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How to Invest Rs. 10 Lakh in 2024: A Comprehensive Guide

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Investing is a skill that can help you achieve your financial goals and secure your future. But with so many options available in the market, how do you decide where to invest your hard-earned money? Especially if you have a lump sum amount of Rs 10 lakh, you might wonder how to use it best.

There is no one-size-fits-all answer to this question, as different investors have different risk profiles, time horizons, and objectives. This article will explore the best ways to invest Rs 10 lakh today based on the current market scenario, expected returns, and associated risks.

Whether you want short-term gains, long-term wealth creation, or a balanced portfolio, we have something for you. Read on to find out more.

Three Pillars of Investment

Before we get into which investment vehicle you should put your money in, it’s important to understand the three fundamental pillars of any investment.

Deciding Your Time Horizon

Before investing your money, you must decide how long you want to keep it invested. Do you want to achieve a short-term goal, a medium-term goal, or a long-term goal?

Deciding your investment time horizon before investing is crucial because it affects your investment decisions, portfolio performance, and financial outcomes. Knowing your time horizon allows you to invest smarter, achieve your goals faster, and enjoy your money longer.

Therefore, deciding your investment time horizon before investing is crucial because it helps you:

  • Align your investments with your goals
  • Balance your risk and return
  • Plan your tax strategy

Assessing Probability of Loss

When you invest your money in any asset, you are exposed to the risk of losing some or all of it.  Assessing the probability of loss can help you:

  • Choose the right investment for your risk profile: You can select the investment that matches your risk tolerance and return expectations.
  • Allocate your assets optimally: You can diversify your portfolio across different asset classes, sectors, and regions to reduce your overall probability of loss.
  • Plan your exit strategy: You can set your stop-loss and take-profit levels to limit your losses and lock in your gains.

Investment Objectives

Depending on their life stage, financial situation, and plans, different investors may have different investment objectives. Some of the common investment objectives are:

Safety: This objective focuses on preserving the principal amount and avoiding losses. Investors who prioritize safety may opt for low-risk, fixed-income securities, such as government bonds, certificates of deposit, or money market funds.

Income: This objective aims at generating a steady and regular income from investments. Investors who seek consistent income may invest in dividend-paying stocks, bonds, real estate investment trusts, or annuities.

Growth: This objective targets increasing the value of the investment over time. Investors who pursue growth may invest in growth stocks, mutual funds, exchange-traded funds, or cryptocurrencies.

Tax deduction: This objective aims to reduce the investor’s tax liability. Investors who seek tax deductions may invest in municipal bonds or tax-deferred securities, such as annuities.

However, rather than investing all at once, invest in phases over six months. It helps you compound your returns and allows you to take timely action by rerouting your next installment to other asset classes to avoid further losses and optimize returns.

An Illustration of How to Invest Rs 10 Lakh in 2024 Across Different Asset Classes

Picture this. You have Rs. 10 lacs to invest and want to do so strategically to achieve your short-term, mid-term, and long-term objectives.

So, once you understand the calculations, you can plan your investments. Choose the asset class that best fits your investing personality, whether you are a low-, medium-, or high-risk taker.

As a general guideline, you can invest 20-30% of your lump sum in safer vehicles that can serve as a buffer against any emergency needs. And. Invest 50-60% in equity and 15-20% in debt to create a well-balanced portfolio with good returns.

3 Best Short-term Investment Options (Up to 3 years)

If you plan to invest for a time of up to three years, here are the three best options to consider:

Liquid funds: These are mutual funds that invest in short-term market securities, such as government bonds, treasury bills, and corporate bonds. They offer low risk, high liquidity, and moderate returns. They suit investors who want to park their surplus funds quickly and earn better returns than savings accounts.

Bank Fixed Deposits – Fixed deposits (FDs) are one of the most reliable and convenient investment options for investors who want to earn assured returns and protect their capital. FDs offer attractive interest rates ranging from 3% to 9.5%, higher than most savings accounts. FDs are ideal for short-term goals, as well as for creating an emergency fund.

Short-term or Ultra Short-term debt funds- Short-term funds invest in fixed-income securities with a maturity period of 1 to 3 years. Ultra-short-term funds invest in fixed-income securities with a 3 to 6-month maturity period.

They offer low to moderate risk, stable returns, and tax efficiency. They are suitable for investors who want to park their money for a short duration and earn better returns than bank fixed deposits.

