How to Invest for the Long-Term Plan?

When you want to secure your future financially, investment in diversified avenues can help you to create wealth for a sustainable future and well-being. One can try to achieve this goal by investing in long-term investment options partially. 

The ups and downs due to the COVID-19 pandemic have made many of us realize the importance of being financially sufficient by savings and investments. 2021 will be a recovery year for most of the economies therefore, for the time being, you may concentrate your funds in the long-term investment avenues and try to follow your investment strategies formulated as per your investment plan. 

Stock Market investments are a good option to invest in the long-term where one is allowed to build wealth at a decent pace. If you are new to stock-market investments here are few things which you should be aware of:

For investment in the stock market, a Demat account is a basic requirement and the most important one. Let us look at what is Demat account?

 A Demat account is a virtual account that holds the physical certificates of securities in electronic or digital format. The method of transforming physical certificates into an electronic form known as dematerialization. A Demat account allows you to hold different types of securities like equities, debt, and mutual funds, etc in a single place. 

Demat accounts are generally known as Investing accounts. As per the risk appetite one can choose whether he wants to be a trader or an investor. In trading, one can buy and sell securities in the secondary market even for a short period of time whereas if you want to be an investor, then you can go for long-term investments. Along with a Demat account, you also need a trading account to trade in the stock market.

How to start trading in India? 

To start trading in India, one needs a Demat & trading account with a SEBI registered stockbroker. As the process for opening the account and start trading has become so easy and smooth that you only need to follow few steps and there you go. 

The steps to open a Demat and trading account online and start trading in the Indian Securities market are mentioned below: 

  • 1. Select a broker or depository participant registered with public depositories like NSDL and CDSL and with the exchanges
  • 2. Visit the website or mobile application of selected stock
  • 3. Submit  the basic details like name, email address, and mobile number 
  • 4. Complete the KYC process
  • 5. Submit the documents like proof of identity, proof of address, copy of bank statement, copy of the signature, and two passport size photos in digital format 
  • 6. Document verification is done from the stockbroker's end 
  • 7. Finally, you will receive a client ID, password, and other required information for trading

However, trading is only advisable when you are aware of the basics of stock market trading. If you are new to the world of the stock market it is advisable to go for long-term investment avenues.  

Benefits of long-term investment: 

Goal focused planning: 

In long-term investments, one can focus on financial goals like buying a house, child’s education and marriage, etc easily.

Convenience:

An investor can conveniently track the investment performance and make required changes to the investments as per the market conditions. 

Not to worry about short-term volatility: 

Need not worry about market volatilities regularly as the investments are least affected by the short-term volatility in the market. 

Compounding Benefits: 

In long-term investments, no one can ignore the power of compounding. It is a simple process the more time you give your investments to grow the maximum amount you will get. 

Long-term Investments Option: 

A person who wants to be an investor more than opting for trading in stock market can consider following long-term investment options. The investment options are as follows: 

Direct Equity Investments:

As we know, direct investment in the equity market is risky but the way one can avoid this is through long-term investment. For long-term investments, equity can return higher with inflation-adjusted returns compared to other different asset classes.

Mutual Funds or ETF: 

Mutual funds are an attractive long-term investment option. There are different types of options available in the stock market to invest in mutual funds. One can opt for equity mutual funds, debt-based mutual funds or hybrid mutual funds which are a mix of equity and debt options both. 

Fixed Deposits: 

The most secured long-term investment option is Fixed Deposits. Fixed Deposits can be done with any of the reputed banks or Reputed NBFCs. The return on fixed deposits is comparatively high when compared to normal saving accounts.

NPS: 

The NPS stands for National Pension System. It is a long-term investment avenue focused on retirement fundings. The NPS comes under PFRDA which is Pension Fund Regulatory and Development Authority. The least annual contribution for an NPS account is now Rs. 1000 earlier it was Rs. 6000. NPS is a basket of different securities like equity, corporate bonds, liquid funds, fixed deposits, etc. As per the specific risk appetite of an individual one can decide the amount to be invested in securities through NPS.

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