The 5 Best Investment Plans for Wealth Creation

Investments are crucial for wealth creation. The best investment plans have the potential to beat inflation while allowing you to fulfil your financial goals. Hence, it is important to ascertain your goals and risk appetite and find an investment plan that aligns with your needs. Here are five investment plans you can consider for wealth creation.

Stocks

Stocks or equities are securities that represent ownership of a portion of the stock-issuing company. Stocks provide returns in the form of capital gains or dividends. Also, the stock market is highly volatile and comes with market risks. Therefore, when the company performs well, you stand to share the profits and when it loses money, you stand to share the losses. Typically, you can ride out the market fluctuations by staying invested in the stock market for a longer term.

Mutual Funds

In mutual funds, multiple investors pool money and a fund manager invests it into various securities. When it comes to equity mutual funds, you and other investors like you invest money into stocks of various companies indirectly. Unlike direct equities where you actively manage your investments, mutual funds essentially use the expertise of a fund manager to manage your investments. You can invest in debt funds, balanced funds, tax-saving funds, index funds, etc. Mutual funds also offer portfolio diversification that helps in potentially minimising the overall risk associated with your investments. Besides, there are few options wherein you can avail loan against mutual funds you have. 

National Pension Scheme (NPS)

If your investment plan aligns with your retirement plans, you can consider investing in National Pension Scheme (NPS). It is a voluntary retirement savings scheme that allows you to make defined contributions in various investment options. With NPS, you can grow your money with equity market instruments, fixed-income instruments and alternative investment schemes. After you attain 60 years of age, you must allocate at least 40% of the accumulated wealth to an annuity plan which provides a monthly pension. You can withdraw the rest as lumpsum.

Unit Linked Insurance Plan (ULIPs)

If you want to build wealth while also protecting the future of your loved ones, a ULIP can be beneficial. ULIP offers benefits of both, investments and insurance. With ULIP, you can choose your life cover, premium payment amount and frequency and policy term. Typically, you can avail of ULIPs from life insurance companies. The insurer divides the premium amount into two parts – one is allocated to providing life cover while the other is invested in equity funds, debt funds or balanced funds. You may select your preferred fund. ULIPs come with a 5-year lock-in period, after which you can make partial withdrawals. Also, if your chosen fund is not performing well, your insurer may provide you with the option to switch funds.

Public Provident Fund (PPF)

If you want to invest in low-risk avenues, you can consider PPF. PPF is a long-term investment option that offers steady returns. You can invest up to ₹1.5 lakh in PPF per financial year with a minimum investment of ₹500. PPFs have a maturity of 15 years (excluding the financial year of account opening). After maturity, you can extend the PPF for a block of 5-years. 

Bottom line

Investments can help you earn potential inflation-beating returns. You can use an investment calculator to estimate the value of your investments after a certain period of time. Ensure you opt for a longer investment horizon to benefit from compounding returns.