Money Tips: Have 10 lakh rupees in hand? Here are the best investment plans for 1, 3, and 5 years – get hefty returns..
Often, the biggest question people face regarding investments arises when they have a large lump sum of money. Let's say you have Rs. 10 lakh. Now the question is, should you let it sit idle in the bank or invest it wisely so that the money grows and remains safe?
The good news is that with proper planning, there are various smart investment options available for different time horizons – 1 year, 3 years, and 5 years. Let's understand how to invest Rs. 10 lakh effectively in the short and long term through bonds, mutual funds, and ETFs.
First, determine your goal and time horizon.
Before investing, it's crucial to understand when you might need the money. If you need it within the next year, it's wise to keep the risk low. A 3-year timeframe calls for a more balanced approach, while for 5 years or more, you can focus more on growth. The longer the time horizon, the better the benefit of compounding.
Best Investment Plan for 1 Year
If you might need the Rs. 10 lakh within a year, the priority should be safety and stability. Avoiding high-risk investments is advisable in such a situation. Short-term bond funds or liquid funds can be a good option. The money remains relatively safe in these, and you can get slightly better returns than a bank FD. Additionally, short-duration ETFs are also an option, where the money is invested in government or strong corporate bonds.
During this period, it's considered wise to stay away from equity-based mutual funds or stock ETFs, as market fluctuations in the short term can lead to losses.
Smart and Balanced Strategy for 3 Years
A three-year timeframe is where you neither want to be completely safe nor take excessive risks. A balanced approach is considered best here. You can divide the Rs. 10 lakh into three parts. One portion can be invested in short-to-medium term bond funds or debt ETFs, another portion in hybrid mutual funds, and the third portion in equity ETFs or index funds based on large-cap stocks.
This kind of mix provides stability while also offering the potential for better returns through equities. It also allows time to recover from minor market fluctuations over three years.
Long-Term Growth Plan for 5 Years
If you have five years or more, this is the time when your money can work hardest for you. The magic of equities is most effective in the long term. Over this period, a significant portion of ₹10 lakh can be invested in equity mutual funds and ETFs. Index funds, large-cap ETFs, and multi-cap mutual funds are considered good options for the long term. Keeping a small portion in debt funds or bond ETFs adds stability to the portfolio.
The biggest advantage in the long term is compounding, where you earn returns on your returns. This is why returns over five years can be significantly higher than those over one or three years.
Invest all at once or gradually?
If the market is already quite high and you are risk-averse, instead of investing the entire amount at once, a portion can be invested through SIPs (Systematic Investment Plans). This reduces the impact of market volatility and also lowers mental stress.
The Most Important Thing in Investing
Regardless of the investment horizon, the most important things are discipline and strategy. Frequently changing your plan and making hasty decisions in pursuit of higher profits can lead to losses. Remember that the right asset allocation, timing, and strategy are the keys to unlocking good returns on your investment.
Disclaimer: This content has been sourced and edited from Zee Business. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.
