Financial experts often proclaim that investors should not mix insurance and investment.
Similarly, we believe you must not mix tax savings and wealth creation. You must be wondering why you should not . After all, you are saving substantially when it comes to investing in tax saving instruments.
Well, please don’t misunderstand us. We aren’t asking you to stop investing in tax saving instruments
We are only suggesting avoid thinking that investing in tax saving instruments is enough to sustain your lifestyle and create wealth.
Here are a few things to keep in mind when you invest in tax saving instruments
- Saving Schemes such as PPF, National Savings Certificates, Tax saving FDs, etc. have long lock-in periods
- Over such long time horizons, the returns that they provide are lower than the stock markets.
- Over the last few years, rates on FDs and PPF have decreased
- The returns may be lower than inflation during certain periods. It means that your savings are losing value over the long term
Here are some benefits of investing directly in equities
- Enjoy returns that beat the index and inflation
- Avoid lock-ins
- High liquidity
- Achieve long term goals such as building a retirement corpus, child’s higher education, or down payment of house.
Still not convinced? Let us help you understand better.
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Read more: How Long-term investing helps create life-changing wealth – TOI.
