Best Investment Plan for 1 Year

The investment plans for 1 year are best to earn higher interest as compared to saving bank account. In this article, we have listed the best investment options for 1 year in India 2019

10 Best Investment Plan for 1 Year

#1. Bank Fixed Deposit

Bank FDs are the most common and safest choice to invest. The interest rate vary on the basis of tenure from bank to bank on the

Kotak Mahindra Bank provides a 7% interest rate on FD for 180 to 269 days.

Pros
  • Secured returns.
  • Easy liquidity at the time of needs
  • FDs can be open online through net banking.
Cons
  • TDS will be deducted for interest earned above Rs 40,000.

Under DICGC rules, each depositor in a bank is insured up to Rs 1 lakh for principal and interest both.

#2. Post Office Time Deposits

Post Office Time Deposits are also a good choice to opt for short term investment.
For one-year TD interest rate is 7%.

Pros
  • Returns are fixed and assured with a sovereign guarantee.
  • Easy to open as penetration of post office is more than banks.
Cons
  • Interest is payable annually but calculated quarterly.
  • Premature withdrawal not allowed. After 6 months withdrawal allowed with a reduced rate of interest.
  • The interest earned is added to one’s income and taxed as per slab.

#3. Fixed Maturity Plan

Fixed maturity plans are close-ended debt mutual funds which have maturity term of 1 year to 3 years.

The duration of debt is aligned with the tenure of the scheme.

FMP invests in CDs, CPs, money market, corporate bond, bank FDs.

Pros
  • FMP offers indexation benefits. Indexation helps to lower capital gains thus the tax is lowered.
  • Returns marginally higher than bank FDs.
Cons
  • Low liquidity. Invest in them when you are sure to hold for the lock-in period.
  • Taxation is similar to debt funds. Gains made under 36 months of holding it is added to one’s income & taxed.

After 36 months gains are taxed at 20% post-indexation.

#4. Liquid Funds

Liquid funds are simply debt mutual funds that invest money in treasury bills, govt securities, and call money.

These funds invest in instruments up to a maturity of 91 days.

Pros
  • Returns are slightly higher than the savings account.
  • Least volatile among all other debt mutual funds.
  • High liquidity. Redeemable within 1-2 days. ICIC Prudential gives instant while Reliance MF provides a debit card.
Cons
  • Before maturity incurs exit load on the fund.
  • Risk is more compared to a savings account, bank FDs.
  • Taxation is similar to debt funds. Gains made under 36 months of holding it is added to one’s income & taxed. After 36 months gains are taxed at 20% post-indexation.

#5. Ultra Short Term Debt Funds

Ultra short-term funds invest in fixed income instruments which are mostly liquid. Unlike liquid funds maturity period is higher than 91 days.

Pros
  • Can be a substitute for bank FD of 90-120 days.
  • Higher yields compared to short term bonds and money market.
  • Changes in interest rate do not affect the value of the fund.
Cons
  • High expenses ratio.
  • Credit and default risk are associated.
  • Taxation is similar to debt funds. Gains made under 36 months of holding it is added to one’s income & taxed. After 36 months gains are taxed at 20% post-indexation.

#6. Arbitrage Mutual Funds

Arbitrage is a type of equity fund which buys security form one market and sells in other markets.

The price difference from buying and selling is profit.

Pros
  • Less risky and offer returns up to 7%.
  • Taxed as equity fund hence more tax efficient when invested for at least 12 months
  • Open-ended funds
  • High liquidity.
Cons
  • High expenses ratio.
  • The payoff is unpredictable. Not very profitable during stable markets.

#7. Recurring Deposit

RDs are a good option if investing for less than a year.

Deposit at regular intervals for a fixed period like 6,9 & 12 months. Interest rate is the same as for fixed deposits.

Pros
  • Secured returns.
  • Easy liquidity at the time of needs
  • RDs can be open online through net banking.
Cons
  • The interest earned is added to one’s income and taxed as per slab.
  • Premature withdrawal with reduced interest.

#8. Savings Account

The safest way to park your money and withdraw at the time of needs.

A savings account gives an interest rate of 3.5% to 7% varies from bank to bank.

DBS bank provides an interest rate of 7% for the amount of Rs 1-2 lakhs.

Pros
  • Secured returns.
  • Withdraw any time with ATM card.
  • Some banks provide online account opening.
Cons
  • Interest earned above Rs 10,000 is liable to tax and TDS will be deducted.
  • Interest rate is less compared to other investing options.

#9. Real Estate

Real estate can also be a good option if you have huge capital.

Pros
  • Open Plot investment gives good return if sold within a year.
  • Return higher than bank FDs, savings.
Cons
  • Tax is applicable on STCG.
  • Huge capital requirement.
  • Highly illiquid.
  • Regulatory risk, Legal risk is associated with real estate.

#10. Fixed Deposits in Small Finance Banks

Small Finance banks are new players in the market and provide better-fixed deposit interest rates than large commercial banks.

Pros
  • Deposit rates up to 8% provided by Fincare SFB which is more than big commercial banks.
  • For a senior citizen, interest goes up to 9.5%
Cons
  • TDS is applicable on the interest earned.
  • SFB branches are not so widespread.

Conclusion

Invest according to your requirements and risk appetite.

If you won’t want to take the risk in any condition it is safe to invest in bank FDs, post office time deposit, savings account. If you can take the risk then you can invest in liquid funds, ultra short term debt funds.

Leave a Comment!