Best Investment Plan for 5 Years (Secure Returns)

Do you dream of financial freedom but are not sure how to achieve that? Do you want to level up your money game? The answer lies in intelligent investing.

But with so many options available, how do you choose the best one for your goals and risk appetite? And how do you ensure that your investments are profitable in the long run?

If questions like these bother you, you are in the right place. This blog will explore the best investment plans for 5 years, factors to consider, and how to pave the way toward a financially secure future.

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Uncovering the Best Investment Plans for 5 Years

A 5-year investment plan will help you earn a good return on your investment, beat inflation, and secure your financial future. Let’s dive in and find the right fit for you.

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Mutual Funds

Investing in mutual funds is a smart way to grow wealth and achieve financial goals. Fund managers manage these investment vehicles and offer a diverse portfolio of different asset classes. Choose from various categories, including equity, debt, and hybrid funds.

Mutual Fund Type	Key Features	Risk Level
Equity Funds	Best for long-term capital appreciation. Invest mainly in company stocks across various sectors. Ideal for investors with a higher risk appetite and a long investment horizon.	Higher risk with the potential for higher returns.
Debt Funds	Invest in fixed-income securities like bonds and treasury bills. Suitable for traditional investors seeking regular income and capital preservation.	Lower risk as compared to equity funds.
Hybrid Funds	Offer a mix of equity and debt investments. Ideal for investors looking for a balanced approach and diversification.	Moderate risk, with potential for both income and capital appreciation.

Bank Fixed Deposits

Bank fixed deposits are a safe investment that provides stability and are an ideal choice for risk-averse investors. You can invest in a tax savings FD with a lock-in of 5 years. It will qualify you for tax benefits under section 80C up to INR 1.5 lakhs a year.

• Low risk and Guaranteed returns.
• Minimum Investment Value: 1000 INR.
• Interest rate starts from 4-7%. Some small finance banks offer attractive 8-9% rates.
• 10% TDS is deducted from accumulated interest if the total interest income exceeds INR 10000.

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Investment Plans

There are various investment plans available in the market that cater to the needs of different investors. These include unit-linked insurance plans (ULIPs), endowment plans, and money-back policies. It is essential to carefully assess the terms and conditions of these plans before making a decision.

Features	ULIPs	Endowment Plans	Money-Back Policies
Life coverage	Yes	Yes	Yes
Investment growth	Yes	No guaranteed returns	No guaranteed returns
Tax benefits	Yes, under Section 80C	Yes, under Section 80C	Yes, under Section 80C
Guaranteed returns	No	Yes	No
Maturity benefits	Yes, based on investment performance	Yes, the guaranteed sum is assured	Yes, periodic payouts

National Pension Scheme (NPS)

NPS is a government-backed retirement savings scheme that combines equity and debt investments. It provides tax benefits and allows you to build a corpus for retirement. There are two types of NPS accounts: Tier I and Tier II.

Features	Tier I NPS Account	Tier II NPS Account
Availability	For Indian citizens aged 18- 65	It is a voluntary account. You can only open if you already have a Tier I account.
Investment Amount	A Minimum deposit of INR 500 is required to open. An annual deposit of INR 1,000 keeps the account active—no upper limit per year.	The minimum investment amount is INR 1,000; no yearly contribution is mandatory.
Withdrawal	You can take out 60% of the corpus at 60, with the remaining 40% used for a pension plan.	No lock-in period. Withdrawal similar to Tier I
Tax Implications	Investments up to INR 2 lakh/year are tax-exempt under Section 80C and Section 80CCD. Returns earned are also tax-exempt.	Income is taxed based on your tax slab, with no tax benefits.

5 years National Savings Certificate (NSC)

NSC is a fixed-income investment option backed by the Indian government. This investment option has a lock-in period of 5 years and is considered low-risk.

Features	National Savings Certificate (NSC)
Availability	Indian public banks, some private banks, all post offices
Investment Amount	Minimum: INR 1,000 and no upper limit
Return on Investment	Interest compounds annually. Current rate – 6.8%
Maturity	Lock-in period: 5 years. Premature withdrawal possible
Taxation	Investments up to INR 1.5 lakh per annum are exempt from taxable income under Section 80C of the Income Tax Act. Interest is taxed as per the regular tax slab.

Sovereign Gold Bonds

These are fixed-income securities issued by the Reserve Bank of India on behalf of the Government of India. Gold bonds reduce the demand for physical gold and its imports, reducing foreign currency’s outflow.

• Fixed interest rate, paid annually.
• Enjoy capital appreciation if the price of gold increases during the tenure.
• Although the maturity period is 8 years, you can exit after the fifth year.

