We all invest to generate returns. Sometimes we have lumpsum funds available, and sometimes we like to invest a small amount regularly. One time investment plans are schemes that allow you to invest a lump sum amount in one go. One time investment schemes include PPF, NPS, FD, and equity MFs. There are low-risk schemes like debt funds, FD, PPF, and NSC and high-risk schemes like equity MFs. Thus, the scheme choice primarily depends on your investment horizon and risk tolerance levels. Following are the best one time investment plan:
1. Mutual Fund Schemes
A mutual fund pools capital from investors to purchase equity and debt securities. It strategically invests in stocks, bonds, government securities, and other assets. A portfolio manager who has the market knowledge and expertise manage mutual funds.
Equity mutual funds allocate at least 65% of their total assets to stocks. Because these funds invest exclusively in equities, they carry a substantial amount of risk. Additionally, these funds have the potential to generate significant returns for their investors over the long term.
Mutual funds are appropriate for nearly every type of investor. There are options for investors with low or high-risk tolerance levels. Additionally, for long, medium, or short duration. Mutual funds permit both lump sum (one time investment plan) and SIP investments.
Consider investing in equities mutual funds if you want to achieve your financial goals through long-term investing. Long-term investments will assist in smoothing out market volatility and have the potential to yield greater profits. Mutual funds also generate better returns on short-term investments than fixed deposits or savings accounts.
Recommended: Explore Best Mutual Funds to Start Investing
Debt Mutual Funds
Investing in debt funds is to earn a consistent income and grow money for short-term needs. Debt funds invest the majority of their pooled capital in debt or fixed-income securities like corporate bonds, debentures, government securities, and money market instruments. The debt issuer promises investors a predictable and consistent interest rate. Therefore, when you invest in debt funds, you indirectly lend money to the corporation/ government that issued the debt.
Debt funds are a secure one time investment plan aiming to earn a higher yield than bank fixed deposits. They accomplish this by investing in various securities based on their credit ratings. The credit rating indicates the creditworthiness of the issuer. A better credit rating indicates that the issuer is more likely to pay interest on a consistent basis and return the principal at maturity.
Debt funds are suitable for risk-averse investors with short to medium investment horizons. Thus, suited for financial goals that require regular money, such as loan repayment, automobile purchase, or vacation fund. Furthermore, debt funds offer good diversification to your investment portfolio. Rather than investing the entire sum in equities, you can diversify and reduce risk by investing in debt funds. The debt component effectively mitigates the negative risk of returns and reduces the portfolio’s total risk. Here are few popular funds.
- ICICI Prudential Liquid Fund (G)
- HDFC Floating Rate Debt Wholesale Plan (G)
- Aditya Birla Sun Life Savings Fund (G)
- HDFC Overnight fund (G)
Opt for SWP Plans in Mutual Funds
An SWP in a mutual fund permits you to redeem your mutual fund investments in instalments. A systematic withdrawal plan allows you to create your own cash flows according to your needs. You can also choose between withdrawing only capital gains from investments or a set amount.
SWP is an excellent technique for keeping your money invested in mutual fund schemes while earning a steady income and return. The withdrawals can potentially be reinvested in other mutual funds or used for other purposes like loan repayments, covering monthly expenses, etc. If you reinvest the cash, you have the opportunity to diversify your portfolio of investments.
Suppose you’ve invested a sum of money in an equity mutual fund, whose current value is INR 20 Lakh. If you want a monthly return on your investments. Then, you will submit an SWP application from your fund. You can opt for INR 20,000 per month in your bank account for 100 months.
SWP plans are suitable for investors seeking regular income and those who are investing for their post-retirement. A long-term investment in a mutual fund with a well-planned SWP can be similar to a pension. Having an SWP will help you generate regular income during no-income days, and you can live without financial stress.
2. Invest in Gold ETFs
Gold Exchange-traded funds (ETFs) invest in gold bullion. These ETFs are passive investments that track domestic gold prices. They are an alternative to purchasing actual gold. They can be obtained in digital format. Each Gold ETF unit is equal to one gram of gold and is backed by gold with a purity of 99.5%. Gold exchange-traded funds trade on stock exchanges. Due to the fact that the purchase and redemption occur on an exchange, a demat account and a trading account are necessary to purchase and sell them.
One can buy and sell Gold ETFs in cash rather than gold. Consequently, all transactions are entirely visible. Dematerialized gold ETF units are retained in your demat account upon purchase. The expense ratio for Gold ETFs is capped at 1%. In addition, there are transaction and brokerage fees to consider. Consequently, there are no added storage or transporting costs or theft risks.
Gold exchange-traded funds are suitable for investors seeking to diversify their portfolios and desire exposure to gold while participating in the market. Gold ETFs are backed by gold with a purity of 99.5%, so they are low-risk investments. Therefore, they are suitable for those seeking low-risk investments.
Furthermore, Gold ETFs lower the risk and costs associated with gold storage. Moreover, they are less taxed than actual gold. Therefore, individuals who want to invest in gold to generate returns and decrease their tax liability can consider Gold ETFs.
