Firstly, a big thanks for operating a blog that is very useful for people like me who have limited knowledge of financial planning. I have two queries:
- Im looking to invest a lump sum of around 3 lacs for a period of approximately a year. Im confused whether to go in for FD or Liq or Ultra Short Term funds or if i should split the amount and invest in all 3 options? Please advise.
- Im currently investing in ELSS funds for tax saving + principal growth. My investment horizon is 5+ years. My question is if i have another option for tax saving in the near future (eg. housing loan), should i continue investing in ELSS or should one switch to non tax – saving equity funds? The investment horizon will continue to be 5+ years.
Robin-1) Don’t scratch your head. Simplify your life by investing only Bank FDs, as your investment horizon is just one year. I prefer Postal FDs over Bank FDs (if you are planning to invest within March 2016). Because Post Office Savings Scheme interest rates not changed even after interest rate dropped due to RBI policy. Hence, use this opportunity and invest in Postal FDs. 1Yr FD is now quoting at 8.4%.
2) First lesson is-Don’t invest in equity oriented products if the time horizon is 5 years or less. Equity investments are meant for long term. Also, align each investment towards your financial goals rather than tax saving. If you feel your financial goals are of long term, then definitely think of equity investments (ELSS-if for tax saving otherwise a regular funds).
Thanks Basu. For point 2, yes my horizon is definitely more than 5 years and hence will continue with equity funds. Just out of curiosity, what would you suggest is the best investment option for 3 to 5 years? Do you recommend debt funds?
Robin-Defenitely part in FDs, part in short term debt funds and part in Arbitrage funds.