Investment strategies you must be well-versed with for financial security

In the economic vertical ensuring financial stability is a top priority, for both individuals and families. To achieve this, it is important to understand investment strategies that can help you establish a financial foundation.

There are two key elements contributing to security. These include term insurance and investment products. This article covers all about term insurance and the benefits of forming investment strategies.

Term insurance

Term insurance plays a role in any financial security plan. It is a life insurance policy that offers coverage for a period or term providing a death benefit to the nominee if the policyholder passes away during that term. Let’s explore why term insurance is crucial for achieving security. 

1.  Protecting your loved ones

The primary objective of term insurance is to protect your loved ones in your absence. It ensures that your family can maintain their standard of living and fulfil responsibilities such as loans, education expenses and daily expenditures when you’re not there.

2.  Premiums

Term insurance policies are well known for their affordability. It is possible to obtain an amount of insurance coverage at a premium. This makes it accessible, for individuals, from income brackets to ensure the security of their families.

3. Tax advantages

Term insurance premiums are eligible for tax deductions under Section 80C of the Income Tax Act up to a limit. Moreover, the death benefit received by the nominee is also exempt from taxes under Section 10(10D). These tax benefits can help reduce your tax liability making it a savvy investment.

4. Customisation

Many insurers offer term insurance plans with features and options allowing you to tailor your policy to meet specific requirements. Riders such as illness coverage, accidental death benefit and premium waiver can provide financial security. 

5. Mental peace

Knowing that your family is financially protected brings peace of mind. In times of uncertainty, this assurance can alleviate stress and enhance your well-being.

Investment strategies for ensuring financial security

Apart from term insurance, there are investment strategies that can help you secure your future. Such strategies aim at growing your fund over time while managing risks. Read on to know the top investment products with their advantages –

Equity investments

Equity involves buying stocks or shares of companies. The stock market in India has a reputation for its potential to yield returns in the long term. Investing in this product provides the listed benefits –

·  Greater returns

Over time equities have the potential to provide returns, then types of investments allowing your money to grow more quickly.

·  Earnings from dividends

Certain stocks offer dividends, which can serve as a source of income.

·  Tax advantages

Investments in equities for the term are subject to tax deductions making them tax efficient.

Fixed deposits (FDs)

Fixed deposits are low-risk investments, through banks and post offices. They offer a fixed interest rate over a period.

Investing in fixed deposits (FDs) has advantages –

·  Safety

FDs are considered investments since they are backed by either the government or banks.

·  Predictable returns

With FDs you can accurately determine the interest you will earn, ensuring stability.

·  Liquidity

Many FDs provide the flexibility of withdrawal although penalties may apply.

Public provident fund (PPF)

PPF is a savings scheme supported by the government of India that offers term benefits. It provides tax advantages under Section 80C. Is recognised for its returns. Some of the advantages of investing in PPF are –

·  Tax benefits

Contributions made to PPF are eligible for tax deductions and the interest earned remains tax-free.

· Long-term savings

PPF has a lock-in period of 15 years making it an ideal option for those seeking term security.

· Safety

PPF is backed by the government ensuring the safety and security of your investments.

Real estate

Investing in estate involves purchasing properties such as apartments, commercial spaces, or land. There are benefits associated with investing in the estate – 

·  Appreciation

Real estate properties generally appreciate over time offering potential capital gains.

·  Rental income

By leasing out properties you can earn regular rental income providing a steady source of revenue. 

·  Tangible asset

Real estate is an asset that can be utilised or passed on to generations.

Now let’s delve into the advantages of preparing investment strategies –

Building wealth

When investment strategies are implemented prudently, they can help in building wealth over time. This accumulated wealth can be utilised for purposes such, as retirement planning, education funding and handling financial situations.

Managing risk

To mitigate risk, it’s advisable to diversify your investments across types of assets. By doing so, if one investment performs poorly others may offset the losses. Reduce overall risk.

Generating income

Certain investments, such as stocks that pay dividends or rental properties can provide a stream of income which enhances security.

Tax optimisation

Many investment options come with tax benefits like deductions on contributions and tax-free returns. Taking advantage of these benefits can help optimise your tax liability and increase your returns.

Term financial goals

Investment strategies are aligned with term goals like purchasing a house funding education expense or planning for a comfortable retirement.

Protection against inflation

Investments have the potential to outpace inflation over time ensuring that the value of your money isn’t eroded and maintaining its purchasing power.

Emergency fund flexibility

A structured investment portfolio can also serve as an emergency fund by providing liquidity when unexpected expenses arise. 

Conclusion

To attain security, it is essential to go for a comprehensive strategy that involves term policy with a well-planned approach as the base. Term policy protects your dependents in the scenario of any unfortunate event.

Moreover, adding investment products such as fixed deposits, stocks, real estate, PPF, etc., can offer diversification benefits and assist in forming a pragmatic portfolio. Such products offer opportunities for long-term growth, risk management and wealth accumulation.

By adopting such an investment approach, you can secure your future, attain your crucial goals, and find mental peace in this evolving financial space. In case of any confusion approach a financial expert for guidance in investment strategies and approach.

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