever you need it. This makes it an ideal option for your short-term needs; both planned and exigencies.