9 Best Long-Term Investment Plans in India for High Returns (2023)
Investment schemes are used by investors when they wish to generate wealth over the course of a period. Investment has two main types, namely short-term investment and long-term investment. Short-term investments have a tenure of up to 3 years and are used to save income. Long-term investment plans have tenure ranges from 3 to 20 years or more. Sometimes tenure can be as high as 25/30 years. The longer you invest, the more corpus will be generated on the investment capital.
There are multiple long-term investment plans in India. These investment options can be safe government schemes or risk-carrying market-linked securities. Before you choose to invest in one, you must look at all the aspects pertaining to it to make a wise and informed decision for yourself.
Benefits of Long-Term Investment Plans
Are you confused if the long-term investment is the right choice for you? Here are some benefits of the long-term investment plans that can help you decide.
- Power of compounding:
Compounding refers to the investment pattern in which the interest that you earn over the invested amount is added to the principal amount. Then the new amount (Interest plus principal) is reinvested. In long-term investment, this happens multiple times. You get more interest each time since the amount invested is bigger each time than it was the previous time. Compounding gives you exponential returns in the long-term investment, contributing to wealth generation.
- Security from short-term volatility:
Market and market-related financial instruments carry huge risk factors because of their volatility. The dips and hits that the market suffers are hard to recover in a shorter period. In the long term, the gains balance the dips, thereby minimizing the risk factor.
- Tax benefits:
When you put your money towards an investment instrument with a tenure of 3 years or more in India, you can claim the tax rebate on the same plan until the end of the plan’s tenure. This levity is granted under the Income Tax Act, 1961. This way, you not only gain the capital towards the end but also save money every year on the same plan without paying higher taxes.
- Portfolio diversification
Long-term investment plans offer you the benefit of diversifying your portfolio. You can study the market before making an investment. This will help you in maximising your returns in the future.
9 Best Long-Term Investment Plans in India for High Returns (2023)
Given below is the hand-picked list of some of the best long-term investments in India:
Unit Linked Investment Plans (ULIP) are one of the best long-term investments in India that come with dual benefits. ULIP plans are often associated with insurance policies. So, by opting for the ULIP plan, you get the benefit of insurance as well as investment. In this plan, a certain amount of your investment is reinvested in the market by the insurer. You get complete autonomy in selecting the funds you wish to invest in. You can diversify your portfolio to get optimized returns. Under the Income Tax Act, 1961, you can claim the tax rebate on the premium that you pay yearly. The maturity amount you get also does not have any tax implications on them.
- Public Provident Fund (PPF):
Provident funds started as a safety net for the private sector employers, but now they are open to everyone who is working or non-working. The minimum amount required to invest in the PPF per annum is INR 500. You can determine the mode and the frequency of the payment. The lock-in period on the PPF is 15 years. After the maturity period, you get the invested amount along with interest earned back. There are no tax implications on the maturity amount. You can reinvest your maturity amount for the same tenure if you wish.
Investment bonds are the debt financial instruments that are issued by the central or state government, municipalities and private entities. These fixed interest income plans require you to invest a lump sum amount. The tenure of the bonds can range from 1 year to 10 years. However, bonds do not let you choose the payment frequency. The common frequency of the bond payout can be monthly/quarterly/annually or bi-annually. It is fixed by the issuer of the bonds while issuing the same. Bonds have a tax implication on the interest amount; however, the returns are higher than what you will get in the fixed deposit plan. So that you can choose them based on your risk analysis.
- National Pension Scheme
The National Pension Scheme (NPS) was introduced to encourage people to invest in schemes that are market linked. It has the backing of the Government of India and is, therefore, one of the safest market-related money-making instruments. You are given the option to invest a minimum of INR 1000 a year. You can choose the payment frequency and amount that you wish to invest annually. The tenure of this plan is till 60 years age of the investor or until the age of retirement. Once NPS gets mature, you will start receiving the pension, depending upon the amount you invested. Till it matures, you are allowed to withdraw 25% of the invested amount. In addition, you are eligible to claim the tax benefits on the NPS.
Gold has gained popularity as an investment choice as its price doesn’t necessarily match stock prices, bond rates, or other investments. This distinctive attribute makes gold an attractive option when investors often turn to it as a haven during times of uncertainty.
Several factors influence the price of gold, including demand and supply dynamics, interest rates, and investor sentiment. During periods of prosperity, when things are going well, the demand for gold tends to decrease since investors typically prefer other investment opportunities. Conversely, during times of downturns or uncertainty, the demand for gold tends to rise as investors seek the stability it offers. Gold is considered a hedge against inflation because its value often increases when the cost of living rises. Unlike currencies that rely on government backing, gold holds intrinsic value as a physical asset. Overall, investing in gold provides protection against market volatility.
Investing in equities involves purchasing and holding company shares, which grants you ownership and the right to receive a portion of the company’s profits as dividends. If the value of these shares rises, you can sell them at a profit. However, if their value declines, you will incur a loss. Equity investments can build wealth over the term, but they are more volatile than investment options, like bonds. This volatility implies that their prices can fluctuate rapidly, hence may not be suitable for everyone.
