What Should I Consider When Choosing Long-Term Investment Options in India?

Long-term investment planning is important for anyone who wants to financially secure their future and achieve financial stability. These investments deliver returns using the benefit of compounding, where your investments grow over a period. They also help ensure your money grows and retains its purchasing power against the effect of inflation and rising prices and cost of living. Unlike short-term investments, long-term investment options provide greater stability by lowering the impact of market volatility, especially when you stay invested through market cycles.

While everyone knows the importance of buying long-term investments, many find the wide range of options overwhelming, making it seem challenging to select the right investments. It often prevents them from starting their investment journey at the appropriate time. This blog covers factors to consider while choosing long-term investments so you can identify the right investment options with higher return potential.

Let us explore the following factors to be considered:

Financial Goals

Defining your financial goals is the foundation for choosing the right long-term investment plan. Decide whether you want to invest for wealth accumulation or save towards  children’s higher education expenses. Setting a clear goal and investment objective will help you narrow down choices that perfectly align with your long-term financial goals.

For example, if your ultimate goal is earning risk-free retirement income, you may choose to invest in National Pension Scheme (NPS) or Public Provident Fund (PPF) over making equity investments. 
People who want to build wealth through market-linked earnings over a period and create a financial cushion for their family can consider investing in our Shriram Life Golden Jubilee Plan. It provides protection and investment benefits in a single plan with various other features like tax benefits, partial withdrawal, easy fund switching, etc

Cost of Investment

It is one of the essential points to consider while choosing long term investments, yet the most overlooked. Investment costs generally include account opening charges, annual maintenance fees, brokerage charges, fund management expenses, etc. High investment costs can erode returns over time if you’re investing in long-term options.

For example, some mutual funds may have a higher expense ratio than others, resulting in lower returns for investors. So, always calculate your cost of investment and compare similar investment options. This will help you easily identify the best investment options in India for the long term where return on investment (ROI) is attractive.

Return on Investment (ROI)

Everyone prefers investing in high ROI options because they measure the profitability of an investment. Since you’re making long-term investments, focus on earning consistent, inflation-beating returns rather than short-term gains.

Always compare historical performance if you’re investing in stocks, fixed deposits, mutual funds, or any other long-term investment options. If your primary investment focus is good returns, then high-ROI options like equities may be considered. Traditional plans like PPF provide slightly lower returns but are typically more stable than equities.

Liquidity

Since many people choose long-term investment options for growth, liquidity doesn’t matter to them. However, buying investments with some flexibility is encouraged to counter unexpected financial challenges. For example, if you have PPF investments, you can use its partial withdrawal facility to cover unexpected medical expenses.

The same may not be possible with Fixed Deposits (FDs) because they may charge penalties for early withdrawal, lowering your funds. Hence, always evaluate the liquidity provisions to pick suitable options.

Tax Implication

The correct investment options typically provide various tax benefits. It can help you reduce your taxes while increasing your earnings. For example, when you invest in options like ELSS mutual funds, PPF, and NPS, you can claim deductions for the contribution amount u/s 80 C while filing the income tax return.
Certain investment options like ULIPs provide tax-free returns u/s Sec 10(10D)  if your premium payments are less than 10% of the policy’s sum assured value. Pick your investments strategically to lower your tax liability and maximize tax-free returns.

Risk Tolerance

You should always invest in options whose risk level aligns with your risk tolerance. Conservative investors who want risk-free returns should explore low-risk options like fixed deposits, annuity plans, or any guaranteed return plans. You can also check our retirement plans and savings plans to find low-risk options.
If you have a moderate to high-risk appetite, you can explore high-risk options like ULIPs, EFTs, equity mutual funds, etc. Our Shriram Life Fortune Builder Plan is ideal for people with moderate to high-risk profiles. It is a single-premium life insurance plan that provides protection and savings benefits in a single plan. 

Individuals with moderate risk profiles should create a diversified investment portfolio comprising low, medium, and high-risk investments to balance steady growth and high earning potential. All goal-based investments must be made after assessing your risk tolerance.  

Investment Terms

It is one of the most crucial factors to consider while choosing long-term investments because it dictates the lock-in periods, exit options, penalties for early withdrawals, cost of investment, and all other investment-related conditions. Not all investment products are designed the same, so always look for options that align with your financial goals, lifestyle, and obligations.

For example, you may invest in Equity Linked Savings Scheme (ELSS) funds over Public Provident Fund (PPF) because the former has a shorter lock-in period than PPF. It can be beneficial for individuals with kids to meet unexpected education expenses in the short term. Understanding investment terms will help you finalize options that align with your liquidity needs without unwanted constraints.

Regulatory and Market Factors

All investments are governed by specific regulations and market conditions. For example, schemes like National Pension Scheme (NPS) and Public Provident Fund (PPF) are government-backed and strictly regulated, due to which they’re considered relatively secure long-term investment options. 

On the other hand, market-linked investment options such as stocks are affected by economic trends, making them risky for conservative investors. If you want to buy the most rewarding and best investment options in India for the long term, evaluate the governing and regulatory factors before committing. A regulated, transparent plan will minimize risk and ensure accountability, so choose wisely. 

Types of Investment Options

Since everyone invests to either grow their income, create safe income streams post-retirement, or build wealth over a period, most investment plans can be categorized into the following three options:

Risk Level of Top Investment Options in India

The following information can be beneficial if you want to choose the best investment options in India for long term based on your risk profile:

Conclusion

Making strategic long-term investments is a great way to systematically build wealth over a period. Whether you want to create a large retirement fund, build your dream house after a few years, make provisions for your children’s higher educational costs or marriage, etc., you can achieve all your goals by choosing the best investment options in India for the long term.

You can use the factors discussed in this article to choose the right investment options that align with your financial goals. For instance, check our Shriram Life Growth Plus Plan if you want life cover and savings benefit in a single policy. Those looking to build wealth over time and secure their family’s financial future can consider our Shriram Life Wealth Pro Plan. You can also explore the various Child Plans and Protection Plans at Shriram Life Insurance to diversify your long-term investment portfolio for maximum benefits.