My wife and I work and intend to invest money for some specific use in the next three years.
We want to invest around ₹10 lakh, which can be accumulated over the next four months.
Moreover, we want the money to be easily available for our personal use such as for home and car loan down payments in a year or two.
We are looking at liquid funds that have a greater flexibility (keeping the principal amount safe) and will allow us to withdraw the amount we want and give good returns within one to two years.
Can you suggest mutual funds that we should invest in and any other option that will give decent returns?
Please note that we invest in other mutual funds regularly.
Sanjeev V
It is good to note that you are saving systematically for your goals.
You have rightly identified liquid funds as the suitable vehicles for reaching your targets. Short and ultra short-term funds too would be appropriate for goals that are due within a year or two. In general, liquid and short-term funds may be expected to deliver 7-8 per cent annually over a three-year period.
Though both liquid and short-term funds carry an element of market risk, fluctuations are usually mild and generally returns have been healthy across time-frames over the last five years.
You can invest in Franklin India Ultra Short Bond-Super Institutional Plan (₹4 lakh), L&T Money Market (₹3 lakh) and Aditya Birla SL Money Manager (₹3 lakh).
Please note that any capital appreciation that is made by redeeming units before three years would be treated as short-term gain and taxed at your slab.
You can also consider parking your surplus in fixed deposits. If interest rates rise over the next few quarters, FDs may become attractive. But if you redeem deposits before their maturity for your requirements, you would end up paying a penalty — you will end up with 0.5 to 1 percentage point below the contracted rate.
Since you are set to take multiple loans, take suitable term covers for yourself and your wife. Add the loan amount taken for the house and car while calculating the sum assured.
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