Where Will You Invest if You Receive a Significant Amount of Money

Receiving a sudden windfall, inheritance, or bonus money can be exciting at first. However, you may be easily overwhelmed with the investment choices available to grow your wealth and achieve financial independence. This article highlights the best instruments for lump-sum investing in India, where you can park your surplus funds and earn better.

• Bank and company fixed deposits offer safe and guaranteed returns on lump-sum investments.
• PPF and NPS investments help you curate a comprehensive retirement corpus with lump-sum deposits.
• Mutual funds offer good market-linked returns for investors with varied risk tolerance and goals.

You can consider the following options if you want to make a lump-sum investment:

Fixed deposits

Tried and tested fixed deposit investments have served multiple generations of Indians. The process is simple: you invest a lump-sum amount into an FD account for a predetermined tenure to earn interest at a fixed rate. Fixed deposits offer guaranteed returns and capital protection, making them attractive investment options for conservative investors. If you have a lump-sum investment to make, you can open an FD account with a bank or NBFC. While company FDs offer higher interest rates than bank FDs, you should check the credit rating of the company carefully before investing. Bank FDs are considered safer alternatives since they are protected under a DICGC insurance cover of Rs. 5 lakhs/investor.

If you are looking for a safe investment option, you can consider fixed deposit. They offer guaranteed returns and a fixed interest rate throughout your investment tenure.

Mutual funds

Mutual funds are another prudent avenue for lump-sum investing. Mutual funds pool money from multiple investors to invest in a diversified portfolio of stocks, bonds, gold, and other assets. They are managed by professional and experienced fund managers who make investment decisions on behalf of the actual investors. Mutual funds are versatile investment options you can leverage for short and long-term goals. Depending on your risk appetite, goals, and time horizon, you can select from a range of equity, debt, and hybrid funds. While SIPs are the favoured investment route for MFs, you can also invest in them through lump-sum investments. However, you should remember to check the scheme’s minimum investment limit for lump-sum investments.

PPF

PPF, or Public Provident Fund, is a government-backed savings scheme with a minimum lock-in period of 15 years. This long-term savings scheme offers good tax benefits and returns for those looking to build a retirement corpus for their golden years. You can make a lump-sum investment of up to Rs. 1.5 Lakhs annually into your PPF account to enjoy tax deductions u/s 80(C) of the Income Tax Act. Additionally, PPF qualifies as an EEE scheme, which means the maturity sum, plus the interest accrued, is tax-free. However, remember that the maximum annual contribution is capped at Rs. 1.5 Lakhs.

Real estate

If you have just received a lump-sum amount, you can consider investing the same in real estate. Investing in real estate involves investing in commercial spaces, residential properties, or land for rental income and subsequent capital appreciation. For instance, you can purchase a second flat or home and rent it out to earn stable and regular rental income. Alternatively, you can list the property as an Airbnb rental and earn income. With strong growth projections, the real estate market serves as a prudent avenue for lump-sum investing. However, real estate is ideal for investors aiming for long-term wealth creation, as property appreciation takes time. Therefore, you need to be comfortable with a less liquid asset.

NPS

NPS, or the National Pension Scheme, is a popular retirement planning instrument in India. This market-linked scheme allows you to build a substantial retirement corpus by contributing regularly. Contributions are invested in a diversified range of assets, and returns depend on their performance. Upon attaining the retirement age, you can withdraw up to 60% of the corpus as lump sum and use the remaining 40% to purchase the annuity from the empanelled list of annuity service providers. NPS also offers attractive tax benefits, including tax deductions of up to Rs. 1.5 lakhs on contributions u/s 80(C) and tax exemption on the 60% lump-sum withdrawal at maturity. Unlike PPF, the NPS has no upper limits on annual contributions, making it a suitable option for investing a lump sum exceeding Rs. 1.5 lakhs.

Apart from the investments mentioned above, you can also choose other avenues to invest your lump-sum funds. Remember that you don’t need to stick to a singular avenue when it comes to lump sum investing. Instead, you can take a diversified approach, allocating a portion of your lump-sum funds to safe instruments like FDs and PPF for capital protection and another portion to market-linked instruments like mutual funds and NPS to enjoy higher returns. If you are looking for safe investment option, then you can consider investing Bajaj Finance Fixed Deposit. With a top-tier AAA rating from financial agencies like CRISIL and ICRA, they offer one of the highest returns, up to 8.85% p.a.