What is the best way to invest Rs 5 Lakh in India?

I have Rs 5 Lakh to invest lumpsum amount. Can some expert suggest me where can I invest?

Pijush Kanti Biswas

Investing your idle money is very important. The sooner you start investing is the better.

Consider some of the options for investing lump-sum amount in best way:

Fixed deposit: 

For low risk investment a fixed deposit in Indian Banks or NBFCs is very good and safe option for investment which offers you anywhere between 6-9% interest per annum, depending on institute and scheme. In addition, you can enjoy a deduction of INR 1,50,000 a year from your taxable income under 80C of Income Tax Act, if you deposit your money for a period 5 years tax saving fixed deposit.

Post Office Monthly Income Scheme (POMIS):

For regular monthly income option at a fixed rate, POMIS is good option. It is low risk investment scheme, having a term of 5 years. You can invest amount of INR 1,500 to INR 4,50,000 in a single holding account and INR 9,00,000 in joint holding account. From April 2016, the interest rate on POMIS is 7.8% per annum, which is payable monthly. So, this scheme is appropriate for a conservative investor.

Mutual funds:

Best investment instruments to invest on, without any prior investment knowledge, are Mutual Funds. A mutual fund is an investment instrument where professionals invest on, various securities like stocks, bonds, money market instruments and many other assets, with investors money giving them a return of 12%-28% per annum depending on investor’s risk appetite.

You will get a diversified portfolio even with a small investment and it is very convenient to buy and sell a mutual fund. Investment amount starts from as low as INR 500 with no upper limit. Mutual fund will give you flexibility to manage your risk appetite, liquidity and various tax benefits under Indian taxation rules.

Among all mutual funds, ELSS (Equity Linked Savings Scheme) offer tax benefits under section 80C of the Income Tax Act having lock-in period of 3 years as compared to the 5-year lock-in period of the other popular tax saving instruments like PPF Account, National Savings certificate, Tax Saving Fixed deposit. Moreover, mutual funds regularly pay out dividends to its investors. The dividend received by the investors from these mutual funds is tax free in the hands of the investors.

Equity markets:

If you have medium to high risk appetite, then Investing in stock market through shares is good option for you which will fetch you a return of 12-15% per annum on an average. High returns of 22%-30% per annum is also reported if you choose to invest on highly risky stocks for longer duration.

Real estate: 

Real estate is a good idea in current situation, when India is on growing trajectory and many new and investor friendly reforms are coming in this sector. You can even expect a double return for a small amount invested in this sector, depending upon the location you invest in and its price appreciation prospects. Giving with just small amount of money, you can check for real estate investment in tier 2 cities instead of tier 1 cities.

Many such schemes are available in the market on which an investor can invest his/her money. To invest always consider these three fundamentals things, risk, liquidity and post-tax returns before investing in any scheme. Always remember, keep your investment expectations real and invest early, invest regularly and invest for long term and not for short term.

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