Best Investment Plan for 3 Years

Ever wondered what to do with your money when you want to grow it but do not want to lock it away for too long? That is where the best investment plan for 3 years comes in. It can facilitate wealth generation over a medium-term period and help you save for specific goals like a down payment on a house, higher education, or creating an emergency fund. Unlike long-term investments that lock your money for extended periods, 3 year plans offer a sweet spot between growth potential and accessibility.

Best Investment Plan for 3 Years in India.

Want to invest your money for 3 years but not sure where to start? India offers a diverse range of short term investment plans for 3 years that are worth exploring and can make a significant difference to your financial future.

1. Savings Account

You can deposit funds in a savings account and earn a modest interest rate from 3% to 6% annually. This interest is calculated by the bank or financial institution on the minimum maintained average balance. The savings account is the go-to choice for individuals who want a low-risk option or are beginning their investment journey. Savings accounts are also preferred due to their liquidity, as you can withdraw money easily through ATMs, online banking, or in-branch services without any penalties.

2. Liquid Funds

Liquid funds are mutual funds that invest in short-term debt instruments like treasury bills and certificates of deposit. They offer attractive returns, usually between 4% to 7%, and are highly liquid. Liquid funds are ideal if you seek slightly better returns at minimal risks while keeping your money accessible.

3. Fixed Deposits

If you are looking for a safe investment option, Fixed Deposits (FDs) are the way to go. Offered by banks and financial institutions, they provide guaranteed returns. The FD interest rates range from 6% to 8%, depending on the tenure and institution. You can choose a three-year FD for stable and predictable growth without worrying about market fluctuations.

4. Fixed Maturity Plans

Fixed Maturity Plans (FMPs) are close-ended mutual funds that invest in fixed-income securities with a predetermined maturity date. You can invest in such plans only when new fund offerings are announced. These plans are similar to FDs but offer higher returns, ranging between 7% to 9%. They are tax-efficient for those in higher income brackets.

5. Gold Investment

Gold investment not only have cultural significance in India but also help diversify your portfolio. Over a three-year period, gold prices tend to offer steady returns, especially during times of economic uncertainty or social crises. You can invest in physical gold, gold ETFs, or sovereign gold bonds for a safe and potentially rewarding short-term investment.

6. Equity Linked Savings Scheme (ELSS)

ELSS is a tax-saving mutual fund that offers the potential for high returns by investing in equities. Although it has a three-year lock-in period, it also allows you to claim tax deductions under Section 80C of the Income Tax Act. With returns often exceeding 10%, ELSS is an excellent choice for those willing to take on moderate risks for better growth.

7. Unit Linked Insurance Plan (ULIP)

Many investors prefer ULIPs as the best investment plan for 3 years as they combine investment with insurance. A portion of your premium is invested in market-linked funds, while the rest provides life insurance coverage. ULIPs offer the potential for attractive returns and are suitable for individuals looking for dual benefits of growth and financial security.

Benefits of 3 Years Investment Plans

It is true that long-term investments generate higher returns due to compounding. However, the best investment for 3 years has its own charm, especially when you want to maintain flexibility and avoid unwarranted risks.

Liquidity

As your funds are not tied up for a long duration, 3 year investment plans are more liquid. Even before maturity, you can withdraw the money in case of any emergency. This helps you maintain agility in the face of unforeseen circumstances.

Diversification

There are various short-term investment options that have a maturity period of 3 years. You can use a combination of all such options to create a well-diversified portfolio. For instance, if you prioritize safety over profits, you can invest a greater sum in FDs. On the other hand, ULIPs can help you benefit from market growth and earn high returns.

Optimal Returns

3 years is a good enough time for your portfolio to grow. Your returns will compound over time and help generate wealth. What’s better is that 3 year plans involve low to moderate risk. So your returns will not come at the cost of volatility.

Flexibility

You can revise your investment amount at short intervals of 3 years as per your changing financial condition. Moreover, once the 3 year plan matures, you are free to invest the money in other assets and earn returns.

Risk Management

When you allocate funds across different asset classes for 3 years, you can balance the risk posed by one asset class with another. Such a diversified portfolio ensures that even when the market underperforms, you continue to earn a specific income. Moreover, if you find out that a certain asset is turning out to be too risky, you can withdraw your investment.

Conclusion

When it comes to the best investment plan for 3 years, remember that there is no one-size-fits-all approach. Take some time to think about what matters most to you - whether it is growing your money quickly, keeping it safe, or having easy access to it when needed. Once you have figured this out, start by picking one or two investment options that match your goals. As you get more comfortable, you can gradually explore other options and adjust your strategy. You can also talk to a financial advisor who can help you create a personalized plan based on your specific situation and goals.

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