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What is a one-time investment?
- Answer
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A one-time investment is an investment made via one lump sum payment to a scheme or plan.
What Are One-Time Investment Plans?
A one-time investment plan is a financial product involving a substantial sum of money paid upfront for a set period. The approach of a one-time investment plan differs from some of the other investment options usually opted for, such as regular savings or recurring investments, where smaller amounts are invested periodically.
One-time investment plans are particularly suitable for individuals who have accumulated a significant sum of surplus funds and are seeking to maximize their investment potential. These plans are not designed for short-term financial goals.
The invested funds are typically locked in for a specific period, making them less accessible for short-term requirements.
How Does A One-Time Investment Plan Work?
Choosing The Right Investment
Stocks, bonds, mutual funds, fixed deposits, and insurance policies are some types of one-time investments. Each of them comes with their own return-value and risks. The first step usually involves evaluating each option and carefully making a choice. To do so, one can consider their risk tolerance and map it to their financial goals.
Making the Investment
The next step involves investing a lump sum amount into the appropriately selected investment option.
The Power of Compounding
The next step is to wait it out while the key advantage of a one-time investment plan, which is the exponential growth of the lump sum amount, is brought about by the power of compounding. Periodically, returns from the investment start yielding profit as the earnings generated by your initial investment are reinvested. The best one-time investment plan should give you sufficient returns on your invested amount.
Key Advantages Of One-Time Investments
Capital Appreciation
With a one-time investment, your wealth gets the opportunity to grow as the entire sum is invested immediately. It gets the time to benefit from market growth over the entire investment horizon. Profits generated by capital market investments, such as stocks and bonds, are dependent upon market performance.
While short-term volatility may occur, at times, the gains may cancel out the losses. With recurrent premiums/investments, later contributions may be made during market downturns, potentially increasing overall returns.
Convenience and Simplicity
You will not need to worry about the administrative burden associated with the arrangement of future premiums or the need to track due dates. You can pay the premium/principal investment at the beginning and reduce the risk of missed payments or lapses in the investment plan.
Reduced Transaction Costs
When investments occur at different stages of a product’s investment cycle, they can incur transaction charges for each investment. For a one-time payment, the notion of recurring fees can be eliminated, as you only need to pay once. This could significantly reduce overall investment costs.
Enhanced Compounding Growth
With a one-time investment, the complete amount remains invested over the investment horizon. Long-term investments are benefitted by compounding. The dividends also eventually lead to further earnings. In contrast, smaller, later contributions, remain invested for shorter durations. They have less time to benefit from the power of compounding.
Potential Disadvantages Of One-Time Investment Plans
Lack of Investment Discipline:
When it comes to a one-time investment plan, unlike regular savings plans, there isn’t an opportunity to cultivate the habit of consistent and disciplined savings.
Liquidity Concerns:
Funds in a one-time investment plan are restricted within a lock-in period. If you experience a need for the same in the future, you may face a liquidity challenge.
Risk of Investing at an Inopportune Time:
Investing a lump sum at a single point in time could attract low returns. This can be due to a market downturn or any unexpected inflation of asset prices. Even the best one-time investment plan will not be completely risk-free.
Potential for Lower Returns in Certain Scenarios:
If the chosen investment option underperforms due to market unpredictability, the entire invested sum may be affected. The investor may experience lower returns (as compared to a diversified investment strategy with regular contributions).
Unlike a traditional money-back policy or a pension plan with guaranteed returns and life cover, the returns of a one-time investment plan will usually be based on market performance.
Limited Flexibility and Adaptability:
One-time investments usually offer limited flexibility for withdrawals in the case of fluctuating market conditions. Do consider such factors before choosing the best one-time investment plan for yourself. Also look at other options, such as a money-back policy, if you want funds at specific points of time in your life.
Who Needs A One-Time Investment Plan?
Non-Resident Indians (NRIs):
Individuals living in another country need convenience and flexibility. They must manage their finances while also ensuring that their investments in India align with their international lifestyles. NRIs can opt for on-time investment plans as they can invest once and let the plan grow their wealth.
Professionals:
Young graduates, particularly those at the beginning of their careers, have good scope to leverage the long-term growth of funds. They can invest lump sum amounts for a long investment horizon, into a one-time investment plan, and earn high returns. Young professionals can leverage this extended timeframe to fulfil future retirement and life goals.
Retirees and Individuals with inheritance:
Individuals with lump sum inheritances or those who have saved enough money for retirement, may often face the challenge of effectively managing large amounts of wealth. They can invest and receive good investments on the lumpsum via one-time investment plans.
People entering retirement age can go for low-risk options, such as fixed-income securities. Inheritors of large amounts of wealth can go for equities or mutual funds. They can leverage the power of compounding to grow their wealth over time. The money can grow while they strategically plan for the utilization of earned returns.
Risk-Averse Investors:
They often have a low appetite for risk and prioritize stability when it comes to investing. Risk-averse investors can use the best one-time investment plan with high returns for prioritizing capital preservation and stable returns over aggressive growth. A one-time investment plan can be their low-risk option, especially when they choose fixed-income securities such as bonds or government securities.Investors can earn a steady income while minimizing exposure to market volatility. The strategies and investments can be tailored to ensure that a one-time investment plan can provide monthly income in the future.
