The Importance of Having an Investment Plan for 10 Years

Investing for the Long Run: Why You Need It

As it is commonly said in the investment world, that investment returns are higher than the investor's returns, this is exactly what a long-term investment, such as a 10-year investment plan, is all about. Here’s how an investment plan for 10 years takes you closer to your financial goals:

Goal Specific Investing

For an investor with specific financial milestones to achieve, a 10-year investment plan is the ideal approach. Whether it's buying a house, funding your child’s education or marriage, or planning a peaceful retirement, you can align your investments with your financial goals.

Power of Compounding

Often, investors undermine the power of compounding, especially when they are distracted by short-term results. Through the power of compounding, you earn not only returns on your principal investment, but your returns also start earning returns, making a 10-year investment plan or a long-term investment plan even more lucrative. Remember that the longer you have stayed invested in an asset, the higher the power of compounding.

Financial Discipline

When it comes to prioritising your financial goals, one thing that you cannot ignore is building financial discipline. And what better way to do it than staying invested in an asset for the long run? If you are not disciplined in your investment approach, it simply suggests that you are withdrawing your commitment before achieving your financial goals.

Reduced Portfolio Risk

Another key importance of a 10-year investment plan is reducing the risk of your investment portfolio. If you have ever timed the market, you must have realised that the market is a volatile space with ups and downs occurring every day. However, if you look at the graphs of a long-term investment, these ups and downs appear to be more straight. This is simply because, in the long run, investments typically tend to blur out risks.

Did You Know that, according to a study, in over two decades, there were around 13 occasions where the NSE Nifty 50 index saw more than 10% withdrawals and in around 11 of these cases, the index delivered better returns just one year later?

Tax Efficiency

When it comes to building an investment plan, you cannot ignore the tax implications. A 10-year investment plan has a higher potential to offer tax benefits. Here’s how:

If your long-term investment qualifies for capital gains, then the tax rate is 12.5% for all capital assets. Whereas the tax on short-term capital gains is 20%. These numbers are so significant that they cannot be undermined.

Additionally, under Section 80C of the Income Tax Act, many long-term investment instruments are eligible for tax benefits.

Benefits Through Portfolio Diversification

Creating a diverse portfolio is possibly one of the most important strategies for a successful investment story. When you have a 10-year investment plan, your ability to create a diverse portfolio also becomes higher. You can invest across different asset classes, and through a balanced approach, you can ensure steady growth over the years, thereby helping to create wealth in the long run.

For Instance, investments in large-cap, mid-cap, and Flexicap funds can be a good bet for creating a diversified portfolio, as they can reduce the impact of sharp declines in any particular market sector.

10-Year Investment Plan: Tips and Strategies

If you are one of the investors who find it difficult to stay invested in an asset because of the market fluctuations, then remember these essential tips:

Stay Committed

Remember your financial goals for which you invested in the first place. Are they fulfilled yet? If your answer is no, then this is not your time to withdraw.

Analyse and Realign

Staying invested for the long run doesn’t mean that you don’t analyse your portfolio regularly. Make sure that you analyse and realign investments according to your changing financial needs and risk appetite.

SIPs and Power of Compounding

Building financial discipline is a challenge that can be overcome by opting for a systematic investment plan. Additionally, it is a combination of SIP and the power of compounding that typically yields positive results, keeping you committed to your goals.

Summing Up

A 10-year investment plan is the centre of all your financial goals. By following a disciplined and consistent investment approach, you set yourself up to enjoy impressive benefits and build a portfolio designed for wealth creation. Next time you are likely to make investment decisions based on fear of market volatility, remember that staying invested for the long run is a way to achieve your financial goals.

Regardless of the type of investment plan and approach you develop, we strongly recommend performing due diligence before making an investment decision. Enter Jio Insurance Broking, which helps you to analyse the market better