There may be instances where one may come across a situation where you have a lump sum amount in your hand and you have no idea where to invest them.
Lumpsums amounts can be invested in a variety of ways, but, you should keep the tax and other things in mind. This is specially since lumpsum is really a large amount and you have to take care of tax liabilities that might arise. In any case here are a few lumpsum investment options that you could consider.
KTDFC Fixed Deposits
This is a very safe place to park lumpsum amounts, because amounts up to Rs 2,000 crores are guaranteed by the government of Kerala.
KTDFC is a government of Kerala owned institution that is engaged in a host of activities including vehicle finance. The best part is that the interest offered by the institution of 8.25 per cent on one, two and three year deposits which is the best from government companies. No commercial bank in the country at the moment offers this interest rate.
So, it is a win win situation for investors looking to park lumpsum money safely with high returns.
TN Power Finance
TN Power Finance Corporation is another government backed company - this time the Tamil Nadu government backed.
The company offers an interest rate of 9 per cent for senior citizens on its 1, 2 and 3 year cumulative deposits. For others the interest rate offered is 8.50 per cent for 1, 2 and 3 years.
The monthly interest paying scheme also offers an interest rate of 8.50 per cent, while under the annual scheme you can expect a return of as much as 8.84 per cent. A good place to park lumpsum given that these are government backed companies.
Savings Account of Banks
In case the lumpsum amount is needed at a later stage, it is advisable to place the money in liquid instruments like savings bank account.
Unlike, bank FDs where there could be a penalty for early withdrawal, here you do not have these issues.
You can look at the Yes Bank Savings Account, where you get an interest of as much as 6 per cent, where the amount is really high. The other best option is the IDFC Bank deposit, where you get an interest rate of as much as 7.5 per cent per annum.
Corporate FDs is not a bad place to invest. However, go for the AAA rated securities, as corporate deposits are not very secure.
Among the safe deposits include those of Bajaj Finance and Mahindra Finance. Bajaj Finance offers you an interest rate of upto 7.85 per cent (not senior citizens). The interest rates from these deposits can go up to 8.20 per cent.
The interest earned on these deposits are very much taxable. You need to compare and check before investing in these deposits.
Park In Short Term Debt Mutual Funds
If you are a risk-averse individual and tax is not a matter then one can invest in short-term debt funds. Tenure may differ from 6 months to 12 months. While earlier, equity mutual funds were advantageous because there was no tax on distributed income, now that advantage has gone. Also, there would be a capital gains tax payable.
So, now debt mutual funds are being treated at par with equity mutual funds. This may be a better way to invest your lumpsum amount. However, seek expert opinion always.
Long Term Equity Funds
One can look to invest in long-term equity funds to generate higher returns along with associated risk. Among the big names include HDFC Equity, ICICI Prudential Focused Bluechip Fund, SBI Bluechip Fund etc.
If you are risk averse, you can consider investing in best long-term debt funds which will generate good returns with time. However, understand clearly that this is a lumpsum amount, so please weigh the risks carefully.
Also, with effect from April 1, 2018, income distributed by equity mutual funds would be taxed.
The very beginning should involve planning to set aside an emergency fund from the lumpsum amount that you receive. This would take care of any eventuality that might arise at a later stage. This could be a medical or any other emergency. Ensure that this amount is a pretty decent sum.
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