Updated on 3 Feb 2020.
The investment plans for 1 year are best to earn higher interest as compared to a bank savings account. In this article, we have listed the best investment options for 1 year in India 2020.
Also Read- 11 Best Investment Plans in India
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- 10 Best Investment Plan for 1 Year in India
10 Best Investment Plan for 1 Year in India
#1. Bank Fixed Deposits (FDs)
Bank FDs are the most common and safest choice to invest. A fixed deposit offers you to earn more interest as compared to your savings account. The interest rate varies on the basis of tenure of FD and bank as well.
Lakshmi Vilas Bank provides a high-interest rate of 7.50% on FD for 365 days or above.
You can also read my article to know the best fixed deposits rates in India.
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 for you to opt for short term investment.
For one-year TD interest rate is 6.9%. Again you get better returns than savings account where interest rate would be 3-4%.
#3. Fixed Maturity Plan (FMP)
Fixed maturity plans are close-ended debt mutual funds which have maturity term of 30 days to 5 years. But you can also invest your money for 30 days, 180 days or 365 days.
The duration of debt is aligned with the tenure of the scheme.
FMP invests in debt insturments like debentures, Certificate of deposits, Commercial papers, money market, govt. or corporate bonds, and bank FDs.
Since, Debt instruments are mostly govt. backed schemes or issued by large companies, market risk is lower as compared to equities but they give better returns than FDs.
After 36 months gains are taxed at 20% post-indexation.
Also Read – 10 best debt mutual funds in India.
#4. Liquid Funds
Liquid funds are simply debt mutual funds that invest money in treasury bills, govt securities, and call money. These are open-ended in nature that is offered through a fund company that sells directly to the investor.
You can use a Systematic Investment Plan (SIP) to invest money in Liquid Funds, this gives more flexibility to liquid funds.
These funds invest in instruments up to a maturity of 91 days.
#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 that ranges from a week to 18 months.
You should invest in Ultra S-T Funds if you want to invest between 6 months to 1 year. You can expect a return between 6-9 percent.
#6. Arbitrage Mutual Funds
Arbitrage is a type of equity fund which buys a security from one market and sells in other markets. In simple words, the fund manager buys shares from the cash stock market and sells it in the futures or derivatives markets.
You earn, the difference in the cost price and the selling price, as a return. Means, the price difference from buying and selling is your profit.
Assume that a company XYZ trades in the cash market at Rs.1,000 and in the future market at Rs.1,020. The fund manager buys XYZ shares from the cash market at Rs.1,000 and initiates a futures contract to sell the shares at Rs.1,020. In the end of the month, when the prices are matching, the fund manager will sell the shares in the futures market and gets a risk-free profit of Rs.20 per share.
#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. The interest rate is the same as for fixed deposits.
It is ideal for salaried people or who want to start the habit of regular investing without taking any risk.
#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.
#9. Real Estate
Real estate can also be a good option if you have huge capital. You must know the area, location of property and infrastructure developments in nearby areas before investing in real estate.
It’s not easy to sell the property quickly in case of urgency, but you can also opt for rental income from your property.
The average return from a real estate investment is around 11% per year.
#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. You can get returns around 8%-9%.
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.