Top One-Time Investment Options In India
National Pension System (NPS):
It comes with low-to-medium risk. NPS offers a mix of equity and debt investments. The investment can be left untouched for more than 10 years. It can also offer tax benefits. NPS is one of the best savings options for retirement but comes with limited investment choices. It also offers limited liquidity, as funds are locked until retirement.
Equity Mutual Funds:
For some, equity mutual funds can be one of the best one-time investment plans with high returns, although these plans generally come with a high-risk profile. They can give good returns as long as the tenures are higher than 10 years. Equity mutual funds invest primarily in stocks. They therefore have both - high potential and high volatility. They come with medium liquidity as fund units can be readily bought and sold on stock exchanges.
Gold:
It is the best option for a medium-to-high-risk profile.The investment can be made for more than 10 years. Although gold prices can fluctuate significantly, gold is considered as a hedge against inflation and can provide diversification benefits within an investment portfolio. The liquidity possibility is moderate and varies depending on the method of investment (such as physical gold and gold ETFs).
Debt Mutual Funds:
These funds are lower in risk when compared to equity funds and can be best invested for a range of 5 to 10 years. Debt mutual funds can be your go-to option for a 5-year investment plan. They primarily invest in debt instruments (such as bonds). Debt funds have lower potential than equity funds but generally provide more stable returns with lower volatility. They offer moderate liquidity (however, specific funds may have varied liquidity possibilities).
Real Estate Investment Trusts (REITs):
They come with medium-to-high risk and offer exposure to the real estate market. Investment should be made for more than 10 years, as the invested money can be subject to market fluctuations. With the right strategy, there can be potential for income generation and capital appreciation. Generally considered to have lower liquidity when compared to other investment options, they are traded on stock exchanges and may not always have an active market.
Balanced Mutual Funds:
They come with medium risk, as they invest in a balanced portfolio of both equity and debt instruments. Like debt mutual funds, balanced mutual funds can also be your go-to option for a 5-year investment plan. They aim to provide a balance between potential growth and stability, offering a blend of equity and debt returns. Balanced mutual funds offer moderate liquidity (similar to other mutual funds).
Unit Linked Insurance Plans (ULIPs):
They come with medium-to-high risk. ULIPs combine insurance coverage with investment options. They can be invested for more than 10 years. ULIPs often include a combination of equity and debt funds. Depending on the plan, the liquidity of the ULIP varies. If you are looking to invest a large sum of money for other individuals in your life, you can also think of more tailored life insurance products, such as an investment plan for a girl child or a term insurance policy for parents.
Fixed Deposits (FDs):
They are low in risk. FDs offer guaranteed returns but with minimal growth on the invested amount (as compared to some of the other options on this list). They offer high liquidity, although early withdrawals may attract penalties.
Factors to Consider Before Making A One-Time Investment
Return Potential:
The past performance of the chosen investment options can give an idea of what kind of returns can be expected. You can study the returns projected and assess whether they align with your investment goals and expectations.
Patience:
Successful investing often requires a long-term perspective. Market volatilities tend to feel less worrisome over a long period of time. In the long term, sustained patience can pay off. Market fluctuations are inevitable, so it is better to be calm and remain invested while avoiding hasty decisions.
Investment Horizon:
For long-term goals, it is important for your investments to have a high return potential. For shorter-term goals, you can look at debt and balanced funds.
Market Trends:
Analysing the market and tracking key market indices can help you find the right moment to make a one-time investment. For example, NIFTY can provide valuable insights into market trends. The Price-to-Earnings (P/E) Ratios, a crucial metric for assessing market valuations, can be tracked. A P/E ratio closer to 14 generally indicates more favourable market conditions for long-term investments.
Liquidity Needs:
Analyse your financial circumstances, including your immediate and long-term financial needs. Ensure that there is an easy availability of funds for a one-time investment.
Experience Peace of Mind with IndiaFirst Life
At times, even the best one-time investment plan with high returns might not provide the upfront benefit of financial protection to investors, which is usually provided by life insurance products. Along with core life insurance plans, investment plans for a spouse or for a girl child may also offer such layers of protection.
The IndiaFirst Life Guaranteed Single Premium Plan is a unique savings plan offering both financial security and the opportunity to grow your wealth.
- It is a non-linked, non-participating, individual, single premium savings plan.
- With a single, upfront premium payment, you get dual benefits of financial protection and savings from one single policy. It can secure your financial future and build a strong foundation for your loved ones.
- Customers can select their desired cover option from a range of choices, with the value ranging from 1.25 times to 10 times your single premium. With this feature, you can align your coverage with your long-term financial aspirations. At the same time, you can address your long-term security needs, whether it's securing your family's future, planning for retirement, or building a legacy for future generations.
Experience the peace of mind that comes with knowing your family's financial future is secure. Choose IndiaFirst Life and embark on a journey of financial prosperity.
