Incremental investment options for the novice investors

 

Introduction:

When it comes to investing, the old adage ‘Little drops make the mighty ocean’ stands true. Incremental investments, where you steadily grow your money bit by bit, can profoundly impact your overall financial portfolio. If you are on the fence about investing, wondering where to start or how to proceed, you are not alone.

Here are some options for incremental investments tailored for individuals like you who are looking to take small steps towards financial growth and security.

Incremental investments options

Systematic Investment Plans (SIPs) in mutual funds

SIPs are an increasingly popular investment avenue in India. This is particularly true for individuals who want to start investing but may not have much money to invest upfront. SIPs allow you to invest small, fixed amounts regularly (usually monthly) in mutual funds.

SIPs are a convenient way for you to gradually build your investment portfolio and benefit from rupee cost averaging. When you invest a certain amount, you get higher units of the mutual fund when prices are low and fewer units when prices are high. This helps to reduce the overall average cost of investment and mitigates the impact of market volatility on your portfolio.  

With SIPs, you can start with a modest amount, often as low as ₹500, and increase your investments as your financial situation allows. Plus, SIPs offer the advantage of compounding returns, where your returns are reinvested, leading to exponential growth in your wealth over the long term.

Unit-Linked Insurance Plans (ULIPs)

ULIPs are versatile financial instruments that offer you dual benefits. With ULIPs, you get the best of both worlds - a guaranteed life cover along with the opportunity to invest in market-linked funds.

ULIPs offer you the flexibility to choose the premium payment option that best suits your financial situation. You can opt for either regular premium payments or limited premium payments. You can also use top-ups to incrementally increase your ULIP investments according to your evolving preferences and financial goals.

A novice investor can consider a ULIP like HDFC Life Smart Protect Plan.  A ULIP fund like this allows you to choose your core objective for the insurance cover before you invest. It provides you with 4 options with various benefits including Level Cover, Level Cover with Capital Guarantee, Decreasing Cover, and Decreasing Cover with Capital Guarantee.  Also, you get to choose from a range of 6 funds¹ to optimise returns. It also gives you the flexibility to choose your premium payments. There are also loyalty additions² you can choose from to boost fund value.

Annuity Plans

Annuity plans are tailored retirement solutions designed to provide you with guaranteed³ income for life. These plans are characterised by their low-risk nature, making them ideal for building a reliable retirement fund. With annuity plans, you have the flexibility to pay premiums for a single or limited payment term and customise your investment strategy according to your financial situation.

Consider the HDFC Life Pension Guaranteed Plan, which allows you to choose the purchase price you are comfortable with and decide on the annuity amount you wish to receive. Moreover, the plan offers a choice to increase your annuity payouts through a top-up option. This allows you to enhance your annuity income as your financial requirements evolve over time. You also have the flexibility to receive your annuity payments on a monthly, quarterly, half-yearly, or yearly basis, depending on your financial needs and preferences.

Direct equity 

While direct equity investments are generally considered riskier, investing in them can gradually build wealth over time. You can start with a small amount to begin investing in stocks. With direct equity, you have the flexibility to start with small investments and gradually increase your holdings as you become more comfortable and confident in your investment decisions.

Direct equity investments offer the potential for significant long-term growth. However, conducting thorough research or seeking professional advice is essential before venturing into direct equity investments.

Investing begins with taking that first step, no matter how small. If you are still on the fence, it is best to consult a financial planner who can explain the pros and cons of various investment tools. Only as you gain experience and confidence will you be able to adjust your investments to align with your evolving financial needs and goals. Remember, it is about starting small and gradually increasing your investments as you progress.

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