Stock markets have been in turbulent waters for a while now, keeping investors on the tenterhooks about their funds. While factors like the US inflation, Fed rate hike and Russia-Ukraine geopolitical unrest are key contributors, domestic triggers like WPI inflation and fuel prices have also had a part to play. Investors are busy evaluating financial decisions that help minimise the risk factor and maximise their returns.
Looking at the current scenario, it seems like the markets are likely to remain this way, at least for now. During this instability, the need for resilient investment plans that secure the money and provide guaranteed returns has surfaced again. One such investment strategy is allocating funds into a guaranteed return plan that not only provides a fixed rate of return but also higher financial security with its insurance component. Let’s deep dive into the features of this plan and how they can help investors navigate through current market volatility.
Safer investment bet
There’s no scarcity of investors in the Indian market who want to evade any kind of loss. Most of them fundamentally want to achieve better returns on investments but not bear any risk. Guaranteed return plans emerge as the best option in this case. Not just for the risk-averse, but the risk-agnostic nature of these plans makes them ideal for every kind of investor. These plans come with a three-fold benefit of keeping your original investment intact, getting a guaranteed rate of returns and providing the financial safety net for your dependents. Irrespective of any kind of fluctuations, these plans keep your money safe and unaffected by market conditions and lock your return rate at the time of investment. At a time when the pandemic still continues to pose a threat not just to markets but also to life and health, the insurance element in the plan promises financial security to one’s dependents, in case of policyholder’s unfortunate demise.
Higher, tax-free returns
The primary objective of any investor – even if they are risk-averse – is to reap greater returns on investment. For this reason, FD used to be a popular option for a generation of investors who were looking at locking their money for a long time and earning as high as 7-9% returns with zero risk. However, now that FDs’ rate of return ranges between 4% and 5%, the investor’s money can in fact fetch real negative interest, considering the growing inflation.
On the other hand, guaranteed return plans offer the same security but at a higher rate of return. For instance, Bajaj Allianz’s Assured Wealth Goal plan offers up to a 6.46% rate of interest on an annual premium of Rs 5 lakh for 10 years, subject to terms and conditions. Similarly, with Max Life’s Smart Wealth Plan, one can earn up to 6.20% interest on investment. To top it off, the return you earn is completely tax-free, which is taxable in the case of FD. This automatically makes your income higher.
Also read: Cash Crunch: Need to dip into your investments? Here’s how to manage withdrawals
Greater flexibility
Though guaranteed return plans are most beneficial for long-term investment, now they are offering a higher degree of flexibility for the short-term too. Investors can lock their money in these plans for as long as 45 years. However, in case they want to surrender the policy sooner, they can do so without any surrender charges. Plans like Tata AIA’s Fortune Guarantee Plus let you get an income for 45 years starting from the 6th year with a tax-free return rate of around 5.8%. In case you wish to surrender the policy, you are eligible to do so and get the original amount within the first five years without any surrender charges. If you wish to surrender during the income period, you will receive your money at a discounted rate of 7.5% which is still profitable given the income you get.
Those who continue with the policy can choose to opt for a lump sum benefit or recurring income plan as per their preference. These benefits make guaranteed return plans an attractive and popular choice suiting every investor’s palette. If you’re looking to park your money right amid the ongoing volatility, these plans should be a part of your portfolio. Remember to comb through your policy’s fine print and check with your insurer to know every aspect of your policy.
(By Vivek Jain, Head-Investments, Policybazaar.com)
Disclaimer: These are the personal views of the author. Readers are advised to consult their financial planner before making any investment.