Do Long-Term Saving Plans Give Better Returns?

Written by : Knowledge Centre Team

2025-12-11

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8 minutes read

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Simran is a 40-year-old woman and a secretary of the owner of one of the biggest firms present in the country. Due to huge debts on his name and a few of the tenders lost by the business, the owner became bankrupt and had to close down. Once a successful owner, Raj was now down in the dumps. Simran on the other hand had accumulated a considerably large wealth over the years in her retirement corpus.

How is it that Simran, the secretary has huge wealth, so much so that she can provide it to her boss to resume the business?

The answer is long-term investments.

Ever since she started working, Simran made it a habit to put a certain sum every year in a long-term investment. This enabled her to accumulate a large fund over some time.

Long-term investments are the type of investment where you invest and hold for a period that is more than 1 year and typically 5-10 years.

How Did Simran get a Good Return?

As discussed Simran amassed a good wealth due to investment in the longer term. She got the advantage of two of the most defining features of long-term investments. These are:

Untouched Investment Growth
Power of Compounding

Untouched Investment Growth- Once you start to invest in a long-term scheme, then it is better to keep your investment intact and not change anything. This allows more time and space for your investment value to grow better.

Simran kept on investing a part of the salary every month and left the investment untouched. She did not withdraw from the funds she was investing neither did she change anything which helped her corpus reach a good value.

However, you should note that not touching your investment does not mean you don’t keep a tab of it.
Power of Compounding- There is a popular saying, The best time to invest was yesterday, the next best time is today. This sums up the gist of the power of compounding returns. The earlier you start investing the more you can benefit from the compounding returns principle. Simran started investing right from the time she started working, this helped her generate good wealth.
Compounding is the benefit you get if you reinvest the interest earned back into your investment. Here is how compounding works.

For example, you have invested Rs 1 lakh in an investment that earns interest of 10%. After 1 year the value of your investment will be Rs 1.1 lakhs. If you don’t take out interest and keep it invested then you will earn interest on 1.1 lakhs. Thus, interest will be 11000. Staying invested for a longer time will give you massive returns.

Why should you Invest Long-term in Savings Plan?

Like Simran in the above case, you as an investor can also reap many benefits if you decide to invest for a longer-term. Here are a few reasons why you should consider a long-term investment

Investing In Higher-Risk Assets

The market is full of volatility. Volatility is often associated with market risk. The more volatility, the more will be the risk in an investment. Generally, the risk goes down in a long-term investment.

So, if you have time and can invest for a longer period, you can consider investing in high-risk assets such as equity funds. Since high risk correlates with a higher return, equities also possess the ability to fetch you greater returns.

Maximizes the Chances of Growth

As told earlier, the risk is higher in the short term. If you jump in and out of your investments, you are more likely to lose money. But if you decide to stick with your investment, it has a very good chance of rising. Especially if you are associated with strong companies.

Also, long-term investments offer you chances to rectify your mistakes and minimize your losses. For example, you decide to buy a stock as you see prices rising, but soon it falls to the same level.

If you are invested for the long term you can add more at a lower price and earn gains when its market performance increases. Long-term investment also helps you get an idea of how a stock will react in the future.

Most Efficient Way of Managing the Risks

Time is a risk-mitigating factor. Long-term investment generally has a time frame of a minimum of 7-10 years. This provides your investment with ample time to grow.

So, the more time you are invested in more is the chances of the risk getting lowered.

The Sensex returns show that the risk keeps on decreasing as the time for investment increases.

For a 1-year timeframe, the risk is 35%. It comes down to just 5 per cent when the investment is held for 10 years.

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Now you know how long-term investments can benefit you, look at some long-term saving plans offered by Canara HSBC Life Insurance:

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Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.

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