What are the Best Investment Plans for 5 years in India? 5-year investment can be a smart investment option to achieve your financial goal in 5 years.
Here, in this article, we have shortlisted a 5-year investment plan based on their risk profile, investment amount and return.
Table of Contents
Understanding Investment Planning
Investment Planning is the process of shortlisting your future financial goals and aligning and planning your investments with these future goals.
Investment Planning starts with assessing your Financial Goals. Prioritize them based on their importance and plan your investments.
Read more: Why Should You Opt For Goal Based Investment Planning?
How To Set Financial Goals SMARTLY
Factors to consider before investing
Although there can be multiple factors that one should take care of before investing. But a few most important factors are enlisted here.
- Liquidity – ease of withdrawal money
- Risk associated with scheme
- Investment Duration
- Your Investment goal matching
- Taxability of scheme
- Expense ratio of the scheme
- Investment charges, if applicable
Understanding investment is important
We all like huge bank balances, to be able to buy anything we want and to live a good life. But only saving money can not fulfil future needs. Therefore, investing is important to grow our money to multifold. With mindful investing money compounds and helps us become wealthy.
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Benefits of long-term investment planning
Long-term investment planning HELPS to grow money in value. It is appreciated substantially.
WHY?
Because the compounding formulae is P*(1+r/nt)^t
P stands for principal, r refers to Rate of investment, t refers to time.
Please NOTE that time is exponential, which that means as time increases money also grows beyond your expectations.
Apart from money growth, there are multiple other benefits such as achievement of long-term goals, tax benefits, low volatility, tax saving, power of compounding etc.
How to create a personalized investment plan
- STEP 1: Set SMART Financial Goals
- STEP 2: Divide goals in short, mid & Long Term goals
- STEP 3: Analyze your risk taking capacity, life stage and market outlook
- STEP 4: Set equity and debt ratio
- STEP 5: Choose funds based on your duration
- STEP 6: Diversification
- STEP 7: Monitor your investments
Best investment options for 5 years in India
Bank/Corporate Fixed Deposit
Bank Fixed Deposit is an easy and convenient way to invest money for 5 years. One can take tax deduction U/S 80 C with bank/ Corporate FD.
Corporate FD offer some better returns as compared to bank Fd but possesses higher risk as compared to bank counterparts.
Post Office Fixed Deposit
Time deposit or Fixed deposit post office is available for subscription for a duration of 1 yr, 2 yr, 3 yr and 5 years only. You can deposit money and enjoy its benefits.
Post Office NSC
PO NSC is a 5-year deposit scheme. Any number of certificates can be purchased. Just deposit the lump sum amount and take maturity post-completion of 5 years. Simplicity, safety and riskless tax benefits is the beauty of NSC.
Post Office Monthly Income Scheme
POMIS provide monthly income to its holder. One can deposit a lump sum amount and take monthly income from the next month. The maximum deposit amount is Rs 9 lac for a single user but if you open the account in a joint name then a maximum 15 lac can be deposited.
Post Office Recurring Deposit
Post Office Recurring Deposit is a monthly deposit scheme of the post office. Here, you pay a fixed amount ( chosen at the beginning of the period) each month for 5 years. At maturity, the lumpsum amount is paid back to you.
Fixed Maturity Plan
Fixed Maturity Plan (FMP) is a fixed tenure mutual fund scheme, that invests its corpus in debt instruments maturing in line with the tenure of the scheme.
The tenure of an FMP can vary between a few months to a few years.
Senior Citizen Saving Scheme
Post Office SCSS is a superb income scheme for senior citizens. The scheme provides quarterly interest payout.
A senior citizen can deposit a maximum of Rs 30 lac and take a quarterly payout from SCSS. Post completion of this period one can extend the scheme for another 3 years or buy a new SCSS scheme at prevailing interest rate.
Large Cap Mutual Fund
The Large-cap equity fund invests at least 80% investment in large-cap stocks. This Large cap mutual fund seeks long-term capital appreciation. Large Cap mutual funds bear lower risk as compared to other mutual funds since they invest primarily in large-cap or giant stocks.
Hybrid Mutual Fund
Hybrid funds Invest in a mix of equities and debt securities. There are a variety of hybrid funds available such as Conservative Hybrid Funds, Balanced Hybrid Funds, Aggressive Hybrid Funds, Dynamic Asset Allocation or Balanced Advantage Funds, Multi -Asset Allocation Funds, Arbitrage Funds and Equity Savings funds.
Multi-Asset Allocation Mutual Fund
These funds Invest in at least 3 asset classes with a minimum allocation of at least 10% in each asset class. Thus possess a lower risk.
| –Best 5 Year Investment Option | Mode of Investment | Expected Annual Return | Minimum Investment Amount | Maximum Investment Amount | Lock in Period | Risk |
| Bank/Corporate Fixed Deposit | One Time investment | 5.5%-8% | Rs.1000 | No limit | 5 years | Low |
| Post Office Fixed Deposit | 5.5%-8% | Rs.1000 | No limit | 5 years | Low | |
| Post Office NSC | 7%-8% | Rs.1000 | No limit | 5 years | Low | |
| Fixed Maturity Plan | 6%-10% | Rs. 5000 | No limit | 3-5 years | Low | |
| Senior Citizen Saving Scheme | 7-9% | Rs.1000 | 30 lakh | 5 years | Low | |
| Post Office Monthly Income Scheme | 7.6% | Rs.1000 | 9 lac for single investor/ 15 lac in joint holding | 5 years | Low | |
| Large Cap Mutual Fund | One Time / Monthly SIP | 10%-12% | Rs.500/Rs 5000 | No Limit | No lock-in | Medium to high |
| Hybrid Mutual Fund | 8%-12% | Rs.500/Rs 5000 | No Limit | No lock-in | Medium | |
| Multi Asset Allocation Fund | 8%-10% | Rs.500/Rs 5000 | No Limit | No lock-in | Medium | |
| Recurring Deposit | Monthly deposit Scheme | 6%-8% | Rs.100 | No Limit | 5 years | Low |
Conclusion
You can choose five year investment option based on your own requirements such as one time investment or recurring investment or if you require income from your money. All best investment options for 5 year are given.
Taking the first steps towards long-term financial success.
You can always work with a Certified Financial planner and plan your finances, including Emergency funding, building a corpus for house purchase, and taking care of your health needs so that you can plan a better retirement income in your second inning, leading to a more secure and financially stable retirement.
