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Insurance is never an investment, rather a protection against risks and contingencies.

Though it may seem like a raw deal, it is in fact not about life but about death. Have doubts? Then, have a look at term insurance  in which the family does not get paid if the insured is alive after the term. Be it medical insurance where your medical expenses get covered or vehicle insurance in which your vehicle receives accident coverage, life insurance is all about getting the damage cover for your life.

However, people nowadays insist they get their money back in life insurance.

Though term insurance is regarded as one of the most effective forms of insurance given its lesser premium and bigger sum assured, it is dumped by many as they lose money if the insured is alive after the term.

However, taking term insurance along with an SIP will be an effective form of investment.

Here, let us look at the case of a 30-year-old healthy person who invests in two ways- in a term insurance along with an SIP & in a traditional policy. Studying this, let us calculate the approximate amount of premium and returns he will receive in both these cases.

If he takes a traditional policy with a sum assured of 1 crore, the premium will be around 3, 54,000 per annum and in 31 years, he will have paid 1, 090,000. After the maturity period, the insured gets 2, 570,000 including the bonus amount of 1,570,000.

On the other hand, if he takes a term insurance of 31 years for a sum assured of 1 crore, the premium he will have to pay is 10,000. In 31 years, he will have paid 3, 23,000.

Let us see what happens when he joins an SIP along with this term Insurance. If he does an SIP of 3, 44,000 per annum for 31 years (subtracting 3,54,000-10,000), investor gets a return of 9 crore approximately at the end of 31 years, which is a surplus of 6.7 crore if compared to a traditional policy.

Planning your Term Insurance with an SIP (Systematic Investment Plan)will always give you the edge over doing things conventionally. But let us also not be blinded by the benefits of a traditional policy.

We are quite accustomed to seeing nervous parents running door to door desperate to arrange finances for their children’s wedding.  However financially stable you may be, you will need a lot of money and gold especially in the case of Indian weddings which are usually colourful and fun as well as a pompous affair.

Systematic investment can save a lot of chaos and confusion and helps you make your children’s most important day a memorable one.

Here let us brief on the ways in which you can plan your child’s marriage.

The must haves in an Indian marriage are gold and money.

Imagine X’s daughter getting married in another 20 years. X will have to arrange gold as well as money for the wedding. However, with systematic investment, he can relieve himself of the pain of arranging money and gold in the nth moment.

One way of arranging money is by

• Buying physical gold: X can either purchase physical gold as it is or gold coins at regular intervals and later convert them into use as or when the time arises.
• Investing in gold ETF (Exchange Traded Funds) SIP: Join a gold ETF SIP in which money will be deducted directly from the bank account. The investment amount can be chosen as per the individual capacity. For example, if 4000 is the current value of 1 gram of gold, investing this amount monthly will allow X to accumulate 12 grams in 1 year and 240 grams in 20 years.

X can accumulate money for the wedding by

• Taking an account of the amount of money required to host a wedding in the current scenario and calculate how much it will be after 20 years.
• Considering the calculated amount, join a systematic investment plan. Imagine investing 2000 every month in an equity fund. It will grow up to 20 lakhs in 20 years.
• Invest in 5 stocks with good growth potential and stay committed to investing in them. X can easily raise 20 or 40 lakhs in this case.

Proper financial planning well ahead of time helps you to overcome the financial hurdles that you may come across when planning a wedding. So, seek the help of a financial advisor  and join a suitable mutual fund  to make your children’s D-day a memorable one.

What is SIP/Systematic Investment Plan

SIP or Systematic Investment Plan has been gaining immense popularity in the financial mainstream these days. There is a huge increase in people who want to know about it and invest in it. Questions are being asked on how to go about in a SIP, best available mutual and equity funds with SIP plans and expected returns.

So, what is SIP?

It is an investment process in which people invest a specific amount in an instrument on a daily, weekly or monthly basis. SIP on a monthly basis has always been the most preferred option. Though people mostly do SIP in mutual funds, it can also be done in direct equity with the help of brokerage firms.

Investing in Mutual Funds

Identifying a suitable mutual fund is the basic step while making a SIP investment. Once you’ve identified, you can provide a mandate to the bank for SIP payment following which money will be deducted automatically. Thus, the process of saving and investing is done at the same time.

Mutual funds  such as LIC mutual fund, Reliance mutual fund etc provide daily SIP plans.

Daily wage workers or anyone who gets paid daily will find these useful as the money they receive everyday can be saved and invested instantly.

Some of the advantages of this process are:

• It brings in discipline as you will not delay or postpone the investment process.
• A certain amount of money is saved and invested without any inconvenience caused to us.
• In case the investment is done in direct equity which fluctuates as per the market performance, it is likely to reflect on your returns. Instead of being disadvantageous, it becomes an advantage as you get an average price as returns.

Choosing the Right Investment

It is also important to choose the right investment

For that to happen, one must have a clarity on the purpose of investment, holding period and risk capability. Once the question of what to choose is answered, the work is half done. Once you have made the investment, make sure it is supervised and necessary changes are made every three months.