WHAT ARE ONE-TIME INVESTMENT PLANS?
One-time investment plans are often called lump sum investment options. They are an effective investment alternative available for investors having strong knowledge and experience of the stock market and its vulnerable scenarios. These plans assist in making investment decisions as here the investors decide to invest a lump sum amount in one go instead of investing through regular intervals in the form of a Systematic Investment Plan (SIP). There are many aspects and options available to do one-time investment. In this article, we are going to discuss and understand the same.
THINGS TO LOOK FOR BEFORE OPTING ANY ONE-TIME INVESTMENT PLAN
1. Goals and Vision:
Your goals and vision must align with your choice. Opting for an ideal plan is very significant as it will lead to building a corpus to compliment the goals whether short or long term.
2. Investment Horizon:
The choice of plan will also majorly depend on the time horizon because it will help to decide whether to go with equity, debt or money market, or government instruments. For a long term, equity funds can prove to be fruitful while debt funds may prove decent in the short term. Most often other instruments come with lock-in periods.
Understanding and being aware of the market scenarios is important to decide whether it is ideal for investing through one-time plans. To do this, one needs to have the required knowledge to analyze and calculate the data to judge the plan. Nevertheless, if you face any hindrance, you can consult your financial advisor.
4. Liquidity and Returns:
Before opting for the option, you should look towards the stats and data to see what returns it has to offer. You should also see if the option aligns with your liquidity requirements.
The key difference between investors and traders is the patience factor. You should give the required time to your invested funds to grow instead of exiting from the plan due to short-term adverse movement.
SOME OF THE INVESTMENT ALTERNATIVES FOR ONE-TIME INVESTMENT
1. Equity Funds
Equity funds in one-time or lump sum investments are comparatively less risky in long term because of the professional management and diversification involved. This option has the potential to offer the highest returns among all one-time investment alternatives. Equity funds invest their assets in the equity & equity-related securities of the companies as per the investment objective of the fund.
2. Debt Funds
There are many types of debt funds with different portfolios and time horizons. You can move forward with choosing a fund of your choice. Though it is always recommended to go forward with funds having high-quality securities so as to ensure a low-risk investment.
3. Bank and Post-Office FDs:
As we all know many types of FDs with different tenure and interest rates are offered by both financial institutions and post offices, these can prove to be good and safe alternatives to park your money but the returns will be comparatively low.
These instruments offer the security of capital as well as decent returns and are considered an ideal investment alternative for many.
5. Treasury Securities:
Treasury bills or treasury securities are other good alternative plans offering safety, higher liquidity, and decent returns. Their maturity tenure varies from 91 days to 365 days.
6. Corporate Deposits:
These plans allow you to invest in deposits offered by top-tier companies. You can go forward with investing in them after checking the reputation and credit ratings of the institution. They offer higher returns in comparison to other deposits.
7. National Savings Certificate:
NSC is a small saving certificate scheme backed by the Indian Government. The scheme is one of the postal savings schemes offered by the Post Office. The vision of this plan is to encourage small savings and investments among the investors for meeting their financial goals. Investors can invest in NSC through post offices across the country.
Also Check - Current National Savings Certificate (NSC) Interest Rate
KVP is a certificate scheme offered by the Indian post office. Currently, it promises to double the one-time investment in a tenure of around 124 months(10 Years & 4 Months). For example, a Kisan Vikas Patra for Rs. 10,000 will give you Rs. 20,000 after it matures.
ADVANTAGES OF ONE-TIME INVESTMENT PLAN
1. Nominal Charges:
As the investment is made in one go in one-time investment options, the transaction charges involved are also most often one-time only. This signifies that the investors will save their money by not paying transaction charges at regular intervals.
One-time investment saves investors from the complexity and inconvenience of keeping a closer track of regular investment payments. It is correct that you can opt for auto-debit for SIP but you need to check whether the auto-debit has not remained incomplete due to insufficient balance or any glitch.
3. Capital Appreciation:
With these plans, the chances of appreciation of capital and wealth increase as the investment have enough time to adjust to market scenarios and grow consistently and significantly.
DISADVANTAGES OF ONE-TIME INVESTMENT PLAN
1. Lacks discipline:
When the funds are invested in one go, there is no association of disciplined investment as no regular commitment is made. Hence, these don’t encourage a disciplined investment approach.
2. No opportunity to benefit from Rupee Cost Averaging:
In case of equity mutual fund investments, because of the unpredictable market scenarios, investors may end up purchasing higher units when the cost is high and witness the drop in costs afterward as the funds were invested in one go. For this case, there is no alternative to purchasing units in the middle of the tenure.