Investments are one of the most crucial aspects of a person’s life, as money lying in the bank account will never get you the returns that you can by investing in a planned manner. You already work hard to make money, so why not make your money work as hard as you do? If you start early, you can gain from the power of compounding, which significantly increases your wealth over a period of time.
Investing early on with little investments, will let you figure out the market and learn from it while you assess your risk appetite before you go in for bigger investments. Therefore, if you want to build a corpus that can match up future inflation rates and provide you with a comfortable retired life, it’s best you start early and stay invested for as long as you for maximum effect. An investment calculator is a handy tool that can help you simplify this task!
Using an Investment Calculator
Not everyone is investment savvy and knows what’s best for them; therefore, to make better informed financial decisions, you can take the help of an investment or a pension calculator to secure your retirement. The way it works is simple; you input a few details about yourself and your income, and the calculator will let you know the best course of action based on that assessment.
This lets you choose a plan that’s likely to work the best in your favor. With some calculators you can even dive deeper and make investments based on specific goals, like buying a car, a house or going on a vacation and then start making systematic investments based on the suggestion to meet those goals.
Types of Investments You Can Choose to Invest
There are multiple investment types available in the market today to suit diverse financial profiles and their objectives. Let’s take a look at a few investment options.
Certificate of Deposit
It is a money market instrument issued against funds deposited by the investor. Essentially, it’s an investment of a dematerialized form with a bank for a fixed period of time and is regulated both by the Federal Deposit Insurance Corporation and the RBI.
They are debt funds and therefore, lower risk compared to equity funds. In a debt fund, and investor essentially lends money to a company, and the issuer of the bond, i.e., the company is required to pay the investor interest on the principal amount being invested. So, if you have a lower risk appetite, a debt fund is a better option compared to an equity fund due to a lower level of risk involved.
You can choose to invest in the equity market since it’s a great financial instrument for fast wealth creation; however, they are a high risk, high reward instrument and you should assess your risk appetite before investing in stocks, as your returns will depend on market volatility. So, if you decide to invest, you need to be prudent.
Most of us are already aware about fixed deposits and many of you might have even invested in one. It’s offered by banks and NBFCs where you agree to invest a lumpsum amount and agree to stay invested for a specified time period and earn interest on the deposited amount through the entire lock-in period, which can range from a few months to several years depending on the plan you pick.
Unit Linked Insurance Plan
A unit linked insurance plan offers the dual benefit of an insurance cover and market-based returns by using a percentage of your investment towards the cover while the rest goes towards investment in equity, debt and hybrid funds helping you create a wealth over a period of time while giving your family a financial safety net in the form of the insurance. It’s one of the best investments you can make as it’s a EEE product and gets you a lot of tax exemptions.
Investing early on in your life can help you create a wealth pool that will come handy during the golden years of your life. However, they are even helpful for short term goals. The point is that you should always invest some amount of your income rather than having it parked in a bank account if you want to benefit from market.