Investment Plans

Following are the factors that you must keep in mind before buying an investment plan:

• Financial Goals: Clarity about your monetary goals will help you decide what type of investment scheme you must buy. The goals may include buying a house, a car, marriage, child’s education/marriage, or building a corpus amount. One of the investment options, ULIPs, can even help you meet your short-term goals like foregin trip, etc. In case you have a small family, or have just started with your career, then you can go for ULIPs to fund your short-term goals. Whereas if you are in your 40s or 50s, then endowment plans are recommended for you. So, before choosing an investment plan, it is essential to gain clarity about your financial goals.

• Current Expenses Vs Savings: The amount that an investor spends in an investment plan plays a major role in meeting the financial goals. If someone has more expenses than savings, then it may indicate that he/she may not be able to meet large short term goals with coverage plans. But if the investor does not have major expenses to meet, let’s say he/she lives in own house without having to pay any rent, then savings are likely to be more than expenses. In this case, it is best to purchase an adequate life cover with return benefits and avail two in one benefit.

• Future Expenses Vs Savings: If the current expenses of an investor are lesser, then it does not imply that the future expenses will be less too. Sometimes, the current expenses may be nowhere as compared to future expenses. For instance, someone may have fewer expenses because their children are young now. However, major expenses may still be their way in coming years which may be due to child’s education or marriage. In this case, the investor can go for an investment option that charges a premium for a few years and then pays enough that it can pay itself from the annuity or other regular benefits. Apart from this, investing a higher amount also lets you multiply your wealth for the future. So, planning future expenses as well as savings help you shortlist the plan to invest in.

• Emergency Fund: Investment plans not only cover your needs but also let you grow your wealth within the stipulated period of time. You can use this wealth to pay for major expenses anticipated such as purchasing a house, to pay for child’s education in upcoming years, marriage, or to meet daily expenses after retirement. This is possible with ULIPs including a child ULIP plan and endowment plans. These plans help you meet expenses in the future. Also a child ULIP comes with a special feature called waiver of premium option which proves to be furthermore beneficial.

• Desired Returns: The returns offered by investment plans should be enough to take care of the investor in case he/she is unable to work anymore or to take care of the family in case of misfortune event of death of the investor. The same goes with an insurance plan. It should offer the required cover as well as sufficient returns. The cover offered should be enough so that the life assured is able to provide for his/her family as well as themselves. To understand the requirement of an investor, one must analyse their expenses in accordance with what a policy has to offer. If your cover is less than required, then ULIP and endowment plans are recommended for you as they ensure an increase in wealth by also offering much needed protection at the same time.

• Number of Dependents: The next thing to think of before choosing an investment plan is the number of dependents. This is because it also determines the sum assured an investor may require. The dependents may be spouse, children, siblings, parents, parents-in-law, niece, nephew, etc. If the investor only has a spouse and children as dependents, then he would require a lesser sum assured and vice versa. In case the children are young, then they would require funds in future for education or marriage. Hence, it will be easier to choose a plan when the number of dependents are taken care of.