Often you might have heard financial advisors recommending investing in long-term investments to meet your long-term goals. But what exactly are long-term investments and what all investment options fall under these types of investment? This article aims to act as a long-term investment guide.
What are long-term investments?
Long-term investments are non-current assets that are held for a duration of more than a year. Stocks, real estate, retirement plans, or bonds are some mediums that can be used to make an investment to achieve long-term financial goals.
Long-term investments: Options
Following are some of the long-term investment options available to an investor:
1. Equity mutual funds
Equity funds are one of the most popular long-term investment options. These mutual funds are market-linked investments that largely devote their assets in the stocks of several companies. As per the protocols laid down by the SEBI (Securities and Exchange Board of India), equity mutual funds are mandated to invest a minimum of 65% of their total assets in equity and equity-related securities. These long-term investment options have the potential to deliver substantial returns over a prolonged period by investing in varied companies spread across different market capitalisations and sectors.
2. Equity-Linked Savings Scheme (ELSS)
An investor looking to save tax can invest in these mutual funds. ELSS funds are a type of mutual funds that invest a majority of their portfolio, a minimum of 80% of their assets in equity and equity-related instruments. These mutual funds offer investors with the tax deduction of up to Rs 1.5 lac under section 80C of the Income Tax Act, 1961. An investor can save up to Rs 46,800 provided that they belong to the highest tax slab. These tax saving mutual funds have a lock-in period of 3 years. Historically, ELSS funds have offered investors with double-digit returns when invested for a long duration. Thus, ELSS tax saving mutual funds provide the dual benefits of capital appreciation and tax-saving attributes.
3. Public Provident Fund (PPF)
These are one of the widely availed long-term investment options in India. PPF schemes are backed by the government of India. They provide fixed and guaranteed returns to investors. These investments have a lock in period of 15 years. Just like ELSS funds, PPF schemes are one of the Section 80C investments and thus offer tax deduction of up to Rs 1.5 lac.
4. National Pension Scheme (NPS)
Managed by the Pension Fund Regulatory and Development Authority (PFRDA), NPS is a government-sponsored savings scheme offering pension solutions to individuals. This savings scheme is ideal for investors looking to meet their retirement needs. It is a mix of bonds, government securities, liquid funds, equities, among others. NPS investments can also be claimed as a tax deduction under Section 80C.
Now, that you are well aware of some of the long-term investment options, what are you waiting for? Invest in mutual funds today to achieve your long-term financial goals. Just make sure that your mutual fund investments align with your financial goals, risk profile, and investment horizon. Happy investing!