3 Best Long Term Investment Plans for 2024

Long term investment plans help you plan for the future — be it your child’s university fees or their marriage. These plans span over five years or more, allowing you to garner high returns by mitigating the impact of temporary market fluctuations.

Investing in such instruments helps you prevent losses from short-term volatility, provides tax benefits, and helps with compounding. Compounding is like a snowball that gets bigger as you reinvest your earnings. It helps your investments grow over time. 

Now, that begs the question — which plan should you choose? You can choose from various long term investment plans, such as equity funds, Public Provident Funds (PPF), and more. If you’re looking for a concrete answer, continue reading! 

This article lists the three best long term investment plans you can opt for in 2024. Before deciding on your investment plan, let’s begin by discussing factors you must consider for an ideal long term investment plan.

How To Choose The Best Long Term Investment Plan?

The best long term investment plan for you depends on your goals — your child’s education/marriage, wealth accumulation, or other goals for the future. There are multiple other factors to consider, as discussed below:

Also Read: How to Save Up for Your Child’s Education Abroad

• Financial goals: Understanding your investment objectives can help you choose the right vehicle. Start by determining how much you need, when, and what it means to you. Also, decide whether or not you want steady returns, capital appreciation, or both. 
• Risk tolerance: Are you comfortable with high risks that could yield high returns? Or do you prefer low risks, even if it means low returns? To determine your risk tolerance, decide on your financial objective, time horizon, and amount of money you want to invest. 
• Asset allocation: Asset allocation is like planning your route on the financial map; it depends on your risk tolerance and goals. For example, consider equity investments if you have a higher risk tolerance. But, if you’re risk-averse, a mix of debt and equity funds might be a better fit.  
• Historical performance: Understanding how the stock has performed in the past may provide insights into potential future movements. Plus, it can help you gauge the stock’s risk profile. Based on these insights, consider whether that’s an investment you want to make. Scour websites like the markets regulator SEBI and mutual funds regulator AMFI for historical performances of different asset classes. 
• Tax considerations: Taxation affects the profitability of the investment, so pay attention to this. Usually, you have to pay a 15% tax for assets held for less than a year, while assets held for over a year are subject to taxes differently.

Best Long Term Investment Plans

Before we dive into the details, here is a brief overview of the best long term investment plans for 2023:

Investment Plan	Tenure	Suitable Investor	Risk Factor	Expected Return
Equity Mutual Funds	A minimum of five years	If you have multiple investments and want to balance out your risk	High	Varies according to the situation of the market
Unit-Linked Insurance Plan (ULIP)	A minimum of five years	If you want financial growth and life coverage at the same time	High	Varies according to the situation of the market
National Savings Certificate	Five years	Investors with low to middle income who want to save taxes on their investments	Low	7.7% guaranteed return

Let’s understand these plans and their benefits in detail

1. Long-Term Investment Plans With High Returns: Equity Mutual Funds

Equity investment involves purchasing shares directly from firms or other individual investors to earn dividends or resell them at a profit. As the value of stocks increases, you can improve your profits.

This can help you deal with market volatility and accumulate wealth for long-term goals such as retirement. It can also help you build long-term wealth for your family, such as for your child’s higher education or wedding expenses.

According to SEBI, an equity mutual fund scheme must invest at least 65% of its assets in equities and equity-related products.

A team of professionals selects the stocks to maximize returns while controlling risk.

Read: Equity vs Mutual Funds

Features

• SEBI has set a maximum limit of 2.25% for the expense ratio of equity mutual funds. However, this limit applies only to the first ₹500 crore worth of assets the fund manages; beyond that, the expense ratios vary. The expense ratio covers the fund’s operating costs, including management fees. 
• Equity mutual funds come in various styles, such as growth, value, and index funds.
• Mutual funds must disclose their portfolio holdings regularly, which provides investors with transparency about the assets. 

How to invest?

• Offline: You can submit an application form and a cheque or bank draft at the branch office of Investor Service Centres (ISC) or Registrar & Transfer Agents of the mutual fund.
• Online: You may invest online through the mutual fund’s official website.
• Indirectly: You may invest through a financial intermediary.

Minimum investment amount: ₹1,000

Best period: There is no concrete rule or criteria for determining the optimal time to invest in mutual funds.

Maturity period: While open-ended equity mutual fund schemes can mature anytime, ELSS plans have a maturity period of three years.

Taxation

• For short-term: 15% + 4% cess.
• For long-term: Tax-free returns if the profits are less than ₹1 lakh per year. For returns more than ₹1 lakh, you have to pay 10% tax + 4% cess.

Risk level: Medium to high

2. Hybrid Long-Term Plan: Unit-Linked Insurance Plans (ULIPs)

ULIP is like a two-in-one solution. It offers long-term investment opportunities and a crucial safety net in unforeseen events. There’s usually a lock-in period of five years, during which you can’t access your funds without penalties.

Features

• Based on your goals and risk tolerance, you can decide whether to invest in equities, debt, or a mix. 
• Depending on your chosen plan, you must pay a predetermined premium amount periodically. 
• You can opt for partial withdrawal. However, it is subject to some specific conditions and charges.

How to invest?

You can buy ULIPs from any bank or insurance firm in India. 

Time horizon: Ten years

Minimum investment amount: ₹1,500 (also depends on fund managers)

Maturity period: Five years

Taxation: Exempt from the tax charged on the investment, the proceeds, and the withdrawal of funds after the completion of the five-year lock-in period.

Risk level: Medium to high

3. Long-Term Savings Plan: National Savings Certificate (NSC)

NSC can be a good long-term investment plan if you’re in the low to middle-income bracket. It’s a government-backed savings plan that helps you start investing and gives you a nice tax break.

Features

• It provides a guaranteed return of 7.7%.
• Banks and NBFCs accept NSC as collateral or security for secured loans. 
• The interest gets reinvested automatically to generate additional earnings, subject to future interest calculations. This creates a compounding effect that can increase your overall returns over time.

How to invest?

You can buy NSCs from public banks and post offices and select private banks.

• Minimum investment amount: ₹1,000
• Time horizon: Five years or more
• Maturity period: Five years

Taxation

• Under Section 80C of the IT Act, investments up to ₹1.5 lakh per year are exempt from tax.
• Each year’s interest is considered a return and isn’t taxed, but the total amount of interest is subject to taxes according to your regular tax slab.

Risk level: Low to zero

What Is the Best Investment Plan For You?

There’s no one-size-fits-all investment plan for anyone. What works for another person might not be your ideal investment strategy. So, the key to finding your perfect investment plan is understanding your needs, financial goals, risk appetite, and return guarantee.

Before diving into any investment, consider a few essential factors. Check out the expense ratios and research the past performance and management. 

FAQs