Now, you already know what traditional plans are. You have observed your grandpa lose his voice vouching for them. But little does grandpa know that market-linked policies are slowly becoming a favourite with investors. And why not? There are plenty good reasons for market-linked investments to be a valid choice:
- They fetch greater returns: although long-term in nature, market-linked policies offer higher returns than traditional plans. Unlike them offering just 8-9 %, market-linked policies like ELSS, MFs and ULPPs offer returns as high as 25 %. Moreover, debt funds protect your money when equity markets plunge, whereas equity funds ensure that you earn higher returns than debt instruments when markets plunge. As evident, you stand to benefit all the way.
- They beat inflation: traditional plans offer returns on fixed interest rates ranging from 8-9.5 %, as per the rates applicable at the time of investing. This doesn't help in beating inflation. Whereas, market-linked policies can beat inflation and make your money grow.
- Tax benefits: market-linked policies like ELSS and pension funds offer tax savings. Also, in the case of ELSS, dividends earned during investment period are tax free, and sale of ELSS units are not subject to tax as they are considered long-term monetary gains.
- Invest when you want: market-linked policies let you invest monies in lump sum or at periodic intervals, which is an advantage over FDs. Systematic investment helps investors take advantage of market volatilities, thus yielding favourable returns.
- Shorter lock-in period: the lock-in period of ELSS and ULPP are 3 and 5 years respectively. FD or PPF, unlike market-linked policies have a longer lock-in period.
- Hassle-free: you don't have to be a qualified authority on stock market and portfolio management for investing in market-linked policies like mutual funds or ELSS. The policy provider has professional fund managers to handle your portfolio and ensure you earn maximum.
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