Financial Planning Guide – Investment or Insurance - Which One Should You Opt For?

Tax planning and investment planning are only two aspects of financial planning. It also includes setting aside emergency savings, building a broad investment portfolio, and obtaining enough insurance. As a result, most investors who are organising their finances for the first time are unsure whether to invest in funds, bonds, equities, or purchase an insurance plan. So, let's look at different aspects of both the options to help you choose between insurance and investing.

What is Insurance?

An insurance plan is a contract that is purchased to protect a person or family against a monetary loss. This loss could be in the form of death, a loss of property, or a loss of health. The insurance policy covers such high expenses, allowing the policyholder's current income to remain unaffected. The most prominent example can be a life insurance policy, which protects your loved ones from financial ruin if you become seriously injured or pass away due to an unforeseen event. 

What is Investing?

Investing is a way to potentially grow your financial wealth. The idea is to purchase financial products, often known as investments, and then sell them for a better price than you paid for them. Bonds, where you lend your money to a corporation or the government in exchange for interest, is one such example of investments. Moreover, investing in stocks means that your shares are equivalent to being a part-owner of a corporation and can also be done. Although bonds are a relatively safe investment, stocks can yield a higher profit and are high-risk investments with no guarantee of returns. Mutual Funds, which invest in a mix of stocks and bonds and are regarded as mid-risk with mid-returns, are another option.

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Investment vs Insurance

When deciding between investments and insurance for first-time investors, experts believe that insurance is a crucial part of any solid financial plan. Having insurance will assist you prevent falling into debt owing to rising healthcare expenditures or the untimely death of the family's breadwinner. Moreover, combining both options might negatively impact the portfolio and result in fewer returns on the investor's investments and insufficient life insurance coverage. On the other hand, if this money is invested in suitable instruments, the investor can have better returns. Hence, it must be noted that life insurance is not a good investment opportunity.

Which One Should You Opt For?

The answer is easy and comes down to your current needs and requirements and future goals and aspirations. Moreover, it must be noted that while investments will look after you and your family in the short term, insurance will look after you and your dear ones in the long run. You can even consult a credible financial advisor to make a better and more informed decision. 

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Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.