5 Best Options For Those Looking To Invest Upto Rs 5 Lakhs

It is highly possible that you have suddenly received a bonus or a lumpsum amount. You are looking at safety as well as decent returns to park this money. Here are 5 best investment options, where you can park a sum of Rs 5 lakhs. Ideally, we are recommending some instruments where your investment is for 2-3 years.

1. Shares of Coal India

This is a suggestion that may come as a little bit of a surprise. However, if you have a demat account and are familiar with shares, this is a good option to consider. Let us see why. Coal India last year paid a dividend of Rs 13.1 per share. For 2019-20, we expect the company to increase the dividends, as the profitability in the first quarter ending June 30, 2019 was good and the cut in corporate tax rate is expected to benefit the company.

Even if Coal India declares a dividend of Rs 14 per share, the dividend yield on the same is 7.1 per cent, based on a price of Rs 196. Remember, dividends are tax free in the hands of investors, while all of the investment ideas recommended below are taxable. Yes, there is an element of risk in buying shares, but, remember if the shares go higher, you tend to gain as well.

2. Fixed Deposits of Mahindra and Mahindra

The fixed deposits of Mahindra and Mahindra offer a good interest rate. A 33-month deposit can give you a yield of as much as 9.40 per cent. An investment of Rs 5,000 translates into Rs 6,293 after a period of 33 months, which makes the same very attractive.

The deposits are rated AAA by CRISIL, which indicates a high level of safety. Senior citizens are entitled to an extra 0.25 per cent, so for those looking to invest upto Rs 5 lakhs, the yield is attractive. Interest rates in the economy are slated to fall further, and hence investors are advised to lock money in high quality debt. The Reserve Bank of India is slated to cut interest rates once again in Oct, which is why individuals should invest now.

3. IDFC First Bank

IDFC First Bank offers an interest rate of 8 per cent on its 1 year deposit. Even the 1 year to 2 year deposit offers an interest rate of 8 per cent, which makes the same attractive. If you are going for a slightly longer tenure of 2 years 1 day to 5 years, you are likely to get an interest rate of 7.50 per cent.

Senior citizens are entitled to an extra interest rate of 0.5 per cent, which takes their interest rate on 1-2 year deposits to as high as 8.5 per cent, which is not bad at all.

4. Bajaj Finserv Fixed Deposits

Bajaj Finserv Fixed Deposits offer an interest rate of 8.35 per cent on a 36 month to 60 month deposit. This is not bad at all considering the fact that banks are offering a much lower interest rate.

The deposits are rated AAA by Crisil, which means the deposits are highly safe. If you are looking for a tenure of 12-23 months, the interest rate drops to 8 per cent.

5. Shriram Transport Finance

Shriram Transport Finance offers an interest rate of 8.65 per cent on a 36 months deposit. The effective yield on the same translates to as much as 9.84 per cent. Crisil and ICRA have both rated the deposits as AAA, which means a high degree of safety.

It is important to remember that company fixed deposits are taxable and a TDS would be deducted, if the interest amount crosses the Rs 5,000 mark. This is a good option for those looking at a slightly longer term.

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