To achieve your financial objectives and build a financial safety net for the future, it is imperative that you invest your hard-earned money sensibly. Guaranteed investment plans, which provide a safe and secure means of increasing your money, are important in this respect. These plans are significant because of their simplicity of use, flexibility, predetermined returns, tax advantages, and convenience of investing. These plans are especially beneficial for risk-averse investors who prefer steady returns over potentially higher but uncertain, market-linked returns.
Best guaranteed investment plans in India
∙Fixed Deposit A fixed deposit (FD) is a financial product which is preferred for its simplicity and reliability. Investing in an FD means that you deposit a lump sum to a bank or NBFC for a specified period of time, which could be a few months or several years. The financial institution provides an interest rate which is higher than that of a normal savings account. The interest rate is determined at the time of investment and remains unchanged during the investment period, regardless of market volatility. This feature makes FDs a safe and predictable investment option. The interest can be either withdrawn or reinvested, which will compound the returns.
∙Tax savings fixed deposit Tax-saving FD is a type of FD that offers tax benefits and also acts as a savings plan. Under Section 80C of the Income Tax Act, the amount invested in a tax saving FD can be claimed as a deduction from your gross total income and up to a maximum of Rs. 1. 50 lakhs in a financial year. Nevertheless, the interest on the FDs is taxable. The Tax savings FDs have a maturity period of five years and cannot be pre-matured before this period.
∙Guaranteed savings insurance plan The guaranteed savings insurance plan is a kind of life insurance that offers both the advantages of insurance and investment. For example life insurance like HDFC Life Click 2 Achieve offers a cover, ensures the financial security of the policyholder’s family in case of their sudden death, and gives returns on the premiums paid. The maturity benefits, including the investment returns, are generally tax-free under Section 10(10D) of the Income Tax Act. These plans are typically long-term like money back policy and are suitable for individuals who want to accumulate a corpus while protecting their family’s future.
∙Post office FD Post office fixed deposits are backed up by the Indian government which is one of the safest investment avenues. The interest rates offered are both competitive and higher than the rates offered by banks. The FDs can be opened for different tenures from one to five years. The interest is payable quarterly and is compounded on maturity. Moreover, FDs of post offices can be easily transferred from one post office to another.
∙Public provident fund The public provident fund (PPF) is a long-term investment scheme that motivates individuals to save and invest for their retirement. The scheme is also backed by the Government of India. This ensures its security. The rate of interest set by the government, which is usually reviewed every quarter, is higher than inflation, hence protecting the investor’s buying power. Additionally, the returns, as well as the invested amount, are exempt from tax under Section 80C, and the maturity proceeds are tax-free.
∙National savings scheme The national savings scheme is a government-sponsored scheme which is intended to encourage small savings and investment. It is based on fixed interest rates, which are reviewed and set by the government every quarter. The scheme provides tax benefits under Section 80C of the Income Tax Act as well. It is a safe investment that is not only risk-averse but also middle- and lower-income individuals. Furthermore, the scheme permits early withdrawals in some cases which means that it is a flexible investment option.
Comparative study of various guaranteed investment plans
| Comparison criteria | Guaranteed Savings Life Insurance Plan (Example – HDFC Life Click 2 Achieve) | Fixed deposit | Tax-saving fixed deposit (FD) | Public provident fund (PPF) | Post office FD | National savings certificate (NSC) |
| 100 % Guaranteed returns | Yes | Yes | Yes | Yes | Yes | Yes |
| Investment duration | 5 or 10 years | 7 days to 10 years | 5 years | 15 years | Up to 5 years | 5 years |
| Tax saving on investment (Section 80 C) | Yes | No | Yes | Yes | No | Yes |
| Tax saving on returns (Section 10 (10D)) | Yes | No | No | No | No | No |
| Interest rate guaranteed | Yes | Every new investment has different interest rate | Every new investment has different interest rate | Yes | No | Yes |
| Time of withdrawal | Accrued survival/income benefit can be withdrawn partly/fully at any time during the contract | Anytime | 5-year lock-in | 5-year lock-in post which restrictive withdrawal or premature closure is allowed | 6 months lock-in | 5-year lock-in with premature closure applicable on the demise or by court order or by a pledge from a gazette officer |
| Life cover | Yes | No | No | No | No | No |
| Amount of withdrawal | Full exit permitted | Full exit is permitted | Nil | Up to 50 per cent of the balance | Full exit is permitted | Full exit |
| Option to invest through a credit card | Yes | No | No | No | No | No |
Long-term guaranteed investment plan
Long-term guaranteed investment schemes play a key role in building up a substantial corpus for future expenses. Here are crucial tips on how to invest in them –
∙Start early The sooner you begin your investment journey the better. It gives your money more time to grow through the compounding effect. Compounding is the term used to refer to the process of reinvesting your gains, which in turn increases your returns exponentially. In addition to that, starting early allows you to be more adventurous while you are young with the potential to earn greater returns. Over time, you can gradually switch to more secure investments.
∙Diversify The diversification strategy includes the investment in various asset classes like equity, debt, real estate, gold, and so on, to reduce the risk. The idea is that when one asset class is down, the others might be up leading to a balanced overall return. Diversification can also allow you to take advantage of the returns of different asset classes which depend on the market conditions.
∙Regular investments Making regular investments, also known as systematic investing, can lead to a large corpus over time. This approach takes advantage of market fluctuations. When the market is down, your regular investment buys more shares, and if the market is up, it buys fewer shares. Gradually, this can bring about considerable gains. Regular investing also instils financial discipline, making it a good habit for long-term wealth creation.
Short-term guaranteed investment plan
Short-term guaranteed investment plans are perfect for fulfilling short-term financial goals. They protect against market volatility, fulfil short-term financial requirements, help in planning your financial future, and offer tax benefits. Illustrations of short-term guaranteed investment plans are –
∙ Short-term mutual funds These are funds that invest in debt and money market instruments whose maturity is up to three years. They are for investors who aim at relatively low risk with lesser volatility and who want to make moderate profits.
∙ Recurring deposits (RD) Recurring deposits are a type of term deposits provided by banks under which you can deposit a fixed amount every month for a certain duration. This is ideal for those who like to invest small amounts of cash every month. The RD maturity period can be between 6 months to 10 years.
Significance of a guaranteed investment plan
∙ Guaranteed returns These plans endow assured returns, which offer financial stability and safety. ∙ Financial planning They engender sound financial planning by helping you achieve short- and long-term financial goals.
∙Tax advantages Some schemes provide tax deductions under different sections of the Income Tax Act.
Final thoughts
Guaranteed investment plans are the perfect choices for both short- and long-term financial planning. They are confidence boosters for investors as they offer them a sure and safe way to invest in and avail profits. These programs can guide you to meet your financial goals in an organised and fuss-free manner, irrespective of whether you are saving for your child’s education, buying a property, or planning for your retirement. Hence, turning to a guaranteed plan is a wise move for you if you want to be on the safe side as far as your financial future is concerned.
