Long term investment strategies are discussed in every household. The bread winners of the family have to plan for various expenses in life, including retirement, children’s education, healthcare, emergency situations, buying a house, etc. The first strategy that almost everyone follows is to make the most of their savings or investing in assets. However, these are age-old methods which may offer lower risk but the wealth doesn’t grow fast enough. The times are changing and so are the options for planning long-term investment. Are you amongst those who still follow the traditional approach for investment or are you a smart investor?
Long-Term Investment: What Does It Mean?
Although people use the term “long-term investment” to indicate their plans for securing the financial needs of their family, it is a common misconception that has been responsible for ineffective financial planning. In order to ensure financial security, insurance is the best option to pursue. However, if you want to make your money work and grow your wealth, then long-term investment strategies will help you define the best and most effective financial plan.
Ideally, any investment done for a period of more than 3 years is considered as a long term investment. Some people hold their investments for as long as 10 years. Successful trading strategies have always focused on making a move when the conditions are appropriate for the investment. This does not have the same implications for all. While some may require shorter sprints in terms of investments, while others may be required to hold on to their investments longer. It’s all about how much risk you are ready to bear.
Common Long Term Financial Objectives
There may be several reasons for planning long term investment. However, the common objectives usually include,
• Education of children
• Planning for marriage of children
• Buying a house, apartment, or plot
• Planning for retirement
A key motivating factor for planning long term investment is that all planned and unplanned expenses are made from the funds that you have. You do not have to pay interest or other charges, which would have been the case if you had sourced the funds as a loan. Still contemplating about making a long term investment?
Best Long-Term Investment Strategies That You Should Follow In 2019
If you have not started planning for long term investment, you should do it now without wasting any more time. For those who have already made investments, this is the time to think about taking another look at your strategy.
Check out the following long term strategies that will help you make better decisions with respect to your finances.
• Open a PPF Account
One of the most traditional long term investment strategies is public provident fund. You must have heard the elders in the house talk about their pension schemes. PPF the most tax efficient and one of the safest options to invest in. There is no risk in this investment and fixed return is assured at maturity. As per statistics, the PPF interest rate for Q1 of 2019-20 is 8% p.a.
When it comes to PPF, you would have to wait for 15 years (which happens to be the lock-in period) before the funds can be withdrawn. Partial withdrawal is permitted in the 5th year but it is subject to certain conditions. You can claim a deduction U/s 80 C of Income Tax act, for contribution made towards PPF up to a maximum of Rs.1.50 lakhs.
• Invest in Gold
If you have been around elders in the house, you would have realized that their concept of investing was most focused on purchasing gold (in the form of gold coins, biscuits, or ornaments). In the current scenario, one has the option to invest in gold through mechanisms like Gold ETFs, Gold Mutual funds, Gold Deposit Scheme etc. Despite the fluctuations in the price of gold, people still consider it as a lucrative investment option. The best way to make the most out of your gold investment is to analyse the demand and supply in the market, and purchase gold when the time is just right.
• Consider Investing in Real Estate
Real estate investment is another traditional and popular investment strategy. One can invest in a house or land for the purpose of personal use or giving it on lease. In either case, the long term benefits from these investments are quite beneficial. However, it is quintessential that the investor remains patient and makes the move when the conditions are perfect. Property valuations may change overnight or it may take years for the value to appreciate considerably.
Real estate investments require substantial funds and more than often, the returns are not earned immediately. Moreover, there are quite a few scammers who trap people with lucrative deals but end up usurping their money and leaving them with nothing. Make sure that you make multiple analyses and conduct various checks before investing in any property.
• Invest in Mutual Funds
When it comes to investments, people have become quite familiar with mutual funds, especially due to the extensive marketing done by various service providers. Brands like HDFC, ICICI and Reliance have further popularized mutual fund investments. The companies that manage these funds are called AMCs (Asset Management Companies) and they are regulated by SEBI. Hence, there is a certain trust in these services with respect to compliance to guidelines and the way investment advice is provided.
It is possible to withdraw funds from mutual fund investments in shorter durations. However, it is advised that long term investment should be maintained for better returns. One should also be aware of the various mutual funds available in order to select the most suitable type. For example, equity mutual funds are riskier than debt mutual funds. However, if you have the capacity to bear that risk, then you can go for an equity mutual fund.
• Become a Stock Market Investor
You might not have heard many people discuss the possibilities of stock market investments being considered as a long term investment. But it is, in fact, a very good option if the investment is managed through proper approach. Investing through correct strategy will not only add to your financial assets but you can enjoy tax benefits as well. But, be cautious of the manner in which you make the investments. The stock market provides opportunities for massive benefits but also causes losses when the market dynamics are not considered before making a move.
This is why you should consider consulting with an investment advisor before investing in the stock market. There is a certain theme based trading strategy (suggested by a prominent investment advisor) which is really suitable for people looking for long term investments in the stock market. This strategy includes several themes and approaches which might be suitable for certain segments. Based on your preferred investment style, you can select a particular strategy and plan your investments based on the recommendations provided by the experts.
Not only does this help you to manage risk better, but you will have recommendations based on extensive research, and this makes it easier to make decisions with respect to stock market investments.
A Word Of Advice - Never Work on Assumptions
Whether you are investing in gold or in stock market, you should never base your decisions on assumptions. If you are more confident about weather reports provided by the weather department than the assumption of expecting a particular weather condition, then you should also not base your financial decisions on assumptions.
Always make it a practice to consult with people who have expertise in the investments that you are interested in. Cross reference their suggestions with market statistics, historic data, and experiences of people who have made similar investments, to arrive at a proper conclusion. You should always consult with an investment advisor to make sure that your actions are based on data driven information.