Choosing a monthly savings plan can be quite confusing, considering the wide range of savings and investment plans available in the market. Also, with the increasing expenses and the increase in demand for quality living, finding a money savings plan that aligns with your needs is essential. A monthly savings plan can be aimed at long-term or short-term investments, depending on your financial goals.
But here are a few factors that you must consider before choosing a monthly savings plan while aligning with your risk appetite.
Understanding a monthly investment plan and its features
To invest in a monthly investment plan, you would need to invest a certain sum every month on which you receive a monthly interest or dividend. The features of a monthly investment plan are:
- Suits individuals with low-risk appetite: Monthly plans are suitable for safe investors who do not want to take risks. The returns are low as compared to other investment options.
- Less volatile returns: These funds are less volatile with little effect from market fluctuations. Hence, the interests earned are very steady.
- Debt-focused plans: The monthly investment plans are mostly debt funds or government-backed plans where almost 70-80 percent of funds are invested in debt instruments.
- No cap on investment: There isn’t any upper limit on the investment, and you can invest any sum to meet your financial goals.
- No restrictions on entry and exit: There aren’t any entry restrictions, and you can exit anytime with a marginal charge of 1%.
After knowing the features, here are a few factors you need to consider while investing in Monthly investment plans.
Decide on your goals: Having a list of short-term objectives will clearly define your requirements and the amount you would need to spend on your investment. Also, defining your goals would help you identify the products that best suit your objectives.
Strike a balance between risks and rewards– It is necessary to understand your risk profile and the extent to which you are planning to bear the risks. Weigh the pros and cons of taking a certain amount of risk and how much returns you would require to fulfil your goals.
Liquidity: Choosing funds that can easily be liquidated or, in other words, converted into cash easily is necessary. You may need cash to fund any emergency situation.
Tax benefits: Various plans offer tax benefits under Section 80C. Moreover, investing in health insurance plans and life insurance plans not only provides you with tax benefits, but the former offers health cover, and the latter provides financial stability to the family in the absence of the primary bread earner.
Review your fund performance: Reviewing your fund performance monthly or at least half-yearly helps you understand the scope to diversify your portfolio and increase returns.
Check the history of the funds: Checking the fund’s history and talking to your investor before investing helps you understand the weaknesses and strengths of particular funds. It also helps to analyse the market and anticipate expected returns. Few funds with stable returns can be reviewed basis feedback from the previous investors.
Remember, every individual’s needs are different, and so is their choice of funds. Investing in funds should solely depend upon your needs and not what others are investing in.
Visit here to know more about Savings Plan: https://www.kotaklife.com/online-plans/savings-plan