Best Investment Plans for 1 Year for 2025

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When exploring the best investment plans for 1 year, balancing capital safety and liquidity is important. Whether looking at a 1-year investment plan with a high return or wanting to grow your money steadily, the idea is to earn reasonable profits during your chosen timeframe.

While best investment plans in India can vary from equities to hybrids and debt instruments, remember that choosing highly volatile options—like equity or hybrid funds—may not suit a short-term horizon. Likewise, long-duration debt funds might involve higher interest rate risks. As a result, the range of best investment plans that fit a one-year timeframe is often limited, making careful selection crucial.

Benefits of Opting for the Best Investment Plans for 1 Year

Choosing the right short-term investment can offer several advantages:

Stable Returns: Although returns may be moderate, a well-chosen one-year plan can provide steady capital growth without excessive risk.
Quick Access to Funds: High liquidity means you can meet sudden financial needs without disrupting your long-term financial goals.
Lower Risk Exposure: Since you’re investing for only a year, you’re less exposed to market volatility and economic cycles, helping you maintain a relatively stable investment profile.
Easy Portfolio Adjustments: The short-term nature allows you to reassess and adjust your strategy yearly, making it simpler to adapt to changing financial objectives or market conditions.
Tax Clarity: Evaluating tax implications upfront helps you choose an investment that offers solid returns and maximizes tax efficiency in the short term.

Best Investment Plans for 1 Year in 2025

1. Liquid Funds – Best Alternative to Savings Accounts

Liquid funds typically invest in debt instruments that yield a predictable return and mature in 91 days. These underlying securities are of high credit quality. They are money market instruments like T-bills, certificates of deposits, and commercial papers with 91 days of maturity. The NAV of these funds is calculated for 365 days. These funds are highly liquid and do not have any entry or exit loads.

The holding period for the securities is concise; hence, there is no risk associated with these funds. However, the fund value might drop significantly when the underlying asset’s credit rating is suddenly downgraded. This implies that liquid funds are not entirely risk-free. They are best suited for short-term money and offer higher returns than bank savings accounts. Therefore, you can park your idle funds in a bank account using these funds to earn better returns.

Funds To Look:

Recommended: Explore Best Liquid Funds to Start Investing

2. Ultra Short Duration Funds – Best for Parking Excess Money

Ultra-short-duration funds, sometimes known as ultra-short-term funds, are debt funds whose portfolios invest in securities with a maturity period between 3 and 6 months. These securities include money market instruments and fixed-income securities such as treasury bills, commercial papers, and certificates of deposits with maturities below six months.

Moreover, these funds provide reasonable returns with sufficient liquidity. The underlying securities have low maturities, making the fund less sensitive to market movements.

Generally, this fund is suitable for investors who want to park their excess funds for up to 6 months. Consequently, if the fund manager’s strategy is to invest in low-credit-quality securities with an expectation that they will upgrade in the future, it exposes the fund to credit risk.

Funds to Look:

3. Low Duration Funds – Best for STP

Low-duration funds are debt funds that invest in securities with maturity between 6 and 12 months. Unlike liquid funds or ultra-short-term funds, low-duration funds hold assets of longer duration and lower credit quality. Therefore, these funds have higher interest rate risk and credit risk. Moreover, these funds tend to outperform liquid funds as they allow them to take on greater credit and duration exposure.

Low-duration funds can be an alternative to fixed deposits as they can enter and exit anytime. These funds are suitable for low-risk investors for short-term financial goals for 6-12 months. Furthermore, you can invest in these funds for Systematic Transfer Plans (STPs). Instead of investing a lump sum in equity funds, you can invest in a low-duration fund and use STP to transfer a certain amount of money to an equity fund. This way, you can earn returns on debt fund investments.

Funds to Look:

4. Money Market Funds – Exposure to money market instruments

Money market mutual funds invest in securities with a maturity period of around one year. These funds invest in certificates of deposits, commercial papers, treasury bills, and repurchase agreements. In other words, the investments are generally in fixed-income-generating securities, which is why these securities are called money market instruments.

Money market instruments are highly liquid as they have short maturities. They are also highly secure as the issuers of these instruments have a strong credit rating. Also, there is no credit risk like low-duration funds. Hence, investors can consider these funds to manage short-term cash needs for one year. However, these funds do not guarantee returns, but the returns are predictable. Moreover, the returns are higher than bank fixed deposits, allowing investors to make money from the surplus cash.

Funds to Look:

5. Arbitrage Funds – Exposure to equity market in short term

Arbitrage funds are a type of equity-oriented hybrid mutual fund that profit from the difference in pricing of securities in two different markets. The securities are bought at a lower cost from the cash market and sold at a higher price in the futures market. The difference is the profit earned through arbitrage. Therefore, arbitrage funds perform well in a fluctuating market. However, these funds cannot take such opportunities during a stable market. They invest in bonds, splitting the asset allocation between two asset classes.

