Long-term & Short-term Strategies for Investing 1 Crore in India
Equirus Wealth
12 Jul 2023 • 4 min read
Investing a sizeable sum of money, such as 1 crore or more, requires a well-thought-out plan, an understanding of the financial landscape, and a careful selection of investment instruments. In India, where investment options are aplenty, two broad strategies commonly followed are long-term and short-term investment. The choice between these two depends primarily on the investor's financial goals, risk appetite, and time horizon. This article presents a comparative analysis of both approaches and provides an overview of various investment options suitable for investing 1 crore.
I. Understanding Long-term and Short-term Investments
Before we delve into specific investment options, let's understand what constitutes long-term and short-term investments:
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Long-term investments are typically held for more than a year and are ideal for goals that are at least five years away. They tend to offer potentially higher returns over the long run and can provide the benefit of compounding.
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Short-term investments, on the other hand, are those held for a year or less. They are suitable for goals that are to be met shortly. These investments generally offer lower returns compared to long-term investments but provide higher liquidity.
Table 1: Long-term vs. Short-term Investment Comparison
| Long-term Investments | Short-term Investments | |
|---|---|---|
| Returns | Potentially higher | Generally lower |
| Risk | Can be higher | Usually lower |
| Liquidity | Lower | Higher |
| Taxation | More tax-efficient | Might be less tax-efficient |
II. Long-term Investment Options for 1 Crore & Above
Investing in long-term instruments enables investors to harness the power of compounding and ride out market volatility. Here are a few options:
- Equity Mutual Funds: These funds invest primarily in stocks and aim to provide high returns over the long run. Equity funds are suitable for those with a higher risk appetite.
- Real Estate: Investing in real estate property, whether residential or commercial, offers dual benefits - regular rental income and potential property value appreciation.
- Public Provident Fund (PPF): A popular long-term investment option, PPF offers attractive interest rates and tax benefits under section 80C of the Income Tax Act.
- Direct Equity: Investing directly in the stock market can yield high returns over the long term but requires expertise and tolerance for market volatility.
III. Short-term Investment Options for 1 Crore
Short-term investments are ideal for preserving capital and meeting short-term financial goals. Some of the options include:
- Short-term Debt Mutual Funds: These funds invest in fixed-income securities with short maturity periods and offer stable returns.
- Fixed Deposits (FDs): FDs are safe investment avenues offering guaranteed returns. Banks offer various FD tenures, and interest earned is taxable.
- Liquid Mutual Funds: These types of funds invest in debt and money market securities with a maturity of about 91 days. They offer high liquidity and moderate returns.
- Arbitrage Funds: These funds leverage the price differential in the cash and derivatives market to generate returns. They are relatively low-risk and offer better post-tax returns than FDs.
Table 2: Long-term and Short-term Investment Options
| Investment Options | Long-term | Short-term |
|---|---|---|
| Equity Mutual Funds | Yes | No |
| Real Estate | Yes | No |
| Public Provident Fund (PPF) | Yes | No |
| Direct Equity | Yes | No |
| Short-term Debt Mutual Funds | No | Yes |
| Fixed Deposits (FDs) | No | Yes |
| Liquid Mutual Funds | No | Yes |
| Arbitrage Funds | No | Yes |
In conclusion, the choice between long-term and short-term investment strategies depends on individual financial goals, risk tolerance, and investment timeline. Investing 1 crore in India presents myriad opportunities. Balancing your investment portfolio with a mix of long-term and short-term investments can help mitigate risk and achieve financial goals effectively.
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Disclaimer: The information provided in this article is for educational purposes and should not be taken as financial advice. Always consult with a recognized financial advisor before making investment decisions. Book a free consultation with one of our experts by clicking on the “Book a meeting” button or write to us at wealth@equiruswealth.com.
