A guide for forming your own long term investment strategy

One of the most common questions that people ask is what are the good long term investment options? While everyone wants to be become good at selecting the right long term investment options there is still a lot of confusion around the subject. For short term gains you can just search for a 24-carat gold rate today in Kanpur or Agra and then invest a small amount in digital gold. But long term investment requires accuracy and commitment. However, if it’s so simple why not just stick to short term investments. Let’s find out. 

Long term vs short term investments?

It is important to understand that long term investments will almost always beat short term investments hands down. There are numerous benefits of long term investments:

1. Compounding

Compounding happens when you earn interest on your principal amount and then, later on, earn interest on your principal and interest amount. This way you are able to build a corpus over a period of time. This is why many people prefer bank fixed deposits as the compound interest rate on these is quite high.

2. Tax efficiency

Tax-efficient products like certain mutual fund schemes can be good long term investment options. These products offer indexation benefits and hence prove to be quite tax-efficient in the long run.

3. Commitment

When you make a long term investment, you have to stick with it even if you face financial crunches in between. This helps you create a disciplined approach toward investing which can help you manage your finances better in the long run.

So clearly long term investments are the best way to earn high returns. As you invest money for a long period, it will acquire more value than what you invested. You can invest in a wide range of opportunities like stocks, bonds and other securities. These investments can be held for a minimum of 3 years or more.

Experts say that long term investments are the best way to grow your wealth. So what are some of the best long term investment options? Let’s find out: Investment in gold

1. Gold

Gold remains one of the safest investment options so far as long term investments are concerned since it offers a hedge against inflation and a safe haven in times of economic uncertainty. An individual can invest in gold through physical gold or through exchange-traded funds (ETFs). Physical gold is by far more popular since the investor gets to own actual gold. In the case of ETFs, investors only get to buy units and not physical gold. Also, there are other expenses involved in ETFs such as Annual Management Charge (AMC) and tracking error risk. However, ETFs come with their own set of benefits like convenience and ease of ensuring security and liquidity. For ETF all you need to do is make the purchase and then keep track of the gold rate today in Karnataka or whichever city you want to keep a check on how your investments are doing.

2. Public Provident Fund (PPF)

If you want to invest in debt instruments with tax benefits then PPF is a good long-term investment option for you. It is also considered a retirement planning tool as it offers tax benefits under Section 80C of the Income Tax Act, 1961. The minimum amount of investment per year is Rs 500 and the maximum amount is Rs 3,00,000. The lock-in period for PPF is 15 years which cannot be extended or withdrawn prematurely except in special circumstances like medical emergencies among others. In order to open a PPF account, you need to visit your nearest bank or post office with your KYC documents such as PAN Card and Aadhar Card. The account has to be opened in an individual’s name and no joint accounts are allowed under this scheme.

3. Real estate investments

These are good long term investments but involve high risks as well. Real estate prices go up and down depending on the market conditions and it takes a good amount of time to find a buyer in case you want to sell your property. This is a good long term investment option like mutual funds.

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