'If we wait to invest only after the economy recovers fully, it might be too late,' advises Vivek Jain, business unit head-investments, Policybazaar.com.
Illustration: Uttam Ghosh/Rediff.com
We all are living in some extraordinary and scary times right now.
When the global economy is sinking due to the pandemic shutdown, stock markets in India are booming.
The Sensex has rebounded 40 per cent from four-year lows in March, erasing majority of the losses in the past three-and-a-half months -- the lockdown period.
The Sensex which was hovering at an all-time low of 26,000 points in the last week of March has now crossed the 36,000 mark; recording its best quarter in the last 11 years.
Given the market situation and continuous fear of the COVID-19 pandemic, it is natural for everyone to extrapolate this trend to the near future.
In this worrisome backdrop, investing your money at this juncture may not be something that makes everyone comfortable.
Most of us would want to wait and have a better clarity or evidence on how the coronavirus will be contained, before deciding to invest.
However, in the last few decades, there have been several pandemics that had people wondering if they should invest right now.
Starting from the SARS outbreak between January and March 2003, the ebola outbreak between December 2013 and January 2014 and rhe zika virus crises from November 2015 to February 2016.
Don'r wait until economy recovers
During the SARS outbreak, the Sensex had fallen by 10 per cent, but it went up by nearly 84 per cent within one year.
During the ebola outbreak, the market fell by 3 per cent, but within one year the market went up by 42.5 per cent.
Similarly, during the zika crises, the markets had fallen by 12 per cent. Within a year the market climbed up by 24 per cent.
No matter how scary the situation was during the onset of the pandemic, the market gradually recovered.
We need to understand that if we wait to invest only after the economy recovers fully, it might be too late.
The fact is the markets usually recover much ahead of the actual economic recovery.
It's better not to wait until the economic recovery and rather invest immediately as the market breaks the negative trend and starts to climb up.
The best products to invest
Investing your money while prices are down can be a smart move so that you can get good returns when prices rise.
One of the best available options to invest in amidst the current market situation is Capital Guarantee Solution plans -- a combination of ULIP and Traditional Products.
Under such plans, as per the policy terms, the premium that you pay throughout the policy term is 100 per cent guaranteed.
Meaning, no matter how worse the market may get, the premiums paid towards the policy remain 100 per cent secured.
Moreover, you also get the upside of market returns without risk to your capital which remains completely secured.
For instance, under HDFC Life's Capital Guarantee Solution Plan if Rs 12,000 is invested every month for 10 years with a policy term of 15 years, the amount you will get at maturity will be Rs 36.6 Lakh* provided the ULIP investment grows at a 7-year return of 9%.
Similarly, under the Bajaj Allianz Life Capital Guarantee Solution Plan if Rs 12,000 is invested every month for 10 years with a policy term of 15 years, the amount you will get at maturity will be Rs 40.6 Lakh* provided the ULIP investment grows at a 7 year return of 10%.
Further, by investing in such plans, you even get tax benefit under Section 10 (10D) on gains in the invested amount.
Along with this, this solution also has a life cover equal to 10 times the annual premium amount.
It comes with Loyalty Additions payable from the 6th year and fund boosters payable at maturity.
It also returns the mortality charges on policy maturity thereby assuring maximised returns on your investment while offering protection from Day 1.