Where to invest Rs 50 lakh for three years?

Hi, I am 54 years old and in private service. Want to know where and how to invest Rs 50 lakh from my current savings in one time or over six months that gives protection to capital and grows decently with good returns. Three years could be the duration for investment. Thanks in advance. - Anonymous

Since your investment horizon is of only three years, you should ideally look at avenues that complement it, i.e., short-term investment options. Assuming that you are investing large sum of money for a non-negotiable goal (e.g., child's higher education, child's marriage, buying a house, etc.), then you should not think about equity at all and look for options in the fixed-income asset class.

Fixed deposits (FDs) in a couple of well recognised banks or investing in two to three high-quality short duration funds should suffice your need as capital preservation should be the primary driver of your decisions.

Considering tax efficiency, short duration debt funds may have an advantage over FDs. However, it is noteworthy that debt funds do not guarantee returns or preservation of capital like FDs, so it becomes important to choose a high-quality fund portfolio to minimise the risk of default, in case you do decide to go for them.

For those with a longer investment horizon of five years or more, it may be worth considering allocating a small portion, about 10-20 per cent, of your portfolio to equities, particularly in the aggressive hybrid or large-cap space. These can potentially provide higher returns. But keep in mind that there is no way to predict the state of the market at the end of the investment period. Therefore, this strategy should only be considered for investments done to achieve a goal that is negotiable or has a long time horizon.

Suggested for you:
Where to invest for your child's education?
Investing to buy a house in three years