Where to Invest 5 lakhs for 1 year?

 A one-year plan for investments is what you're searching for. Do you wish to invest your money for only one year, or are you one of those investors? If the answer is yes, you shouldn't worry because several investment options exist for a year. Numerous factors, such as your children's marriage or their further education, may cause you to desire to end your investment strategy in only one year. 

Clearly, neither an equity fund nor any hybrid fund can be used when discussing an investment horizon of one year. Long-term debt holdings are not an option in this case. Even when invested in debt funds, the risk associated with interest rates would be too great. Although there aren't many selections, there are still enough to choose from.

Investment Plan: Allocating 5 Lakhs for a 1-Year Duration

The following are some reliable investing choices mutual fund investors have for a one-year investment horizon.

1. Fixed Deposits At The Bank

You may invest your money in a bank's fixed deposit (FD) for a limited period, such as a year, and it is one of the most secure one-time investment plans available. The banks participating are the basis for claiming it is the safest. Most of the time, individuals invest in government-run banks, where their financial information is kept secure. 

Because various banks provide varied periods of deposits, you can invest with bank FDs for as long as 6, 9, or 12 months. When such deposits mature, they can be renewed, allowing the money to be invested if it is not immediately needed. 

You may choose from alternatives for investing, such as month-to-month, half-annually, quarterly, and yearly. You can select a quarterly, month-to-month, annual, half-annual, or cumulative investment choice, depending on your needs. 

Banks now provide an annual interest rate of about 6.5% on FDs for terms lasting 12 months or more. For older folks, this interest rate is raised by 0.5%. Tax deductions are available for interest paid on FDs. But it is contingent upon your salary and your pay grade.

2. Liquid Funds

One of the most common ways to store short-term cash for up to a year is through these arrangements. Most of the time, these liquid funds invest in financial securities with a 90-day maturity. These funds are ideal for short-term parking money since they have a short holding duration and carry no price risk. These liquid investments in the Indian marketplace have the best performance.

3. Short-Term Investments

The fact that these funds invest based on length rather than a term to maturity, making them better suited for maturity matching, has also contributed to their rising popularity. The ultra-short-term funds usually invest in debt instruments with three to six months maturities. These ultra-short Duration Funds have had outstanding performance.

4. Recurring Deposits

Investments in this type of deposit must be made consistently over a certain period, with a lump sum maturity charge. The Recurring Deposit (RD) accounts may often be opened online with any bank. You can create an RD for a year to accomplish short-term objectives. It can be saving money for a certain purchase or giving a lump sum present to a close friend or family member. 

You may do this and put down a certain amount each month for a year, which you can then spend. Both three and six months are acceptable opening periods for an RD. However, there won't be any interest paid to you if you decide to terminate the loan within a month for whatever reason. 

The rate of return is often identical to the interest rate of an ordinary bank FD. Since the tax is subtracted from the interest earned, TDS may be taken out if the interest earned exceeds ten thousand rupees.

5. Low-Duration Funds

The low-duration funds, like high-duration funds, invest in assets depending on duration. They invest in assets with a tenure of 6 to 12 months. Additionally, they are well suited for the storage of cash for up to a year. The best low-duration funds are listed below.

6. Term Deposits in Post Office

Deposits made at the post office are among the safest investing possibilities. For a period of one, two, three, or five years, you can deposit money in the post office. You can only invest money in a rapid-term transaction for a period of one year. The interest is paid yearly, and early withdrawal is permitted after the first six months. 

In these strategies, the returns are set. For a short-term plan, such as an investment strategy for a year, you can make contributions for up to 12 months; however, the interest is computed quarterly and paid annually. Currently, the interest rate on Post Office accounts is 6.8% to 7.5% for terms ranging from one to five years. The interest rate collected from such insurance is taxed since it is added to your income.

7. Money Market Funds

Most of the time, these money market mutual funds invest in financial securities with a maximum maturity of one year. The majority of money markets are risk-free and have high liquidity. Contrary to duration funds, which have some credit risk, there isn't any credit risk in this situation. Top performers are listed here.

8. Plans with a Fixed Maturity

These debt mutual funds have a closed-end structure. The fund's portfolio provides consistent earnings. It might last anywhere from one month and five years. Fixed Maturity Funds are relatively liquid. When you are sure you can secure the funds for that period, it is advised to invest in such one-time investment programs. 

Fixed Mutual Funds insulate you from market changes by focusing on debt-oriented investments that offer steady returns over a short maturity period. The returns in FMP, however, are not fixed nor guaranteed. 

You must pay taxes on the earnings you achieve over the course of 36 months since they are regarded as profits. But after 36 months, earnings are subject to a rate of taxation of 20%

9. Floater Funds

Debt funds that at least sixty-five percent of their assets are allocated to floating-rate bonds are known as floater funds. These bonds' interest payments fluctuate with changes in the economy's interest rates. A regular rate reset to maintain them in line with market rates. These funds work best for short-term investments when rates of return are rising. These standouts are listed below.

10. Debt Mutual Funds

Debt funds are perfect for individuals who need daily earnings but don't mind taking a little risk. Debt investments are less unstable than equity investments since they don't carry as much trouble. Debt funds outperform equities mutual funds when it comes to safety. 

Both consistency and confidence in the return are lacking. Your current earning potential can be upwards of 10% annually. Your income is increased by your earnings in the first 36 months and taxed accordingly. Profits gained, however, are subject to post-indexation 20% taxation on profits made after 36 months. The units are excessive, given the amounts available, and can be redeemed quickly.

Things to Think About Before You Invest

Take into account the following elements before choosing that one-time investing strategy:

● Risk

Due to their shorter maturity times, all short-term investments typically have lower chance segments than their long-term counterparts. In the usually secure temporary investment option category, it was said that some transitory short-term assets could be less secure than others. T-bills, for instance, are safer than debt funds from the profitability perspective.

● Diversification

It is one important reason why short-term investments primarily receive all the credit. It provides an option so that you may occasionally switch your investment. Additionally, unlike a long-term investment, the money invested is not locked in, and the investor can invest the profits in other options if necessary.

Conclusion

These are the top investment plans in India for those with a one-year investing horizon or shorter. You must realize before investing that the expected post-tax profit is minimal since the premium or perks are familiarized with the advantages and taxed according to your income bracket.

Choose secure investment solutions where there is less risk of money lost if your financing horizon is anywhere up to a year. Make the best decision of a one-time financial plan daily and make it a habit to choose security over returns when financing is available for a shorter period. If you are still confused, contact the experts at Okbima. Find the investment plan that best suits your needs.