3 Best Medium-Term Investment Options (From 3- 5 years)

Arbitrage funds: These mutual funds exploit the price differences between the cash and derivatives markets. They offer low risk, tax efficiency, and stable returns. They suit investors who want to exploit market volatility and earn arbitrage profits.

Balanced Funds- Balanced funds invest in a mix of stocks and bonds, aiming to offer both income and capital appreciation. They suit investors who want to balance risk and return and have a moderate risk appetite. Balanced funds can help investors diversify their portfolios and reduce volatility.

Hybrid funds: These funds invest in more than two asset classes, such as equity, debt, gold, or international equities. They are designed to meet the specific investment objectives of the scheme, such as dynamic asset allocation, multi-asset allocation, or retirement solutions.

They suit investors who want to explore different asset classes and benefit from their low correlation. Hybrid funds can help investors optimize their risk-reward ratio and enhance their returns.

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3 Best Long-Term Investment Options (Above 5 years)

Equity Linked Savings Scheme (ELSS): ELSS is a mutual fund that invests at least 80% of its assets in equity and equity-related instruments. ELSS offers the dual benefit of capital appreciation and tax saving.

ELSS has a lock-in period of three years, which is the shortest among all tax-saving instruments. ELSS can generate higher returns than fixed-income options in the long run, as it participates in the stock market’s growth. Investors should have a high-risk appetite and a long-term horizon to invest in ELSS.

Public Provident Fund (PPF): PPF is a government-backed savings scheme that offers a fixed and guaranteed return. PPF is one of India’s safest and most popular long-term investment options, providing tax-free interest and principal amount.

PPF has a tenure of 15 years, which can be extended by another five years. PPF allows investors to deposit a minimum of Rs. 500 and a maximum of Rs. 1.5 lakh per year. PPF is ideal for investors who want risk-free and tax-efficient options to save for retirement or other long-term goals.

Stocks: When you buy a stock, you own a part of the company. Stocks can offer high returns in the long term and provide dividends as a source of consistent income for the shareholders. Stocks are suitable for investors with a high-risk tolerance and a long-term perspective, as they can withstand the volatility and uncertainty of the stock market.

Key Takeaways

Investing Rs. 10 lacs today can be a challenging task, as there are many options available in the market. However, the ideal investment method depends on the investor’s risk profile, time horizon, and financial goals. Keeping an eye on these factors that can help you make an informed decision are:

  • Asset allocation: Dividing your portfolio among different asset classes, such as equity, debt, gold, or international equities, can help you reduce risk, optimize returns, and achieve diversification.
  • Quality and growth: You should look for quality businesses with strong fundamentals, sustainable competitive advantages, and consistent growth prospects. You should avoid chasing fads and bubbles and focus on the business’s intrinsic value.
  • Tax efficiency: You should consider the tax implications of their investment choices, as taxes can erode the returns. Be aware of the tax rules and regulations, and plan your investments accordingly.

Investing Rs. 10 lacs today requires a careful and systematic approach based on the above factors. Investing wisely can help you achieve your long-term financial goals and secure your future.

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  1. How can balanced and hybrid funds help investors meet their medium-term objectives?

    By investing in balanced and hybrid funds, investors can achieve portfolio diversification, lower volatility, better risk-return trade-offs, and higher growth opportunities from different asset classes.

  2. Should I invest Rs. 10 lacs in a lump sum or instalments?

    You must create your investment rule. It's never a good idea to risk Rs. 10 Lacs simultaneously. Create a plan for investing this amount systematically over 6-12 months. Because if markets fall, you have time to take corrective action with the least amount at your disposal. Furthermore, you can diversify your investments to improve risk-adjusted returns and benefit from compounding.  

  3. Which should I pick if I want to invest Rs. 10 Lacs in gold or Real estate?

    Both have pros and cons; this question has no straight answer. There are a few factors you must analyze before you take your final call-
    Liquidity- Gold is more liquid than real estate, meaning it can be more easily bought, sold, or exchanged for cash than real estate.
    Taxation- Gold and real estate are subject to capital gains tax, but real estate also offers tax benefits such as deduction on home loan principal and interest.
    Returns- Gold and real estate have historically appreciated over the long term, but gold is considerably less volatile than real estate.

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I’m Archana R. Chettiar, an experienced content creator with
an affinity for writing on personal finance and other financial content. I
love to write on equity investing, retirement, managing money, and more.

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