Where to invest Rs 10 lakh for five years?

I want to invest Rs 10 lakh lump sum for five years. Can you suggest any good mutual funds which give good returns? - Nayana Parmar

Mutual funds are indeed the most preferred option for retail investors to create wealth.

You should choose a mutual fund that is most suitable for you - a fund that is in line with your purpose, investment horizon and risk appetite.

Here's what you can do
Invest in an aggressive hybrid fund
Since you want to invest for five years, which is a medium term horizon, you can look to invest in an aggressive hybrid fund.

Hybrid funds invest in a mix of both equity and debt instruments. Among all the hybrid funds, aggressive hybrid funds give you the maximum exposure to equity. They invest around 65-80 per cent in stocks and the rest in debt.

These funds are suitable for medium term goals and for those who do not have the stomach to tolerate volatility that comes with pure equity funds. Since a part of these funds is invested in debt, it helps to cushion a severe fall in the stock market.

Invest in a flexi-cap fund
If you have some prior experience in equity investing and would not mind extending your investment horizon by one to two years, then flexi-cap funds can be a good option for you.

You can also view our recommended list of mutual funds handpicked by our seasoned team of researchers.

Choose SIP over lump sum
We recommend investors to always go with the SIP route primarily because of two reasons.

• SIP automates the process of investing so you rule out the possibility of blowing up your money on materialistic things.
• Secondly, as we can't predict the stock market, doing an SIP is the only viable option to contain volatility that comes with equity investing.

So, instead of investing all your money at once, you can spread the Rs 10 lakh over a period of six to 12 months to reduce the risk as well as average your investment cost.

You can also know the exact name of the funds that are suitable for you to invest in as per your investment amount and time horizon. Check out Value Research Portfolio Planner and after a few clicks and inputs, you will get a list of our recommended funds for you.