Investment Strategies: How to Save 5 Lacs in 5 years?

by Vinaya HS on June 17, 2010

in Finance

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D was curious to know,

How much should I save/invest each month if I want to build a corpus of 5 lacs (Rs 500,000) in 5 years? Also, in which financial instrument should I save/invest this monthly amount?

I’d recommend saving Rs 7,000 each month in a 5-year Recurring Deposit at the Post Office. An absolutely safe and disciplined approach to building the targeted corpus. At current interest rates (the interest rate is locked once you open the deposit), the maturity amount would be 5.1 lacs (Rs 510,230) (slightly higher than the target).

What do you think? Can you suggest an alternate investment strategy?




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{ 6 comments… read them below or add one }

Ashutosh June 17, 2010 at 11:43 AM

Hi Vinaya,

Certainly this can be counted as amongst the safest strategy for reaching the goal. However, someone with medium risk appetite can also look at have some exposure to diversified mutual fund. So both mutual fund and post office RD can be used in conjunction.

What do you think ?

-Ashutosh

Vinaya HS June 17, 2010 at 4:38 PM

Ashutosh,

Personally, I find five-years too short a window to invest in a diversified mutual fund. But if I had to pick, probably I’d opt for a balanced/hybrid mutual fund — one that’s higher on the debt side.

How does that sound?

Shankar June 17, 2010 at 6:13 PM

I feel investment in PPF is wise. Tax benefits. Interest is tax free. Can vary one’s contribution. Can draw only once in a year from saver point of view. Risk free.

Vinaya H S June 18, 2010 at 2:02 AM

It certainly is. But only if your time horizon is fifteen years or more.

Ashutosh June 19, 2010 at 12:02 PM

I always have a bias towards equity :)

Still I would say, investing in Balanced Mutual Fund is better than putting money in RD.

PS: Just wondering why wasn’t I auto subscribed to the replies :(

Sandriano June 23, 2010 at 7:24 PM

Hi Vinaya,

The RD option looks conservative for someone who is below 35 yrs of age. I would consider the option of investing in a blue chip(s) for the same duration.

Regards,
Sandriano

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