Gold etfs to start Investing
- IDBI Gold ETF (G)
- Invesco India Gold ETF (G)
- Aditya Birla Sun Life Gold ETF (G)
- SBI ETF Gold (G)
- HDFC Gold Exchange Traded Fund (G)
3. Invest in PPF
The Public Provident Fund is a post office savings scheme backed by the Government of India and launched by the National Savings Institute. Thus, the scheme guarantees returns. For the current quarter, the PPF Interest Rate is 7.1%. The interest payment is due annually on March 31. However, interest is calculated on the minimum PPF balance between the fifth and the thirty-first of each month. The scheme has a 15-year lock-in period. You can extend the program for 5 years. All Indian nationals are eligible to invest in the Public Provident Fund.
Additionally, PPF allows investors to borrow against their PPF investments. The loan facility is accessible between years three and five.
To maintain an active PPF account, you are required to deposit a minimum of INR 500 every year. If you fail to do so, the account will be deleted, and you will have to pay the penalty to reactivate the account. The minimal investment is INR 500, and the maximum is INR 1.5 lakh.
PPF investments, returns, and maturity amounts are tax exempted under Section 80C of the Income Tax Act, 1961. Thus, PPF is suitable for investors seeking long term, low risk investments with tax benefits.
List of PPF Calculator
4. Bank Fixed Deposit or Time Deposit
A fixed deposit (FD) is a savings scheme offered by public and private banks and non-banking financial companies (NBFCs). You can invest a lump sum in a fixed deposit in exchange for interest and the principal amount upon maturity. This one time investment plan has a fixed tenure, and to withdraw before maturity, you must pay the penalty and accept a lesser rate of interest.
Banks offer variable interest rates on fixed deposits. Also, the interest rate on an FD is higher than the interest rate on a savings account. The interest amount on an FD is either paid to the investor at regular intervals or on maturity, depending on the investor’s preference.
The interest rates on fixed deposits are higher than those on other risk-free investments such as Treasury Bills and Government Bonds. Fixed deposits offer complete flexibility in terms of investment duration. The duration of fixed deposits might range from seven days to ten years. Thus, investors who wish to invest in a low risk investment scheme that offers duration flexibility can invest in bank FD.
Popular Bank FDs
5. Post Office Fixed Deposit
Post Office Fixed Deposit is a popular savings program. The Ministry of Finance determines the interest rates on a quarterly basis. The minimum investment amount for a post office fixed deposit account is INR 1,000. The one time investment plan tenure range from one year to five years.
Additionally, depositors have the option to reinvest their interest. This option is not available for a one-year TD, though. Additionally, the interest can be redirected to a five-year recurring deposit program. Also, if the depositor does not withdraw at maturity, the cash will be reinvested at the new relevant interest rates for the initial deposit term.
Post office fixed deposits are eligible for a tax deduction under Section 80C of the Income Tax Act. Investors are eligible for tax exemption of up to INR 1.5 lakhs per year. When filing income tax returns, you can claim the tax benefit.
6. National Savings Certificate
National Savings Certificate (NSC) is a small savings program encouraging low- and middle-income individuals to save. The Indian government backs this post office scheme; hence the returns are guaranteed. NSC is a 5-year fixed income savings plan. The interest gets automatically reinvested in the plan. On maturity, investors will get both their initial investment as well as the accrued interest.
The minimum investment amount is INR 100. Only resident Indians are eligible to invest in the National Savings Certificate. HUFs, NRIs, and trusts cannot invest in NSC. Except in the case of the investor’s death, an NSC investment cannot be withdrawn early. However, it is always possible to borrow against your NSC investments.
Section 80C of the Income Tax Act of 1961 allows for a tax deduction for investments in NSCs. Investors can claim tax benefits of up to INR 1.5 lakhs when filing their income tax returns. Additionally, reinvested interest is eligible for a tax deduction.
7. National Pension Scheme
National Pension Scheme (NPS) is an initiative of the Central Government that is available to employees in the public, private, and unorganized sectors. Previously, this program was exclusive to public sector personnel. Now, all Indian nationals can select a voluntary program.
An individual can opt for NPS investments during their work. In addition, it permits the investor to withdraw a portion of the collected funds after retirement while the remainder is invested in an annuity. After retirement, the investor receives the remaining money monthly as a pension. Furthermore, investments in the NPS provide tax benefits of up to INR 1.5 lakh under section 80C and Rs 50,000 under section 80CCD.
NPS has the following two types of accounts:
- NPS Tier 1 account is the most fundamental type of NPS account. Tier 1 account has a Permanent Retirement Account Number (PRAN). And this account will remain active until you reach age 60. Therefore, the money is locked in until retirement. Furthermore, you have the option of extending the investment until age 70. Upon maturity, you may withdraw 60% of the investment amount in a lump sum. This is completely tax-exempt. The remaining 40% must be used to buy an annuity. The income from an annuity is taxable in the year of receipt as per your income tax slab rate.
- NPS Tier 2 account is an optional account. Only Tier 1 account holders can open a Tier 2 account. The minimum initial deposit required to open a Tier 2 account is INR 1,000. Minimum additional contributions must be at least INR 250. Tier 2 account has no lock-in period; thus, you can withdraw the funds anytime.