What is an investment calculator?

The meaning of savings and investments has undergone a drastic change. Terms like return on investment, inflation and compounding were not common in the investing lexicon a few decades ago. With the availability of several investment options, it has become pertinent to take into consideration all the factors before signing on the dotted line. Newer and more complex investment products have come into the market. The process of analysing investment options has changed accordingly. Newer investment options offer features like transparency, flexibility and ease of investment. It has become possible to get an idea of the value appreciation an investment will offer over its entire tenure.

The key tool to ensure transparency is an investment calculator. An investment calculator requires certain details to generate the future value of an investment. Investing has various aspects. Most of the investment plans require regular contributions. A lump sum amount is invested at the start, which is followed by regular contributions. An investment calculator takes into account the regular contributions added to the initial investment. It also requires the expected rate of return and the investment tenure to generate the value of the total investment after the tenure. An investment calculator also gives the breakup of the investment over the years. The initial investment, the contributions and the total value of the investment in the final year.

An investment calculator makes investing easy and investing in the right products is crucial for a financially stable life. Investing helps you achieve life goals like children’s education and marriage in a disciplined way. Saving money regularly is not enough to create wealth in an era of rising inflation. Investing for the long term can help you create wealth and live a stress-free life.

An investment plan is a financial product that multiplies your money through compounding or market-linked growth during the tenure of the investment. An investment plan essentially converts regular savings into wealth over a period. One has to differentiate between saving and investing. Saving is merely setting aside money for use in future. One generally saves to preserve money for the near future because keeping aside money without earning returns erodes the value of the money. Investing is akin to channelizing the money saved to earn high returns. An element of growth is associated with investing; Just savings do not grow your money but investing does. Investment plans are tools for disciplined investing. Achieving financial freedom becomes easy with the right investment plans.

Most people earn money and use it to fulfil their life goals. The higher one earns, the higher one spends on achieving his/her financial goals. However, simply earning and spending is not enough for a financially stable life. One has to save and more importantly invest smartly, to build a secure future. There are various types of investments that are available in the Indian market. One has to be clear about where to invest money to achieve a certain goal. The investment to build a retirement corpus will be different from the investment to buy a car. Similarly, the investment tenure will be different too. Ideally, one should form a mixed portfolio with different types of investment products. Some investment products are designed for long-term goals; while others help you achieve short-term goals. It is important to understand the investment product before committing to it. If you are a beginner, it is advisable to start from the basics and build up gradually. Let us understand what investment plans are and look at the type of investment plans available in India and the benefits they provide.

There are plethora of investment plans available in India. One can opt for long-term investment plans as well as short-term investment plans. One can also choose investment plans according to his/her risk profile. Investment plans with exposure to the financial markets have a higher degree of risk. On the other hand, fixed-income investment options are relatively less risky, but also offer lower returns. Risk-averse investors generally opt for stable investment options with guaranteed returns, while investors with a slightly higher degree of risk tolerance choose equity-oriented investments. However, the ideal combination would be to build a diversified portfolio with both stable and high-growth investment options. Some of the major investment plans available in India are:

• Unit Linked Insurance Plans
• Pension Plans
• Endowment Plans

A unit-linked investment plan or ULIP offers dual benefits of investment and insurance. It provides the option to invest in equity or debt funds or combination of both along with the protection of insurance cover.

How do ULIPs work?

The premium paid for a unit-linked insurance plan is invested in the financial markets. There are several investment funds that channelize the money into debt or equity instruments or a combination of them. Investors can choose the funds depending on their life goals and risk tolerance. Investors with a higher tolerance for risk should opt for equity-oriented funds, while the debt funds are more suitable for risk-averse investors. Along with ensuring market-linked returns, ULIPs also provide life insurance cover, making them one of the most preferred investment options.