The difference in pricing in the cash and futures markets is significantly less. These funds invest in many opportunities per day to make profits. The tax for equity arbitrage funds is similar to equity mutual funds. Arbitrage funds are best suited for investors looking for short-term equity exposure. The risk profile is similar to debt funds. Therefore, investors seeking returns from volatile markets can invest in these funds through the SIP or lumpsum route.

Funds to Look:

6. Floater Funds – Best for Short Term Investment

Floater Fund is a debt fund that invests more than 65% of its total assets in floating rate instruments. A floating rate instrument can be corporate bonds, debt instruments, or loans from companies with variable or floating interest rates. In other words, the floater funds do not have a fixed coupon rate.

Any change in the repo rate by the Reserve Bank of India (RBI) affects the interest rate of any debt instrument. Every floating-rate debt instrument has a specific benchmark. However, the interest rate of these instruments changes in accordance with a change in the benchmark rate.

As the market lending repo rate increases, the interest rate of these floater funds also increases and vice versa. This change is reflected in the NAV, allowing investors to earn higher returns. Therefore, this fund aims to benefit from the fluctuating interest rate scenario. You can invest in floater funds when the interest rates in the country rise.

Floater funds have credit risk attached to them as there can be default payment of underlying security. Analyzing the country’s market economy before investing in these funds is essential. Hence, investors can match their short-term goals for one year and capitalize on the rising interest rate.

Funds to Look:

7. Fixed Deposits – Best Risk Free Short Term Investment

A fixed deposit is a traditional financial instrument offered by banks, post offices, or NBFCs (Non-Banking Financial Companies). A lump sum is deposited in a bank fixed deposit for a specific period, ranging from 7 days to several years, at a predetermined interest rate. The fixed deposit interest rate offered is higher than that of a regular savings account.

Fixed deposits are safe investment instruments where investors can choose to invest and decide the investment tenure based on their financial goals. They offer guaranteed returns on investment. Hence, investors seeking to earn assured returns without risk can invest in fixed deposits. It offers capital protection and regular interest to meet monthly expenses. You can easily withdraw from your FD account. However, breaking a fixed deposit before the completion of its tenure is subject to certain charges.

Schemes to Look:

Recommended: Compare FD Interest Rates for All Banks

Best SBI Investment Plans for 1 Year in 2025

Investment Plan	Interest Rate
SBI Liquid Fund	6.70% p.a.
SBI Equity Savings fund	13.10% p.a.
SBI Large & Midcap Fund	18.10% p.a.
SBI Fixed Deposit	7.10% p.a.
SBI Recurring Deposit	6.80% p.a.

Best HDFC Investment Plans for 1 Year in 2025

Investment Plan	Interest Rate
HDFC Liquid Fund	6.70% p.a.
HDFC Hybrid Debt Fund	12.10% p.a.
HDFC Large and Mid Cap Fund	24.40% p.a.
HDFC Fixed Deposit	7.10% p.a.
HDFC Recurring Deposit	7.10% p.a.

Things to Keep in Mind While Choosing the Best Investment Plans for 1 Year

The following are the factors to consider while investing for 1 year –

Risk: Short-term investments generally carry less risk than those you hold for several years. Still, not all one-year options are created equal. For instance, a fixed deposit is a safer choice than a short-term debt fund because it guarantees returns. Always consider how much risk you’re comfortable taking when aiming for a 1-year investment plan with a high return.
Diversification: When looking for the best investment plans in India that suit a one-year horizon, your diversification options might be limited. It’s unlike long-term investing, where you can shuffle between various alternatives. However, you can still create a modest spread by placing money in a few select instruments. This approach helps ensure that not all your funds are concentrated in a single investment and encourages a balanced portfolio.
Liquidity: One major advantage of most best investment plans for 1 year is their high liquidity. You can often access your money quickly if unexpected expenses crop up. For example, parking surplus funds in certain liquid investments allow immediate or near-immediate withdrawals. Some options credit your bank account immediately up to a specific limit, while others may take a business day (T+1) to process your withdrawal.
Flexibility: Short-term investments are often more flexible. Since the capital involved is usually smaller than long-term investments, you can channel extra funds into other alternatives as opportunities arise. This flexibility ensures your money works optimally, even within a shorter time frame.
Tax Efficiency: Since the holding period for these debt funds is less than three years, short-term capital gains (STCG) are applicable where the profits are taxable at your income tax slab rate. Also, it would help if you calculated the post-tax returns from your investment to understand how much profit you earn with your earnings slab. Therefore, it is essential to evaluate the tax efficiency of the investment alternative while choosing the best investment plans for 1 year.

Conclusion

To sum up, it is essential to understand the immediate short term goal while picking the best investment plan for 1 year. Also, understanding the post-tax return or the profits you receive keeping in mind your tax slab rate.
Furthermore, since the time horizon is less than 12 months, selecting a safe investment option is better where the risk of losing capital is minimal. Therefore, prioritising safety for the short term is better than investing in risky instruments.

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