My 15 lakhs FD matured. How do I use the money?
August 9, 2017
As per a recent survey by SEBI, more than 95% of Indians prefer parking their money in Fixed Deposits (FD). Well, if that is true by any measure, then it is only likely that a good number of those FD(s) are maturing every single day. And the looming question is – Should I start another FD?
Before we answer this question, let us look at the various options we have in hand.
Retain it as cash – Unless you have a spending need within the next 7 days, there is ABSOLUTELY no reason to consider this. Liquid funds work best for any spending needs in near future. Idle cash at home is like a bucket of still water. The level only depletes with time gradually.
Start another fixed deposit – Fixed deposit returns have been falling and the extent of our expenses is increasing. Healthcare costs increase by approximately 15% every year. Are the fixed deposit returns still attractive? We would say a big NO to that. Low returns coupled with taxation of returns renders them to be an unattractive investment destination. With easy access to better information, a lot of Indians are now realizing this. Have you awaken yet?
Invest in debt funds – Debt funds are a type of mutual fund which invest in debt related instruments like Government bonds, corporate bonds, commercial paper (CP) etc. The reason a lot of people are now shifting to debt funds is because of better returns and lower taxation possibilities. With the tax net getting stringent, it only makes sense to explore all possible avenues of reducing tax liability. Read more about how debt funds fare better over FDs here
Invest monthly in equity funds – Equity mutual funds are the latest talk of the town. Useful or in-vogue, whatever you call them, they are amongst the very few wealth creating asset classes available to Indians today. A pre decided monthly investment in equity mutual funds can result in double digit returns over the long term. But only and mostly over the long term. And by long term we mean that your money should stay invested for more than 5 years. For example, an investment of INR 80,000 over 18 months (INR 14.4 lakhs) can lead to a corpus size of INR 41 lakhs after 10 years (Assuming annual return of 12%). And that too tax free.
Therefore in conclusion, the best investible options available are debt and equity mutual funds. You can choose either of them or a mix of them depending on your risk profile, return expectations and time horizon.
How do we help?
At CAGRfunds, we assess your complete profile in terms of risk, return and time horizon and accordingly make customized suggestions to you. We ensure that your money gets invested in the right avenues and meets your expectations.