Investment Avenues That Can Help You In Building A Corpus For Your Child
Published On Feb 25, 2022
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You may find that you spend so much time evaluating investment options that you decide not to invest at all. And when the time comes to put it to work, it could be for all the wrong reasons. However, in order to make your hard-earned money work for you and become a passive source of income, you must invest wisely. The most important reason to invest is to achieve a specific goal. A retirement investment is organised differently than one for wealth building, child education, or property buying, for example. Selecting a product becomes much easier after the investing goal has been established.
Building a Corpus: Various Investment Options
The following are a few different sorts of investments, along with their risk profiles:
Stocks, often known as shares or equities, are the most well-known and straightforward kind of investment. You're buying a share of a publicly-traded company's ownership when you buy stock. When you buy a stock, you hope that it will rise in value so that you can sell it later for a profit. Of course, there's a chance that the stock's price will drop, causing you to lose money.
When you buy a bond, you're essentially lending money to a company. Usually, this is a corporation or a government entity. Local governments offer municipal bonds, whereas corporations issue corporate bonds. While the money is lent, the lender receives interest payments. After the bond matures — that is, after you've kept it for the contractually stipulated period of time – you get your principal back. Bonds offer a lower rate of return than stocks, but they also carry a lesser risk. There is, of course, some risk involved. It's possible that the company from which you buy a bond may go bankrupt, or that the government will default. On the other hand, Treasury bonds, notes, and banknotes are considered extremely safe assets.
3. PPF(Public Provident Fund)
PPF stands for Public Policy Forum (Public Provident Fund) The Government of India provides PPF, which is one of the safest and oldest investment options available. It can be opened at any nationalized or private bank, as well as post offices. PPF accounts can be opened for as low as Rs. 500, and annual contributions of up to Rs. 1.5 lakh are tax-free. The interest rate on PPF accounts is compounded annually, and it is revised by the government every year. The triple Exempt-Exempt-Exempt (EEE) benefit applies to PPF investments, and the full corpus of a PPF, like ULIPs, is tax-free at maturity. Although, the 15-year lock-in term is one of the most important disadvantages of PPF; however, partial withdrawals are permitted beginning in the sixth year.
4. Unit linked insurance plans (ULIPs)
Life insurance companies' unit-linked insurance plans (ULIPs) are excellent insurance-cumulation investment plans that provide both life insurance and the potential for long-term wealth creation. A ULIP's premium is invested in the market, giving the investor market-linked profits while also guaranteeing a fixed sum in the event of death. Depending on their risk tolerance, policyholders can choose to invest in equities or debt funds. Equities funds are appropriate for risk-averse investors, while debt funds or a combination of the two are appropriate for conservative investors.
There are a plethora of financial alternatives to choose from. Some are appropriate for beginners, while others require more experience. Each type of investment has its own set of risks and rewards. Investors should consider each type of investment before deciding on an asset allocation that suits their goals.
Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.