Saturday, July 13, 2019

I Have Rs. 5 Lakhs Cash – What Should I Do With It?

  Tim       Saturday, July 13, 2019
I have Rs 5 lakhs cash, what should I do with it?

A sum of Rs 5 lakhs is a sizeable capital to earn a good return. A potential investor with such an amount of money is usually under the dilemma of what the right option will be – where he can earn as high as possible and not have a high risk of losing capital. There are various things you can do with Rs 5 lakhs to multiply it. 


            Equity -Oriented (Riskiest)

        Stocks and Equities and ETFs – Large-caps, mid-caps and small caps
        Various Mutual Funds – Equity, Debt, Hybrid
        Derivatives – Futures & options

Fixed Income (Least Risky)

        Saving Schemes such as Public Provident Fund (PPF), SCSS and others
        Bonds – government and private
        Fixed Deposits – bank and company FDs

Alternative (Low to Medium Risk)

        Real estate – commercial and residential

        Bullion – gold, silver, platinum




Comparison of Investment Options

The next thing you need to decide is which of these you can invest in with the following criteria. Let us do a comparison -

1)     High ROI 

      Equity and mutual funds are known for high ROI over a long period of time. However, this return has no fixed timelines. Bonds and other medium risk options are dependent upon the market sentiment when you are going to sell the instrument. E.g., Even if you have been holding a real estate for 10 years and its value has been increasing, the time period in which you are going to sell is important. If there is a real estate crash, you will end up receiving a lower ROI.

Low-risk options such as FDs give a fixed rate of return which you know at the beginning of the investment. Company FDs offer the best returns as seen below –

Investor
Interest rates
Amount
Tenor
Return
ROI
New customer
8.6%
₹5 lakhs
5 years
₹2,55,299
51%
Existing customers
8.85%
₹5 lakhs
5 years
₹2,64,033
53%
Senior Citizens
8.95%
₹5 lakhs
5 years
₹2,67,549
54%

Among other small saving schemes – the rate of interest is fixed for a year and usually does not change much.

2)      Safety, stability, and guarantee

All low-risk investment options are great for safety and stability of returns. You can be assured of your principal and interest repayment. If you are keen on these then going for company FDs then you can consider Bajaj Finance FD which not offers stable returns but a high ROI.

Options with medium to high returns are great for people willing to risk their Rs. 5 lakh capital to an extent. Analyze your risk appetite – what is the purpose of investment, how much income do you have, age, and other factors and then go for these options.

3)      Ease of investing

You can invest in most of these options easily, but for bank related and government schemes, you need to go for verification and documentation. NBFCs like Bajaj Finance offer a completely online process for management and tracking of FD accounts. You can also use the Online fixed deposit interest calculator to understand the ROI on your capital of Rs. 5 lakhs.

4)      Availability of credit

Also if you want to avail a loan against FD, when there are no liquid funds available, fixed deposits can be your savior. By investing in Bajaj Finance FD, you can easily avail loan up to 75% of the maturity amount. This facility is not available in any of the other investment options except PPF.

5)      Other beneficial features

Most high-risk options do not have any assurance of returns or option to choose the frequency of interest payouts. In FDs, you can choose periodic interest payouts (monthly, quarterly, and half-yearly). The option of cumulative and non-cumulative interest payouts is not available with most options except FDs. You can choose to get your interest earnings either periodically or at the end of the maturity period.

Investing in Bajaj Finance FD is risk-free as it has ICRA’s MAAA and CRISIL’s FAAA ratings. Such high credibility ratings imply that your investment amount of Rs. 5 lakhs is never at risk.



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