We are living in a world where everything is getting increasingly expensive, be it food, real estate or fuel prices. As a result, most of us believe that we have barely enough money to stay afloat, let alone putting some aside for investing. In reality; however, all we do is overthink when it comes to making investments. If we look closely at the money markets, we will find several financial products that are cost-effective, and yet prove to be excellent long-term wealth-building instruments. If you’re still not sure, here are five financial products that have got cheaper with time yet offer high returns on investment.
- Term Insurance Plans
Term insurance plans are perhaps the most affordable insurance investments available today. Essentially a pure life insurance product, these plans offer comprehensive life cover at meagre premium rates. Therefore, several reputable insurers have introduced their specific term plans in recent years. These term plans are relatively cheaper than other life insurance products. Further, major players in the insurance sector such as Max Life insurance are offering a variety of benefits with these plans, including critical illness cover, flexible premium payment duration and tax-exempted death benefits. For example, a term cover of Rs 50 lakhs, which earlier cost Rs. 15,000 per annum, can now be purchased at the cost of Rs 5,000 per annum only.
In the year 2010, under the directives of Insurance Regulatory and Development Authority of India (IRDAI), all life insurance companies began offering Unit-Linked Insurance Plans (ULIPs) as a low-cost investment option. Under the new directions, insurers are now allowed to levy ULIP charges up to 3 percent on the policy during the lock-in period, after which the costs are reduced during the entire tenure of the policy. Moreover, IRDAI increased insurance cover on ULIPS to 10 times of the first-year premium compared to the five-year premium and had raised the lock-in period (to 5 years). Along with term insurance; therefore, ULIP is yet another low-cost financial product that has gotten more affordable with time.
- Direct Equity
Often, people are wary of investing in stocks due to the volatile nature of money markets, no guarantee of returns and exorbitant agent commissions. Agreed, not everyone is cut out to handle money-market investments on their own. However, directly investing in equities is neither complicated nor it is unyielding. Instead, Direct Equity is a cost-effective option for individuals who wish to achieve higher than inflation-adjusted returns in the long term. Investing in direct equities allows you to invest in companies that have an aggressive, equal-weighted portfolio instead of having a market-weighed one. This, in turn, helps you get higher returns on a consolidated basis.
Moreover, with the recent circular circulated by the Securities and Exchange Board of India’s (SEBI) on reviewing and bringing transparency to the total expense ratio (TER) structure, fund houses now have to follow the revised regulatory diktat of booking all scheme-related expenses in individual schemes. As a result, directly investing in equity has gotten marginally cheaper in recent years.
- Mutual Funds
There has been an exponential rise in investment into mutual funds since the entry charge on these instruments was abolished by the Securities and Exchange Board of India (SEBI). Earlier the charges were levied to meet expenses on distributor commission. Since there are no more charges, investors don’t have to pay fee anymore to an agent or distributor, which in turn, has made mutual fund marginally cheaper and an exciting market-linked investment tool to put money into.
- Bank Fixed Deposit
Also known as Fixed Deposit or FD, this is the cheapest and relatively risk-free investment option. Many individuals today have an FD account, which yields high interest on a yearly basis. As an additional benefit, each depositor has insured up to a maximum of Rs. 1 lakh for both principal and interest amount under the Deposit Insurance and Credit Guarantee Corporation (DICGC).
With these effective investment options becoming cheaper and readily available, you can focus on maximising your savings rather than holding on to them, believing that investments, in general, are dangerous. While costings of equity and mutual funds have got marginally cheaper in recent years, products like ULIPs and term insurance have shown a tremendous reduction in their costs to sit at the very top of the list of most affordable investment products.
Hence, if you are looking forward to purchasing life insurance products, you can proceed to buy a policy online. Reputable insurers are now providing affordable term plans and ULIPs to best suit your needs. However, while making the purchase, don’t forget to compare online term insurance and ULIPs to avail the lowest possible rate of premium.
Be diligent in your approach, research thoroughly and invest in the right instrument!