Investment Plans

Plans allow systematic enhancement of wealth with insurance

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How to Make Your Life Financially Secure in an era of Inflation

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Financial security remains dubious unless it factors in the current and projected rates of inflation. Today investment planning is not just about growing your money but growing it at a rate which outpaces inflation.

This is one of the reasons why government securities and debt instruments are not preferred when it comes to inflation. The rate at which a bank fixed deposit (FD), for instance, provides returns are more or less equal to the rate of inflation. Thus, effectively, you do not get any returns but it is like hedging against inflation. You may not lose in this case, but also you may not be in a position to gain. So, what should you do in order to achieve financial freedom? Here are a few options.

Insurance plans: Today insurance plans are broadly categorized into two segments: traditional endowment Policy and unit linked insurance plan (ULIP). A traditional endowment policy mainly provides you Coverage against life and you get a pre-determined sum after a specific period of time. It is a Traditional Plan and the primary objective is to get the insurance cover wherein rate of returns take backstage.

ULIP, at the other end, is linked to equity markets. It is an insurance cum mutual fund product. As the Term suggests, you could expect superior returns generated by investing in equities. But you have to adopt a long-term horizon as in the short-term, investing in equities involves Risk and prices may undergo fluctuations. Investing in ULIP also provides you tax exemption on amount up to Rs 1 lakh, under the Income Tax Act. It is due to these multiple benefits, ULIP is gaining popularity as an investment insurance plan.

Systematic Investment Plans (SIP): SIP allows you to invest in ULIP and even any other mutual fund product in a regular frequency. SIP instills discipline and when you have a schedule to invest a certain portion of your income/savings in a particular product, you tend to accumulate a decent sum of amount, which may not be possible through sporadic, irregular investments.

Since SIP is more of a methodology of investment than a product in itself, you could check a wide variety of mutual fund and ULIP products and develop your own route to SIP. You may also consider money back plan under which you get the amount of investment back and take the returns in different manners. This product allows you to achieve your financial goals as you get a certain amount of your investment back at regular intervals.