Benefits of ULIP investments

• ULIPs are flexible investment products that allow investors to switch between equity and debt funds for a certain number of times every year. It ensures that investors have the flexibility to adjust their portfolio as per the market conditions.
•  ULIP investments are tax-efficient. The premiums paid for a ULIP plan are eligible for a tax deduction under Section 80C of the Income Tax Act, 1961, subject to provisions stated therein.
•  Depending on the market conditions, ULIPs offer relatively higher growth opportunities, ensuring that investors have a substantial corpus at the end of the policy term.
•  ULIP returns are tax-free. However, tax benefits are subject to amendments in the Income Tax Act, 1961, subject to provisions stated therein.
• Along with market-linked growth, ULIPs offer life insurance cover, which guarantees financial stability to your dependents even in your absence. 

Pension plans for retirement are financial products that help you accumulate wealth for the post-retirement life. These plans ensure that you have a financial buffer to enjoy a financially stable life even after retirement. With the corpus of pension plan, you can enjoy the golden years of your life without making any compromises in your lifestyle.

How does a pension plan work?

Retirement plans have two broad phases. In the first phase, retirement plans build capital. This phase coincides with your active working life when you can save more and hence you can contribute more to the retirement corpus. A pension plan invests all the contributions during the first phase. After retirement, when you are not able to save and contribute anymore, the accumulated funds are utilised for a suitable annuity or pension plan that pays a certain amount regularly for the rest of your life.

Benefits of pension plans

• Pension plans allow you to lead a financially independent post-retirement life by ensuring guaranteed income.
•  Many people wait for retirement to fulfil their life goals. 
• The funds received from a retirement plan can be utilised to fulfil long-pending life goals like travelling the world or pursuing other projects. Invest in a pension plan as early as possible. It results in a longer contribution period leading to a larger corpus at the end of the tenure. 
• The premiums paid for pension plans are eligible for tax deduction of up to Rs 1.5 lakh per annum under Section 80CCC of the Income Tax Act, 1961, subject to provisions stated therein.
• Additionally, one-third of the lump sum retirement savings obtained from a pension plan are tax-free under Section 10(10A) of the Income Tax Act, 1961, subject to provisions stated therein

Endowment insurance plans are traditional life insurance policies that combine insurance with investment opportunity. Endowment plans provide maturity benefits if the policyholder outlives the policy term. Unlike ULIPs, the investment under endowment plans is not invested in the financial markets. Further, there are two types of endowment plans - participating and non-participating. Policyholders share a part of the insurer's profit in a participating plan, while a non-participating plan does not have any provisions for a share in the profit. 

How do endowment plans work?

An endowment plan offers the security of insurance along with the capital growth of investments. The insurance component ensures that your family does not face any difficulties even in your absence, while the investment component invests your savings in fixed deposits and government bonds to guarantee stable returns. 

Benefits of endowment plan

• An endowment plan helps in inculcating the habit of disciplined savings with regular contributions. Small contributions result in a large corpus at the end of the policy term.
• Endowment plans offer guaranteed as well as non-guaranteed returns as the investments are not market linked and hence are immune to market fluctuations.
• The life cover offered by endowment plans ensures the financial stability of your family. 
• The premiums paid for an endowment plan are eligible for tax deductions under Section 80C of the Income Tax Act, 1961, subject to provisions stated therein.
• The maturity benefits of endowment plans are tax free under Section 10 (10D) of the Income Tax Act, 1961, subject to provisions stated therein.

The Bajaj Allianz Life Investment Calculator is a simple, easy-to-use tool that is immensely helpful for planning long-term investments.

Investment plans from Bajaj Allianz Life

Bajaj Allianz Life offers a number of insurance cum investment plans catering to a wide variety of customers.

Bajaj Allianz Life Capital Goal Suraksha

The Bajaj Allianz Life Capital Goal Suraksha is a long-term investment plan that diversifies the investment. Diversification not just secures the investment but also increases the potential for higher returns. The investment plan also offers life insurance cover.

• It offers guaranteed returns along with the potential for higher returns.
• Option of limited premium payment term.