When you talk about investing your hard-earned money for a safe and secured financial future for you and your loved ones, it is important to make sure that you park your money in the right investment instruments. Fortunately, even amidst the second wave of the ongoing Covid-19 pandemic, the current investment market in India is not gloomy. However, while planning to invest your money in any investment product, you need to be patient and practice perseverance to reap the benefits of your investments. The secret ingredient to achieving investing success is being patient. Earning massive returns by way of a windfall gain is not always possible for everyone. Often it is observed that most investors juggle their allocations, as they are unsure about where to invest their money. Unfortunately, in this quest, the investment decisions become an amalgamation of risk appetite, a pinch of herd mentality, and immense emotions that often stroll from severe exuberance to tepid pessimism.

Investors looking for investment avenues that promise high returns without the risk of losing principal money must consider investing their money in Capital Guarantee (CG) Plans. In the last few months, most customers have been on the lookout for such investment plans where they grow their corpus in a few years with little or no risk to the capital invested. Capital Guarantee Plans are a mix of traditional and market-linked products, offering customers an ideal combination of high-return and low-risk investment products. When you invest your money in Capital Guarantee Products, the capital is divided in a ratio of 60:40, wherein 60 per cent of the capital goes into traditional products and 40 per cent capital is invested in market-linked plans – ULIPs. The ratio of traditional products and ULIPs may vary from plan to plan. Investing your money with the equity fund through market-linked products keeps you on a favourable run.

You may choose Capital Guarantee Products over other market-linked investment products as with CG plans you as you can have both - keep your Capital secured and earn a very good appreciation on your investment through ULIPs. Diversifying your investment portfolio can help you expect a better rate of return consistently. To earn an optimal rate of returns on your investments do include CG plans in your investment portfolio. Apart from giving customers the option of receiving the maturity amount as a lump sum, the insurers have also come up with an income variant of Capital Guarantee plans wherein the customers apart from receiving maturity lump sum also receive the returns as monthly/annual income for the entire policy term - up to a maximum of 25-years. The income option also caters to the early liquidity option that most investment products lack. With CG plans, customers also enjoy life cover up to 120 times of the monthly premium, paid out to dependents/nominee as a lump sum upon the untimely demise of the policyholder.

Another important investment product to add to your financial portfolio considering the current market situation is Guaranteed Return Plans. With the rate of interest on bank fixed deposits falling drastically in the 8 years – from 8.5 per cent in 2014 to 5.4 per cent in 2021 – it is affirmative to look for avenues that offer better returns and allow you to lock in the interest rates not just for 5 or 6 years, but also for a maximum of 45-years – catering to re-investment risks. These plans promise maximum IRR - the annual rate of growth investment – ranging between 5.5 per cent - 6 per cent. Ideally, people who hold their investments for a longer period earn more returns than those who are fickle with their investments. This holds true for all classes of investors.

You may choose to invest in guaranteed return plans if you are still in the accumulation stage and wish to build a surplus corpus to meet one-time expenses like kid’s education and marriage. Similarly, these plans are also favourable for people looking to build a significant corpus for a robust retirement. The best part is that, unlike bank fixed deposits, returns earned on guaranteed return plans are completely tax-free under section 10(10D) of the Income Tax Act. Fortunately, insurers have now come up with no-surrender charges products under the guaranteed return products category wherein the customers do not need to pay any surrender value in the first five years and can easily liquidate the policy.

Take Note

While one of the above-mentioned investment instruments is a combination of market-linked and traditional plans, the other option is just traditional products. Market-linked investments offer the potential of high returns and guaranteed plans help you to lock in the rate of interest for a maximum of 45-years – catering to re-investment risks. Both these plans play an integral role in the process of wealth creation for defined life goals. For long-term goals, it is important to make the best use of both worlds. Have a judicious mix of investments in your portfolio, keeping risk, taxation, and time horizon in mind. Before anything and everything else, it is important that you pay yourself first. This means putting some part of your earnings into an investment before paying for expenses that entice you.

This article was authored by the Head of Investments, Policybazaar.com

DISCLAIMER: Views expressed are the author's own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.