Post Office FD Vs Debt Fund: Where to invest Rs 5 lakh to get more profit..

The choice of investment always depends on the financial condition, goals, and risk-taking ability of the person. In such a situation, when it comes to a lump sum investment of Rs 5 lakh or 10 lakh, it becomes more important for people to choose the right option because such a large amount cannot be invested anywhere. In such a situation, like a bank or post office, an FD has also been a safe and reliable investment option for years. At the same time, in recent years, debt funds have also emerged as a popular option. People consider it an option that gives better returns than an FD. Let us understand where an investment of Rs 5 lakh can give more profit.

Features of Post Office Fixed Deposit (FD)

Security: This is one of the safest investment options as it is backed by the government.

Fixed returns: You get to know the interest rate at the beginning of the investment, which makes it easier to estimate the returns.

Lock-in period: Available for all tenures, such as 1, 2, 3, and 5 years.

Regular interest payment: You can choose to receive interest on a monthly, quarterly, or yearly basis.

How much will be the profit on an investment of 5 lakhs?

Suppose you are investing in a 5-year FD with the post office. This FD is currently getting 7.5% interest. If you invest Rs 5 lakh for 5 years, then you will get 2,24,974 interest in 5 years and a total of Rs 7,24,974.

Features of debt funds

Debt funds are a category of mutual funds. It invests especially in fixed-income securities such as government bonds, corporate bonds, debentures, commercial papers, and treasury bills. Its returns are market-based. Know the features of debt funds.

Diversification: There are many types of debt funds, like liquid funds, ultra-short duration funds, short duration funds, medium duration funds, and long duration funds, thus giving you the opportunity for diversification.

Liquidity: They are more liquid than FDs as you can sell your units on any working day (exit load may apply in some funds).

Professional management: Your money is managed by fund managers who take investment decisions based on market conditions.

Return on investment of Rs 5 lakh

The return of a debt fund is based on performance and may change in the future. On average, many debt funds have given a return of 6-9% in the last few years.

Suppose you invest Rs 5 lakh in it for 5 years and it is getting a return of 9%, then you will get Rs 2,69,311 as interest. In this way, you will get a total of Rs 5,00,000 + 2,69,312 = Rs 7,69,312. Although this example is only approximate, the actual returns will depend on the performance of the fund.

Risk: Debt funds have less risk than equity funds. This includes interest rate risk and credit risk.

Which option to choose?
The choice depends on your individual needs-

Risk appetite
If you do not want to take any risk at all and want 100% protection of your capital, then a post office FD is better for you. If you can take a little risk and want higher returns than FD, then debt funds are a good option.

Investment period
For a short period (less than 3 years), post office FD or short-duration debt funds can be considered. For a long period (more than 3 years), debt funds can be more tax efficient and give better returns due to indexation benefits.

Liquidity
If you may need your money quickly, debt funds (especially liquid funds) provide more liquidity than FDs. FDs may attract a penalty for premature withdrawal.

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