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Best Short Investment Plan for 3 Years

Investing can assist you achieve financial goals such as buying a car, taking a foreign vacation, and owning your dream home. If you are looking to invest towards achieving these goals in 3 years, let us bring to you the list of such investment options and their benefits as well.

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Investment Plan for 3 Years

Best Short Investment Plan for 3 Years

Best Short Investment Plans
October 09, 2024

Table of Content

 

When compared to medium or long-term investment options, the best short investment plan for 3 years is designed to fulfil the life goals you wish to achieve in 3 years.

Best Investment Plan for 3 Years

There are many benefits of 3 year investment plans, such as the following:

  • Liquidity

    • One of the core benefits of 3-year investment plans is that they offer a high degree of liquidity, as the investors have the option to invest or redeem whenever they require. Such liquidity helps investors safeguard their long-term investments and create a financial cushion for achieving them.

  • Diversification

    • Another major benefit of investment plans for 3 years is diversification. As per your requirement and suitability, you can choose to invest either a small or a large amount of money, such as Rs 1,000 or Rs 1 lakh. You can also choose to invest in various investment options at the same time, thus helping you create a diversified portfolio across different asset classes and balance the risk-reward ratio.

  • Optimal Returns

    • There are many short-term investment options that come with a high degree of risk but also offer high returns on investment. However, the risk involved in such 3-year investment options is lesser than the one involved in medium to long-term investments, thus making it suitable for those who have a low-risk appetite and wish to invest for a short tenure.

  • Flexibility

    • As investors can use the option of changing the investment amount at certain small periods, this provides a degree of flexibility as your investment amount is not tied up. Moreover, it also provides an opportunity for investors to reinvest the gained returns into other investment options, which hold the potential to further gain more returns in the next few years.

  • Risk Management

    • The benefit of diversification is what helps investors also minimize their risk when investing in the best short investment plan for 3 years. As your money is distributed across different asset classes, the risk-reward ratio gets balanced.

Best Investment Plan for 3 Years

1. Savings Account

A savings account is one of the types of bank account in which you deposit your money and withdraw it on a need basis, whether as cash or through online modes like UPI. However, savings accounts are also among the best investment options for 3 years, with some private and small finance banks offering high-yield savings accounts with interest rates going up to 6%-7%, depending on the amount deposited. Given the high degree of safety and liquidity, savings accounts often turn out to be a good option to invest short-term money.

2. Liquid Funds

One of the best short-term investment plans for 3 years is liquid funds, which are a category of mutual funds which majorly invest in short-term market securities such as government securities, corporate bonds, treasury bills, etc. Liquid funds are a type of debt mutual funds which hold a lower degree of risk on investment, and their maturity period is upto 91 days. These funds offer a higher degree of liquidity and low risk, thus making them suitable for those wishing to invest for the short term but have a low-risk profile.

3. Fixed Deposits

One of the most popular and safe savings plans in our country is FD (fixed deposits). FDs are financial instruments that offer a fixed interest rate for the chosen tenure. Their interest rates vary across different banks and across different deposit amounts and tenures. However, there is some degree of liquidity as you can withdraw your FD prematurely or even take a loan against it. The interest rates offered by private and small finance banks on FDs currently go as high as 8%-9% p.aA.

4. Gold Investment

For many generations, gold has been a common investment option for the best short investment plan for 3 years; gold can be a wise choice. Gold investment has multiple benefits, such as stability plus protection during bank crisis, social unrest, or inflation. Moreover, another big benefit of gold is that the ups & downs in the stock market do not majorly impact its value, thus making it a good investment option in the short term.

5. Equity Linked Savings Scheme (ELSS)

ELSS are a form of diversified and tax saving equity mutual funds with a lock-in period of three years, which is the shortest among all other investment options under Section 80C. After the three year lock in period, you can redeem your ELSS investment. Also, you can invest in ELSS through SIPs or a lump sum. The short lock-in period ensures disciplined investing and, at the same time, offers the facility to redeem the amount after 3 years. You can also choose to reinvest the amount in ELSS.

6. Unit Linked Insurance Plan (ULIP)

ULIPs are a best investment plan for option for both 3-years and 5-yearsB. They combine investment and insurance, with part of your premium covering life insurance while the rest is invested in market-linked funds for potential growth.

Unit Linked Insurance Plans offer flexibility to switch fund options based on your risk appetite. They have a minimum lock-in period of 3 years for disciplined investments. While ULIP Plans typically have a 5-year lock-in, one can stop premium payments within the first 3 years. The fund value is then transferred to a discontinued policy fund. This balance of growth and protection makes ULIPs the most preferred investment option.

Conclusion

With a plethora of investment options to choose & select from when selecting the best short investment plan for 3 years, make sure you factor in your risk appetite and expected returns. Making the right decision can help you achieve short-term financial goals in a timely within the investment horizon of 3 years.

FAQs on Best Investment for 3 Years

Q. Which is the best investment for 3 years?

Gold, bank FDs, ELSS, high yield savings accounts, and liquid mutual funds are some of the best short investment plan for 3 years. Factor in your risk appetite and expected returns when choosing amongst them.

Q. Can you invest for 3 years?

Definitely Yes. You can invest in whatever investment horizon you wish, whether it's for a short-term investment of 3 years or a long-term investment of 20 years. You can invest in bank FDs, gold, ELSS, savings accounts, or liquid funds for 3 years.

Q. How to double money in 3 years?

You can use the rule of 72 (which is T ≈ 72÷R) to understand how you can double your investment portfolio in just 3 years. Putting T as 3 years in this formula, R (return) comes out to be 24%. So you would need to invest in investment options that can give you 24% returns so that you can double your money in 3 years. Note that this is a general thumb rule, which gives you a fair idea.

Q. How does liquidity impact 3-year investment options?

Liquidity impacts your withdrawal options for an investment and whether you can redeem or withdraw funds from it. Investment options in India that offer a high degree of liquidity, such as savings accounts and liquid funds, can benefit you in times when you need the money that is invested.

Q. What are the tax implications of a 3-year investment?

The taxation would vary across different investment options. For example, interest on savings accounts is tax-free up to Rs 10,000 a year, whereas earning above this would be taxed as per your tax slab. On the other hand, in the case of physical gold, a 20% tax is levied on long-term capital gains (LTCG) upon sale, whereas if it is a short-term gain, you shall get taxed as per your applicable income tax slab.

Related Articles:

References:

A. https://www.paisabazaar.com/fixed-deposit

B. https://www.hdfclife.com/insurance-knowledge-centre/about-life-insurance/surrendering-ulip-after-lock-in-period-ends

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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In unit linked policies, the investment risk in the investment portfolio is borne by the policyholder. The Unit Linked Insurance products do not offer any liquidity during the first five years of the contract. The policyholders will not be able to surrender/withdraw the monies invested in Unit Linked Insurance Products completely or partially till the end of fifth year.

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