5 Reasons to Invest in Mutual Funds

While considering investment in the mutual funds or equities, one usually hesitates to invest due to the lack of information thereby assuming it to be too complex. However, what you need to know is that when you invest in MFs, your money, along with that of other investors, is put into various investment vehicles, such as money market instruments, stocks, bonds and securities. A fund manager is responsible for looking after these investments, in order to ensure that investors get the best possible returns.

Types of MFs:

There are basically four types of MFs that you can choose from:

1.      Equity – which invests only in stocks

2.      Debt – which invests in fixed income securities

3.      Money Market – which invests in short term instruments, such as government securities

4.      Balanced – which invests in equity and debt, to bring you the best of both worlds, meaning a balance between risk and reward.

Investing in MFs can be very beneficial. Here are five reasons why.

1.     Professional Management and Guidance

A qualified portfolio manager is in charge of each mutual fund. S/he is backed by a qualified research team so that investors can gain from the experience and expertise of knowledgeable fund managers. The manager is responsible for deciding where the money should be invested such that the best returns can be targeted, while keeping risks as low as possible.

2.     Provides a Shield in Times of Inflation

The fund managers assess various options to ensure that your money is invested in a way that you receive inflation-adjusted returns. This is one thing that the money in your savings account or even in fixed deposits might not be able to give you.

3.     Liquidity

Compared to a fixed deposit, these funds are very liquid. Unlike FDs, MFs have no penalty on withdrawing the capital early. However, some MFs have an exit load, meaning that you can withdraw after a specific period of time. This is actually done to help you remain invested for a good enough period to gain returns.

4.     Convenient

Since we live in a tech savvy world, where the internet has taken over, online services have also enhanced mutual fund investments. Investors not have the choice of making transactions online, which makes choosing, investing and tracking and even withdrawing your investments very convenient. Further, introduction of features like Systematic Investment Plan calculator or the Goal calculator, etc., allow you to understand your requirements for investment better.

5.     Higher Return

Based on the term of investment, MFs can generate higher returns, as compared to many other investment options. This is because your money is invested across a range of diverse sectors and instruments.

Another key advantage is that you can easily transfer money from one fund to another. As your investment grows and your risk appetite increases, you can look for schemes that offer higher rewards, although they might entail higher risks.

Term plans: Understanding the essentials

We list the 5 salient points that you need to know about term insurance.

Buying a term plan has become par for the course for those who are sensitive to the current and future needs of their loved ones. Though all the relevant information is freely available, buying a term plan online can become a tricky business if you are not aware of some important facts.

If you are about to buy a term plan, you must be aware of 5 important features of the same:

1. Buying term insurance is very simple. Earlier generations of Indians were used to buying insurance from the insurance provider branch offices, or through brokers. But buying term plans is extremely simple today. You can buy a term plan online in minutes, after entering details in the application form provided on the insurance provider’s website. After selecting the right plan and filling all the details, you can proceed to pay for the policy using Net banking or NEFT. Most insurance companies also do not insist on medical tests to complete the purchase.
2. The tenure is a limited one. Most term policies are structured such that once the tenure is up, the plan is terminated at that point – there cannot be a renewal of the policy or an extension of the tenure at that point. A new policy must be purchased at this point. The premiums paid are not returned to the policy holder, nor is there a plan maturity benefit. It is important to know these features before you buy the term plan.
3. It provides ample coverage. The term insurance plan is extremely useful for the families of those who take these policies. This is because the term plan has a very high sum assured amount. Currently, term insurance has some of the highest sum assured amounts across the insurance spectrum. Thus, the policy corpus allows the family members to enjoy a comfortable life even in the policy holder’s absence.
4. Anyone can buy it. Another important benefit of buying a term plan is that the premium payments are extremely affordable. This makes it an attractive option for those who have recently started working, or those who face many demands on their monthly income. Even as one pays a low premium amount, one can get a high coverage. Meanwhile, one can buy a more expensive plan at a later date.
5. You can decide the mode of pay-out. Not all term plan providers pay a lump sum amount on plan termination. You can decide the mode and frequency of pay-out at the time of buying the term plan. You can opt for a lump sum payment, or you can choose a periodic payment term so that your family members receive regular income.

Riders you need to check while going for a term plan

So, you are planning to buy a term plan. But have you thought about adding a term rider to your plan? Certainly, buying a term insurance plan is a good decision as it protects your near-dear ones in case of an unwanted event. However, there are various untoward events which may result in financial loss. So, term riders give protection in such situations. In this way, cost effective riders let you make the most of your insurance protection plan.

What is a Rider?

Depending on his/her specific needs, one can customize term insurance plans with add-on/attachment called ‘rider’ to increase the benefits of the policy. One has to purchase this additional feature along with the basic policy. Term insurance is an insurance product that offers death benefit to the family of insured in case of sudden death of an insured person. When it comes to buying a term plan with extra benefits, people think it as it would be pricey. However, it is essential to understand term riders and complete information about it. Surely one will understand the importance of extra benefits that can strengthen an insurance plan just by paying few bucks more.

Let us have a look at a few of common riders that supplement the coverage in the policy.

• Critical Illness - Some diseases/health issues can make a person out of action temporarily or permanently. Due to such health complications, it becomes impossible for the affected person to continue work. The person also loses his earnings because these illnesses require higher medical expenses. Term riders prove to be beneficial here. By adding critical illness term rider, you can have protection from loss of earnings and financial burden of treatment. Stroke, Coronary artery bypass surgery, heart attack, paralysis, cancer, kidney failure, major organ transplant like pancreas, lung, heart or liver, etc. are some of the most common critical illnesses.
• Accidental Death Benefit Rider - This type of term rider offers additional sum assured to the nominee if the death of an insured person faces due to an accident. Remember, even if you don’t purchase this rider, you will get the basic sum assured. This term rider is only for the additional sum assured if the policyholder dies due to an accident.
• Premium Waiver Rider - as the name suggests the rider waives premium in case of disability. A person has to stop work after a disability. Thus, there are no earnings, and still one has to pay the insurance premium. However, by availing waiver of premium insurance term rider, the insured person does not need to pay insurance premiums further.

Different insurance companies offer various types of riders. One should look for a reliable and reputed insurance provider to avail the maximum benefits. Remember, although the term riders are beneficial and provide additional cover to your term insurance plan, it is essential to understand the concept and go through the policy brochure carefully. Invest a little time in finding more details about different riders and selecting appropriate riders that will prove beneficial for you and let you maximize your term insurance policy benefits.