The one thing related to finances that most Indians learn from an early age is saving. Savings helps us achieve our short-term and long-term objectives. This is the reason it is advisable to invest in a savings plan. Common men usually take out a small portion of their income regularly and invest in the best savings plan.
But there are some factors that you can consider before investing in a saving plan in India.
Factors to Consider Before Choosing a Savings Plan
Here are the factors to consider when choosing a savings plan:
- Risk tolerance and profile
In order to buy online saving plans, the first factor is to decide the capacity of risk that a person is willing to take. The two important points that can help you determine risk tolerance are age and personal inclinations. The younger you are, the higher the risk tolerance can be. Consequently, the higher the risk, the greater the returns.
Moreover, it also depends upon the type of investor you are, i.e., risk-averse or risk-seeking. A risk-averse investor is one who takes the least risk even if there are lower returns and might opt for an FD instead of a savings plan. On the other hand, a risk-seeking investor takes risks aggressively and can also opt for a stock market investment that has high risk and can fetch higher returns rather than a guaranteed savings plan.
After identifying the risk tolerance and profile, one can check whether it matches his/her financial goals or not.
- Time period of investment
Another important factor when choosing a guaranteed savings plan is the time period of investment. There are various savings plans that provide you with a medium to long-term investment horizon along with additional benefits.
For example, some plans come with the benefit of guaranteed returns, while some other plans help you build your corpus with a small amount of investment on a regular basis. Basically, it is better to compare the different plans available on the basis of the benefit that you will receive over the term of the investment chosen.
- Financial Objectives
Different investors have different financial goals. These financial goals also vary with the period of investment. The important thing here is to identify the goal of your investment. For example, some people want tax-saving investments, while some want to create a corpus for retirement or a child’s education, marriage, etc. Therefore, it is important to have a clear picture of your financial objectives before opting for a savings plan.
For instance, Tata AIA life insurance provides such a saving plan wherein you can meet your objectives with your regular income and even receive the premium paid at the end of your income period.
- Flexibility of plan
The next important factor is to understand the flexibility of the plan. It is advisable to choose a flexible plan if you want to invest for a long time period. By opting for a more flexible plan in the long term, one can withdraw the invested amount in case of any emergencies occurring in the short term. It is also advisable to read the terms and conditions of the savings plan before you sign the contract.
- Rates of the savings plan
The price of the plan is also an important factor when you are going to buy online saving plans. It is crucial to know all the charges associated with the savings plan you are opting for. It is good to look for a plan in which there are minimum charges, flexible withdrawal terms, etc.
If a person gives most of his earnings in the form of charges, then capital accumulation will automatically reduce. Hence, a comparison of the different price options available is a crucial step in order to reap maximum benefits out of a plan.
A savings plan provides you with tax benefits, flexibility, financial coverage, etc. There are a few more factors that can also be considered, like the inflation rate, tracking the performance of the plan, etc. Once you have analysed all the factors, you can make an informed investment decision.