Having a successful investment portfolio is a dream for every investor. To achieve this, it's important to know your investment goals and align your investments accordingly.
This includes dividing them based on their time frames for better planning. Short-term investments need to be liquid, while medium-term investments, like those for 5 years, should balance liquidity and growth. If you're looking for investment options for a 5-year period, here are some popular choices to start your investment journey.
The list of popular investment options with a tenure of 5 years has both traditional as well as dynamic investment options to cater to every category of investors.
ELSS (Equity Linked Savings Scheme)
ELSS is a type of mutual fund that has a 3-year lock-in period and offers tax benefits under Section 80C up to Rs. 1,50,000. It also provides exemptions on long-term capital gains up to Rs. 1,00,000; gains beyond this are taxed at 10%. ELSS, along with other mutual funds, offers flexible investment options like SIPs, making them accessible for investors with limited capital.
NSC
The National Savings Certificate (NSC) has become a popular investment choice recently. This government-backed savings scheme offers fixed income and tax savings for residents in India. With a fixed tenure of 5 years, it provides an annual interest rate of 7.7%. You can start investing in NSC with as little as Rs. 1,000, and there's no upper limit on how much you can invest. The scheme also offers tax benefits under section 80C, allowing deductions up to Rs. 1,50,000. However, the interest earned from NSC is taxable.
Post Office Time Deposit
The Post Office Time Deposit scheme is open to all Indian citizens over the age of 10, with guardians able to invest on behalf of younger children. The minimum deposit is just Rs. 1,000, making it accessible to many. This scheme is designed to reach even rural and remote areas of India. It offers tax-saving benefits under Section 80C and allows flexible lock-in periods. Investors can withdraw funds as needed, and interest can be received in cash or by cheque. The return rates range from 6.9% to 7.7%, depending on the investment amount, with a maximum investment limit of Rs. 1,50,000.
FDs, and RDs
Bank Fixed Deposits (FDs) and Recurring Deposits (RDs) are traditional but attractive options for medium to long-term investments. With recent interest rate hikes, these options are becoming more popular among all age groups, especially seniors who receive extra interest from banks. FDs and RDs offer flexible investment terms and tax benefits with 5-year tax-saving FDs, which allow deductions under section 80C up to Rs. 1,50,000 but have a 5-year lock-in period. However, the interest earned from FDs and RDs is taxable according to the investor's applicable tax rate.
ULIPs (Unit Linked Insurance Plans)
ULIPs combine life insurance with investments in equity and debt funds. Part of the premium goes towards life insurance, and the rest is invested. They provide financial security and liquidity, with tax benefits under Sections 80C and 10(10D). ULIPs have a 5-year lock-in period and allow switching between investment funds. They are available to resident Indians aged 7 to 70 years.
FMPs (Fixed Maturity Plans)
FMPs are close-ended debt mutual funds with fixed tenures of 1 to 5 years, investing in fixed-income instruments like government and corporate bonds. They offer predictable returns and are suitable for low to moderately risk-averse investors. FMPs have preset maturity dates and come with a lock-in period. Those with tenures over 3 years enjoy tax advantages, with interest taxed as long-term capital gains at 20% of the indexed value.
When selecting a 5-year investment plan, it's crucial to set clear financial goals, assess future expenses, and ensure they match your financial capacity. Investors should also consider factors like dependents, current insurance coverage, risk tolerance, anticipated returns, the reputation of the provider, and the terms and conditions of the plan to make an informed decision.
(This article is part of IndiaDotCom Pvt Ltd’s Consumer Connect Initiative, a paid publication programme. IDPL claims no editorial involvement and assumes no responsibility, liability or claims for any errors or omissions in the content of the article. The IDPL Editorial team is not responsible for this content.)
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