In 2023, the investing landscape has evolved dramatically in terms of dimensions and preferences. With investors’ mindsets shifting, the best investment plans for 5 years have become an appealing subject these days since a 5-year investment horizon provides more consistent returns than a short-term plan of a few months to a year.
Suppose you are looking for the best investment plan for 5 years to multiply your savings and accomplish your financial goals; Stay tuned. In this article, we will share with you some of the most profitable investment options that can help you grow your money in the long term.
What is a 5-year investment plan?
An investment plan for five years is a strategy that helps you achieve your financial goals in a relatively short period. It involves choosing the best investment plan for 5 years that suits your risk appetite, return expectations, and liquidity needs. A 5-year investment plan can be useful for various purposes, such as saving for a wedding, buying a car, or funding your child’s education.
Types of investment plans for 5 years
Unit Linked Insurance Plans (ULIPs) are hybrid products that provide both insurance and investment benefits. Depending on your risk tolerance and market dynamics, you can invest in a variety of funds ranging from equity to debt to balance. You can also switch between funds whenever you want.
Fixed Deposits or FDs are one of the best investment plan for 5 years in India for low-risk appetite investors. They offer a fixed rate of interest for a fixed period, which can vary from 7 days to 10 years. You can choose a 5-year FD to lock in your money at a higher rate than savings accounts or liquid funds. FDs made for 5 years under tax saving are also eligible for tax deduction under Section 80C up to Rs. 1.5 lakh per year. However, the interest earned on FDs is taxable as per your income slab.
Another popular product in the category of the best investment plans for 5 years in India is Mutual funds. Mutual Funds are professionally managed pooled funds that invest in various securities, such as stocks, bonds, gold, etc., to generate returns for the investors through risk diversification.
Stocks are shares of ownership in a company that trades on the stock market. They are one of the most rewarding but also the most risky investment options for five years. Stocks can offer high returns if you invest in the right company at the right time and hold them for a long time.
National Savings Certificate (NSC)
The National Savings Certificate (NSC) is a government-backed investment scheme offering guaranteed returns and tax benefits. You can start with an investment of Rs. 100, with no maximum limit.
You earn guaranteed interest, which is annually compounded and spiced up with tax deductions up to Rs. 1.5 lacs on the principal invested and interest accrued under section 80 C. This is the most suitable option for low-risk investors in the list of the best investment plans for 5 years in India.
What is the eligibility requirement for a 5-year investment plan?
Here are some examples of common eligibility criteria:
Age: You need to be at least 18 years old to invest in most of the investment plans for 5 years. Some of the investment plans may have their upper or lower age ceiling, such as the maximum entry age for ULIP being 75 years.
Residence: You need to be a resident of India to invest in most of the investment plans for 5 years. Some investment plans for 5 years restricted non-resident Indians (NRIs) from investing, such as NSC, in which NRIs are not allowed to invest.
PAN: You need to have a permanent account number (PAN) issued by the IT Department to invest in most of the investment plans for 5 years. PAN is mandatory for tax purposes and KYC compliance. Non-submission of PAN may expose you to higher tax rates.
Bank account: You need to have a valid bank account in your name to invest in most of the investment plan for 5 years. You will need to provide your bank details, such as account number, IFSC code, branch name, etc., to make or receive payments related to your investments.
Know Your Customer (KYC) documents: You need to provide valid identity and address proof such as an Aadhaar card, voter ID card, passport, driving license, etc., to invest in most of the investment plan for five years.
You should always check the specific eligibility criteria of the plan you want to invest in before making a decision.
How to choose the best investment plan for 5 years?
Step 1: Define your financial goals and time horizon. You should have a clear idea of why you want to invest, how much money you need, and when you need it.
Step 2: Assess your risk appetite and return expectations. You should know how much risk you are willing to take and how much return you are expecting from your investment. Generally, higher-risk investments offer higher returns but also have higher volatility and uncertainty. Lower-risk investments offer lower returns but also have lower volatility and more stability.
Step 3: Evaluate your liquidity needs and tax implications, such as the tax deduction, tax exemption, or tax liability on the income or maturity amount. You should know how easily you can convert your investment into cash without losing much value.
Step 4: Compare and select the best investment plan for 5 years. You should compare the features, benefits, costs, and risks of different investment options. You should also check the past performance, prospects, and tax implications of each investment option.
The best investment plan for 5 years is one that helps you achieve your financial goals in a relatively shorter time. Each of the available options has its advantages and disadvantages, depending on your preferences and market conditions.
Therefore, you should compare and select the best investment plan for 5 years that meets your financial goals, suits your risk profile, offers good returns, provides liquidity, and saves tax. You should also monitor and review your investment plan regularly and make necessary changes as per your changing needs and circumstances.
Frequently asked questions:
- Which investment is best for 5 years?
The best investment for 5 years depends on your financial goals, risk appetite, and liquidity needs. There are many options available, such as fixed deposits, mutual funds, stocks, bonds, gold, and real estate. You should compare the features, benefits, costs, and risks of each option and choose the one that suits your preferences and circumstances.
- Can I double my money in 5 years?
Yes, you can double your money in 5 years, but it is not easy or guaranteed. You will need to invest in high-risk and high-return options that can offer you an annual return of at least 14.4%, which is the rate required to double your money in 5 years according to the Rule of 72. However, such options also have high volatility and uncertainty, which means you should have good knowledge of fundamentals and market conditions before you risk your money.
- What Types of Risks Does a 5-year investment plan Involve?
An investment plan for 5 years has some risks that you must be well aware of, like Inflation risk, market risk, credit risk, liquidity risk, and investment risk. Assess each of these risks before you put your hard-earned money at stake.
- When is the best time to begin investing in a 5-year plan?
The right time to start investing in a 5-year investment plan is now! The sooner you start, the more time you have to grow your money and achieve your goals. Just start with what you have and what you can afford, and keep learning and improving along the way.