Evaluating your risk tolerance and investment objectives is crucial if you are contemplating investing in equities. Additionally, diversifying your portfolio by investing in asset classes is important. Such diversification helps minimise risk while maximising returns.
- Mutual Funds:
Mutual funds are market-related financial instruments that offer one of the highest returns. Out of many categories of mutual funds, two categories, namely, debt funds and equity funds are very popular. Debt funds usually bring you slightly lower returns, but they are more secure. Equity funds, on the other hand, usually bring higher returns but also carry a higher risk. When investing in mutual funds, you can choose the option to diversify your portfolio. However, always ascertain the risk associated with it.
- Equity Mutual Funds:
Equity mutual funds offer a way to invest in a portfolio of stocks from various companies eliminating the need to individually select stocks. There are categories of equity funds, each with its own risk and return characteristics. Large-cap funds focus on investing in established companies with market capitalisation. They are considered less risky compared to mid-cap and small-cap funds. Mid-cap funds target companies with medium market capitalisation, while small-cap funds concentrate on those with market capitalisation. Multi-cap funds diversify their investments across companies of varying sizes.
- Real Estate:
Real estate is one of the best long-term investments among immovable assets. The real estate market is always thriving, and you can make more money with them if you invest for a longer tenure. If you purchase a property by loan, you are also eligible to claim tax deductions while filing your ITR.
Read More: Best Mutual Funds for Long Term Investment
How to Choose the Best Long-term Investment Plans?
- Determine your investment objectives first – What are you saving for? Retirement? Your childs education? Maybe a down payment, on a house? Once you have clarity on your goals you can select an investment strategy that is tailored to help you achieve them.
- Assess your risk tolerance – Next assess your comfort level with the possibility of your investments losing value. Are you risk averse or more open to taking risks? If you prefer stability a conservative investment plan might be suitable. If you’re willing to embrace some risk then an aggressive investment plan could be more appealing.
- Research thoroughly before making any decisions – There is an array of long term investment plans in the market so it’s crucial to read reviews compare different options and seek advice from a financial advisor who can provide valuable recommendations.
- Consider your time horizon – If you anticipate needing the money in the future opt for an investment plan that allows easy access. On the hand if you have a time frame before requiring those funds consider an illiquid investment plan that may offer potentially higher returns.
- Remember to rebalance your portfolio – As your financial goals evolve and your risk tolerance changes, over time it’s important to rebalance your portfolio to ensure it remains aligned with your needs.
Is Long-Term Investing Ideal for you?
Long-term investment is ideal for you,
- If you have long-term financial goals like children’s marriage, education, or any other purpose.
- If you are in a higher tax bracket and not in immediate need of cash.
- If your goal is wealth creation and passive income generation.
- If you are risk averse, then these plans will suit your temperament as, over the years, it absorbs the market fluctuations, guaranteeing you the investment corpus.
- If your sole purpose is tax savings, then the long-term plans will help you save taxes in the long run without having to invest every year.
What are the Common Long-term Financial Goals?
- Increasing earning potential
- Building emergency fund
- Improving credit score
- Paying off education loan
- Saving up to buy a house
- Opening a retirement account
- Evaluating insurance policies
- Creating child education fund
- Living debt-free
- Preparing a will
Before investing in any investment plan, you must consider all the factors. Getting a piece of advice from a financial expert or researching before investing will help you a lot. Investing in a long-term investment plan is a huge financial commitment, and being prepared and aware of it beforehand will make the decision even more fruitful for you.
1. What are long-term investments?
Long-term investments are the type of investments that have a longer tenure. This usually ranges from 3 to 20 years or even more. You can choose to invest in pension plans, market-related securities like funds and bonds, or other safe instruments like a provident fund that suits your disposition more.
2. Are long-term investment plans safe?
Yes, long-term investment plans are among the safest money-making instruments. They are more prone to withstand the fluctuations of the market and absorb the dips over the course of their tenure.
3. What is the lock-in period of Unit Linked Insurance Plans (ULIP)?
ULIPs have a 5-year lock-in period. If you are looking to withdraw funds before the lock-in period ends, your returns will get adversely affected to a certain degree.
4. Which long-term investment option would be perfect for a risk-averse investor?
If you don’t have a risk-bearing appetite, PPFs or NPS would be ideal as they do not possess a lot of risks compared to all the other options mentioned above.
5. Can I invest in government bonds as a long-term investment option?
Government bonds are a good alternative for long-term investments. The Government of India creates them to raise funds for public and private infrastructure building and other government-related functions and projects.
6. What are the best long-term investment plans for 10 years?
The best long-term investment plans for 10 years would be
1. Real Estate
4. Direct Equity
5. Equity Mutual Fund
7. How to invest 1 lakh for the long term?
You can invest 1 lakh for long term in a number of ways. Some of the popular investment options are:
8. Which investment gives the highest returns in the long term?
1. Real Estate
9. How to invest for 10 years?
1. Set your investment goals
2. Choose the right investments per your risk appetite
3. Diversify your portfolio
4. Invest regularly
5. Rebalance your portfolio