A decent capital like Rs. 5 lakhs can be a good starting point for a significant corpus. Most people look at PPF or EPF money to start investing. The easier and more lucrative way is to collect money from surplus cash like bonuses and create a lump sum investment. You can invest in various options with such a large amount. They can range from highly risky to low risk as enumerated below –
Equity -Oriented (Riskiest)
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Stocks and Equities and ETFs – Large-caps, mid-caps and small caps
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Various Mutual Funds – Equity, Debt, Hybrid
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Derivatives – Futures & options
Fixed Income (Least Risky)
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Various Small Saving Schemes such as Public Provident Fund (PPF), SCSS and others
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Bonds – government and private
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Fixed Deposits – bank and company FDs
Alternative (Low to Medium Risk)
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Real estate – commercial and residential
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Bullion – Gold, silver, platinum
A Return on Investment (ROI) is the need of every investor. You can calculate this simple ratio by the following formula.
ROI = (Maturity – Principal)/ Principal
All investment options can be compared based on this simple calculation. While the time period is important, if you are looking at a similar duration and riskiness levels, you should use this formula.
ROI Comparison
How you invest money also determines your ROI. Equity and mutual funds are known for high ROI over a long period of time. However, this return has no fixed timelines. Bonds and other medium risk options are dependent upon the market sentiment when you are going to sell the instrument. Eg. Even if you have been holding a real estate for 10 years and its value has been increasing, the time period in which you are going to sell is important. If there is a real estate crash, you will end up receiving a lower ROI. Low-risk options such as FDs give a fixed rate of return, which you know at the beginning of the investment. Another investment option one should consider for this comparison is Company FDs.
Most high-risk options do not have any assurance of returns or option to choose payment. In company FDs, you can choose the time intervals of monthly, quarterly, and half-yearly. The option of cumulative and non-cumulative interest payouts is not available with most options except FDs. You can choose to get your interests either periodically or at the end of the maturity period. Options with medium to high returns are great for people willing to risk their Rs. 5 lakhs capital to an extent. Analyze your risk appetite, the purpose of investment, your income level, age, and other factors and then go for these options.
Company FD offering 50% ROI
Just like low-risk investment options are great for the safety and stability of returns, you should be assured of your principal and interest repayment. If you are keen on going for company FDs, then check out the credit ratings of the FD by companies like ICRA and CRISIL.
Bajaj Finance FD has one of the top ratings for fixed deposits with CRISIL’s FAAA/Stable rating and ICRA’s MAAA (stable) rating. The high interest rates not only have stable returns but a high ROI. It has built this credibility to achieve a deposit book of Rs. 16,000 crores with a customer base of 2,50,000.
Bajaj Finance FD offers the best returns as seen below on Rs. 5 lakhs deposit for 5-year FD –
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Investor
Interest rates
Return
ROI
New customer
8.35%
₹2,46,646
49.32%
Existing customers
8.45%
₹2,50,098
50.02%
Senior customers
8.70%
₹2,58,783
51.75%
For senior citizens, Bajaj Finance FD can be most beneficial due to high ROI with an interest rate of 8.70%. This will be much more lucrative than PF once your PF matures. The PF only pays a rate of 8.65% for FY 2019.
To align with your overall financial planning, you can also use an online fixed deposit calculator india to understand the ROI on your capital of Rs. 5 lakhs.
