5 Things to Consider before Investing in Saving Schemes

5 Things to Consider before Investing in Saving Schemes

Investments can be an overwhelming affair, especially for beginners. Someone about to invest for the first time in their life may get confused with the extraordinary number of options available to them.

There are many advantages when one invests in best saving options, but there’s also a high degree of research necessary. Hasty investments without a proper plan are the surest way to financial disaster. You must consider some essential aspects of investment plans before you zero in on one.

5 Things to Consider before Investing in Saving Schemes –

     1. Your Objective

There can be any number of purposes to go for an investment plan. You might be saving funds for retirement, or to start a new business, or for personal reasons like marriages or education plans. The objective of your financial investment determines a lot of crucial aspects of the type of plan you should invest in.

For example, if you want to save for your retirement, a Personal Provident Fund (PPF) can be a suitable and reliable choice. It’s a long-term government-backed investment plan which is also tax-free. It has a tenor of 15 years which can be extended by 5 years.

     2. Your Age

As far as investments are concerned, being young is a decisive advantage. A young individual typically has a higher risk tolerance, fewer responsibilities and more time to invest long-term for high returns. As one gets older, you have to consider a lot more aspects like retirement planning, familial obligations etc.

     3. Flexibility of Withdrawal

There is always an off chance that you’ll need to access your investment before it matures. Emergencies may occur without notice. It’s always better to invest in monthly income scheme or saving schemes with flexible terms which allow you to withdraw your money.

You may avoid schemes which make with long lock-in periods or hefty fees for premature withdrawals. If you must go for such policies, ask your plan provider for the details of pre-withdrawals, charges, etc.

If a lot of your money is stuck on such inflexible investments and you require cash immediately for an emergency, you may opt for short-term advances such as personal loans.

Financial institutions like Bajaj Finserv offer Personal Loans for many purposes such as funding education, marriages, medical emergencies, etc. with no end-user restrictions and attractive terms.

Bajaj Finserv also brings you pre-approved offers for personal loans, home loan, business loans, and multiple other financial products. These offers simplify the process of availing your loan and help you save on time. All you need to do is share a few essential details and check your pre-approved offer.

     4. Interest Rates

There are a high number of options available to an investor in today’s day and age. For the maximization of your resources, you should choose one that offers the highest interest rates. However, higher ROI is generally linked to higher risk as well. The best investors find a balance between the two and invest accordingly.

Employee Provident Fund (EPF), Public Provident Fund (PPF) and National Savings Certificates (NSC) are good choices in this regard. Both offer 7.9% or above interest rates. Since they are government backed, the risks are also quite low.

     5. The Amount of Time you can Invest In

An investment bears the best returns when one dedicates a significant portion of their time behind it. If you are willing to invest not just money but also time, you may consider individual shares. There is a higher element of risk in the share market, but there’s also a higher chance to get an increased ROI.

However, you may not have the time or inclination to take a hands-on approach.  In such cases, a fixed deposit is your safest choice. You may also consider saving schemes like Open Ended Investment Companies (OEIC) which pool together a lot of small investments and re-invest them on a diversified portfolio.

Most importantly, it is paramount that you understand the pros and cons of every saving scheme you can invest in. Only after a thorough understanding should you make a single decision about an investment. Half-cooked plans should be avoided at all costs when it comes to finances. Ideally, you should also have a diverse portfolio of investments, like a 60/40 to gain a higher ROI at the lowest possible risks.