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Real Estate Investment Trusts (REITs)

REITs let you invest in a portfolio of income-generating real estate assets. It can be a long-term wealth-building strategy but requires substantial capital and due diligence.

• Requires a demat account for investing in India.
• Minimum investment criteria range from INR 10,000 to INR 15,000.
• No maturity date.
• Delivers 90% of net rental revenue as dividends/interest to shareholders.
• ROI ranges from 8% to 14% in the short to medium term.

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Tax Saving Investments

Several investment options, such as the Public Provident Fund (PPF) and Equity Linked Saving Scheme (ELSS), offer tax benefits under Section 80C of the Income Tax Act.

Features	PPF	ELSS
Tax Benefits	Investment in PPF is tax-free. Interest earned on your investment is also tax-free.	Section 80C offers INR 1.5 lakh/year tax benefits. Capital gains over INR 1 lakh are taxable at 10% without indexation.
Capital Safety	Considered relatively safe with guaranteed returns.	Market-linked investment is subject to market risks.
Risk Level	Low risk	Moderate to high-risk
Returns	Offers fixed returns with the current interest rate of 7.10%/annum.	Offers market-linked returns with an average CAGR of 10-15%.
Lock-in Period	15 years. Partial withdrawals are allowed after 5 years.	3 years. After that, you can redeem or sell for personal use.

5 years Recurring Deposit

It is a perfect example of a monthly investment plan for 5 years. The government recently increased the interest rate to 6.7%, but senior citizens can get an 8.2% rate. This option is suitable for people who want to save regularly.

• Returns: Rate – 6.7% per annum. Higher than savings account schemes
• Premature Closure: Available with no penalty
• Loan Facility: Available against RD account
• Eligibility: Government organizations, corporations, small businesses, and Indian citizens above 10 with a savings account.
• Risk Level: Low-risk appetite

Why Invest for 5 Years: A Smart Strategy for Long-term Growth

You deserve to see your hard-earned money grow and work for you. Investing in a 5-year plan that aligns with your goals and risk tolerance can help achieve this. Here are some benefits of doing so:

1. Beat Inflation: In August 2023, India’s inflation rate was 5.59%, exceeding the RBI’s range. It means that the purchasing power of your money is decreasing over time. A 5-year plan will help preserve the value of your money and earn returns that outpace inflation.
2. Passive Income: Over a 5-year horizon, you can yield passive income through dividends, interest, or rental income. This additional income stream can provide financial stability.
3. Diversification: The best investment plans for 5 years can reduce risks by diversifying your portfolio. You can allocate funds to different assets for a balanced approach.
4. Compounding: It is the process of making returns on the initial investment and the accumulated interest. Compounding has more time to work with a 5-year investment horizon, resulting in potentially higher returns.
5. Peace of Mind: Investing in a 5-year plan allows you to adopt a disciplined approach, reducing the stress of short-term market volatility.
6. Long-term: The best 5-year investment plan allows for a longer-term perspective, reducing the impact of short-term market fluctuations.

5 Factors to Consider When Selecting a 5-year Investment Plan

Here are the most critical factors you should consider before investing.

1. Financial Goals: Are you looking for regular income, capital appreciation, or a combination? Different investment plans have diverse objectives, so select one that aligns with your goals.
2. Risk Tolerance: Some plans are riskier than others but offer higher returns. Understand your comfort level with return fluctuations and the possibility of capital loss. Pick a plan that matches your risk tolerance.
3. Liquidity: Some plans are more liquid than others, meaning you can withdraw more efficiently. If you need your money before 5 years, look for schemes that allow early withdrawals without charging too much.
4. Historical Performance: While past performance doesn’t guarantee future results, it can provide insights into its track record and potential returns.
5. Tax Implications: Some plans offer tax benefits, while others may be subject to taxation. Assess how it aligns with your tax planning strategy.
6. Expert Advice: Seek guidance from financial advisors to get personalized advice based on your goals and risk profile.

Bottom Line

Securing your financial future is a journey that requires careful planning and informed decision-making. There are various avenues to grow your wealth over time. Explore these best investment plans for 5 years and choose the options that align with your financial goals, risk tolerance, and time horizon.

So, why wait? Start investing wisely and improve your future with a 5-year investment plan.

Frequently Asked Questions

Which is the best monthly investment plan for 5 years?

There are several options to invest every month for a 5-year time frame. Some examples include – Mutual Funds, RDs, PPF, SIP, and NSC.

Are there any low-risk best investment plans for 5 years?

Some low-risk options for a 5-year investment are government bonds, treasury bills, and fixed-income assets. Consider your goals and risk tolerance.

Why Should I start investing early?

It can help you generate wealth over time. Even a small monthly deposit can grow into a considerable sum by the time you reach retirement age.