That are the perfect funding choices for recurring monetary objectives like yearly youngsters’ faculty charges, insurance coverage premiums, or yearly journey form of objectives?
All of us have sure recurring monetary objectives. As I discussed above, these could embrace our youngsters’ faculty charges, insurance coverage premiums, journey bills, or home upkeep. In such conditions, what’s the greatest product to put money into, and the way can these objectives be managed?
Greatest Funding Choices For Recurring Monetary Targets
When I’m pointing to recurring monetary objectives, I imply to imagine that they’re all in short-term nature like inside 1 yr or 2 years.
Because the objectives are short-term in nature, you clearly must take away the fairness element when investing to realize such objectives. The one possibility is to discover debt devices. Additionally, please word that for such short-term objectives, chasing returns should not be your funding technique. As a substitute, deal with security and funding your objectives on the proper time with the correct amount. Due to this fact, don’t chase returns from debt merchandise both. As a substitute, they need to be as secure as doable whereas offering first rate returns across the present inflation fee.
# Financial institution FDs or RDs
Use financial institution FDs if in case you have a lump sum quantity obtainable to fund such recurring objectives. Nonetheless, if that isn’t the case, then merely use financial institution RDs. As talked about above, don’t search for banks, NBFCs, or small finance banks that provide increased charges of round 0.5% to 2%. It hardly issues for such a brief interval. Therefore, stick with PSU or well-established personal sector banks the place you possibly can make investments.
The one difficulty with financial institution FDs or RDs is that you just should be certain of when your purpose is due. In any other case, for those who want the cash earlier than maturity, you’ll find yourself paying a untimely withdrawal penalty. If the funding to your purpose comes after maturity, then you’ll have to reinvest once more.
In case your financial institution gives Sweep-In FD, then merely use this feature.
# Liquid Funds
As I discussed in my final weblog put up “Brief-Time period Funding Choices in India 2025“, use Liquid Funds to your necessities inside 1 yr (few months) or so objectives simply. The one benefit of Liquid Funds over Financial institution FDs or RDs is that you do not want to specify the maturity. Therefore, for objectives which might be short-term in nature however not sure of when it can occur, then use Liquid Funds. As you might be conscious, the taxation of Liquid Funds is similar as Financial institution FDs and RDs.
Do word that liquid funds don’t essentially imply secure investments. There have been sure previous situations the place returns took a major hit because of fund managers’ selections to put money into low-rated bonds. Therefore, be cautious when selecting liquid funds (Check with my earlier put up “Is Liquid Fund Protected and different to Financial savings Account?“.
# Arbitrage Funds
In case your purpose is greater than a yr, then you possibly can take into account Arbitrage Funds additionally as they provide tax benefit over Financial institution FDs, RDs, and Liquid Funds. Nonetheless, make sure that for few months these arbitrage funds could generate detrimental returns (check with my earlier put up “Can Arbitrage Funds give detrimental returns?“.
Conclusion – Exploring past these above-recommended classes is probably not appropriate for funding your recurring monetary objectives. As I discussed above, the first focus must be the safety of the principal and the flexibility to fund the objectives correctly somewhat than chasing the returns. Don’t attempt to beat the inflation for such objectives by exploring different options. As a substitute, the easiest way to beat inflation is by selecting security devices and investing extra to realize monetary objectives.
