Long-term investing is all about investing in the right investment options and waiting it out patiently to redeem them to meet your long-term financial goals. These investment options aim to achieve distant future goals such as buying a house, funding for one’s retirement, child’s higher education or their marriage, etc. This article aims to act as an investment guide in long-term mutual funds.
What are long term investments?
Long-term investments are non-current assets that are held for a period of one year or more. Bonds, stocks, real estate, savings or retirement plans are some mediums through which an investor can make long-term mutual funds investment plans. Long-term investment can be spotted on the asset side of a company’s balance sheet. They are used to create other income apart from the normal operations of a company.
Different types of investment options in long term investments
Following are some of the types of investment options offered under long-term investments to investors:
- Equity mutual funds
Equity mutual funds are must-have investment options for investors looking to invest in long term funds. These funds are market-linked securities that predominantly invest in equity stocks. As per the current SEBI’s (Securities and Exchange Board of India) regularisations, equity funds are required to invest at least 65% of their total assets in equity and equity-related securities. These mutual funds have the potential to deliver significant returns by investing in companies of different market capitalisation. If you are looking for tax benefits, you might consider investing in ELSS funds (equity-linked savings scheme).
- Public Provident Fund (PPF)
PPF is one of the most secured and widely availed investment options in India. It is a government-backed tax saving scheme that offers a fixed rate of interest. As PPF accounts have a maturity period of 15 years, the power of compounding is huge. PPF schemes fall under the EEE (exempt-exempt-exempt category). This means that the principal amount, interest earned, and the maturity amount, all are exempt from tax. Investments under PPF schemes also fall under Section 80C of the IT Act.
- National Pension Scheme (NPS)
NPS is a government-sponsored scheme that offers pension solutions to investors. It is managed by the Pension Fund Regulatory and Development Authority (PFRDA). This scheme was designed to meet the retirement needs of investors. It is a mix of bonds, equities, government securities, liquid funds, among others. Post-retirement, investors can withdraw a part of the corpus in lumpsum. The remaining amount can be received as a monthly payment. Investments under NPS schemes are eligible for a tax deduction of up to Rs1.5 lac u/s 80C.
Long term investing requires adopting the right strategies, consistency, patience, and discipline. It requires regular monitoring of the investment portfolio. Experts often advise investors to start investing early in their life. This is because the longer the period of investment, the higher is the probability of earning significant returns, thanks to the power of compounding. What’s more, when you invest for a longer duration, the market downturns and volatilities seem minor. Happy investing!