Mutual fund investments are among the best forced investment options
The most popular forced savings vehicle on this planet is house
Investments mean asset building that eventually leads to a stable financial life. And it becomes a reality when you have “no option but to invest.” There are various options like starting a SIP in Mutual Fund, taking a House Loan, opting for a Child Plan, taking Education Loan, opening a Recurring Deposit, buying a Life Insurance Policy that force you to keep paying premium or installment over the years/months to build your wealth by “force.”
Mutual fund investments are among the best forced investment options with the SIP option to build your financial life and meet your financial goals in the long run. Since the SIP amount set by you will be deducted each month on a fixed date, it will forcibly set aside that much for your investment every month.
Here the automation does the miracle as you cannot change your mind, what one often does when involved manually. Once you start investing, you will hardly want to close it until you get some positive return on your SIP installment. Thus it will result in long-term investment routine since Mutual Funds need to be invested long-term to earn good returns.
Recurring Deposits (RD) is another option similar to SIP to start a forced investment habit though returns are not that handsome. In Recurring deposits, a fixed amount is deducted from your account every month and deposited into the RD account. You earn interest on your deposited amount that is equal to the interest earned on FDs.
RD is a reliable product where returns are guaranteed and stable, and you can meet your short term goals in 1-3 years. This forced saving makes you save a fixed amount every month and ultimately build saving habits.
The most popular forced savings vehicle on this planet is house. Usually, property or a house’s life is much longer, and property prices rise in the long run. Thus it is a good investment. Even if you do not stay in that house, you can still generate income through rent.
Home Loan helps to build an asset that is your property. As you have EMIs to pay or pay into the mortgage every year you typically get while buying a house, make sure you manage those amount anyhow and automatically save for it. At the end of your EMIs, the satisfaction of owning your asset through religious savings is motivation in itself. Hopefully, you can sell for a higher price than whatever you put into the mortgage or pain in EMIs.
If you have kids, you can start a child plan. It is an excellent forced investment for you and your kid’s financial future that also organizes your finances. The good thing about the child plans is that they benefit that if anything happens to you during the tenure, your company will pay the remaining premium.
In child plans, besides the sum assured you get in case of untimely death, it secures your child’s future even in your absence. You need to continue paying premium throughout the tenure, and there are penalties if you fail. Since it is the emotional part that you are saving for your child’s future, you stick to the investment timely.
When you lack money to continue your studies, an education loan is the only option that you have to pay back later once you get a job. And you have to pay for this EMI; there is no escape from it. Whatever may be the earning, you will be forced to pay away with the EMI part, and the rest money will be there for you to “enjoy.” It is one of the forced investment options, and here you are investing in building your career and settling your life.
Life Insurance Policy
Life insurance is a financial product that provides financial protection for people or organizations you care for in the event of your death. When you choose to buy a life insurance policy, you are “forced” into putting money into it. Here your cash value has a guaranteed minimum growth rate, which makes life insurance a “safe” investment. If you invest money into a life policy for say thirty years, at that point, you’ll have an asset that you can use to fund your retirement or any other life goals.
Often we think car loan does not yield any benefit as its value is depreciated over time. But, when you take a car loan and use it as an income generator, by renting it to people or using it as a transport service, the car loan is generating income for you.
In each of the above case, you may have noticed that forced investment helps to give a good shape to your financial life. Talk to a financial advisor who can show you the right path to make a forced investment through automation that meet your life goals easily.
That’s why Comparte Investment team asks do you have “Nivesh Ki Aadat”.
(About Author: Arindom is a professional writer, editor, blogger and a member of the International Association of Professional Writers and Editors, New York. A management postgraduate in finance with extensive industry exposure, he is associated with many reputed global online magazines and publications as a regular contributor. He loves to help his readers writing highly informative and well-researched investment-related content to make informed decisions.
The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of organization)