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How to Invest 20 Lakhs?

Investing is a process and needs a lot of groundwork to make your money work for you. If you have consistently parked funds in a savings account and accumulated a huge sum, you can create an investment plan and deploy part of the balance in your savings account to create a substantial corpus. If you wish to invest Rs. 20.00 lakhs, you should know how to invest 20 lakhs to generate attractive returns.

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How to Invest 20 Lakhs ?

Best Ways to Invest 20 Lakhs ?

How to invest 20 lakh
December 27, 2024

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If you are used to only conventional saving methods and do not understand other options, seek assistance from professionals who will suggest where to invest 20 lakhs and get high returns. However, creating a portfolio depends on your risk tolerance and financial goals. This read will give you valuable information about the various investment avenues and where to invest 20 lakhs for monthly income. 

Best Investment Options to Invest ₹20 Lakhs

To resolve your confusion about how to invest 20 lakhs, you should be aware of the various options available and which suit your requirements.

1. Monthly Income Plans

If you wish to know how to invest 20 lakhs for monthly income, here are some alternatives.

  • A pension plan is a safe option to create a monthly income stream. Income commences immediately or at a predetermined date and depends on which annuity plan you choose.

  • Endowment plans are traditional insurance plans that offer life cover and maturity benefits. You can use the lump sum you receive if you survive the policy term to create a regular income source. 

  • Fixed deposits are safe investment options suitable for risk-averse individuals.  The plan offers flexible payout options i.e., monthly, quarterly, half-yearly, or yearly.

  • A Unit-linked Insurance Plan has insurance and investment components. A portion of the premium is invested in market-related assets. To create a monthly income source, opt to receive the fund value in monthly instalments. 

2. ULIPs

For your concern about where to invest 20 lakhs, Unit-linked Insurance Plans (ULIPs) are a good avenue to secure your family financially, create a corpus for the future or accomplish long-term financial goals. A portion of the single premium of Rs. 20 lakhs is utilised for life cover and the rest is invested in market-related assets to optimise your savings.

3. Pension Plans

Pension plans like annuity cum insurance plans and ULIPs are good options for your concern of where to invest 20 lakhs for monthly income. Both have life cover as well as wealth creation components. Annuity plans are safer options and provide guaranteed returns whereas ULIP is a risky option as the returns on investment depend on market fluctuations.

With an option to receive monthly payouts, annuities and ULIPs are ideal for creating a regular income stream post-retirement.

4. Guaranteed Income Plans

A life insurance policy (non-ULIP policy) like an endowment policy is ideal for individuals who wish to know how to invest 20 lakhs to generate guaranteed income. It has a dual advantage of death benefits as well as maturity benefits. If anything untoward happens to you during the policy term, your family will receive the death benefit. If you outlive the policy term, you will receive a maturity benefit. These benefits are determined at the time of policy purchase and remain the same unless the service provider offers additional benefits like loyalty bonuses. With the flexibility to receive maturity benefits in monthly instalments, this plan serves as an ideal fixed income source.

5. Fixed Deposit

Fixed deposits are time deposits with a tenure ranging between 6 months to 10 years. With a fixed interest rate determined while opening the account, this scheme provides guaranteed returns. You can opt for monthly interest payments if you wish to create a regular income source from this investment plan.

6. Systematic Withdrawal Plans

Systematic withdrawal plans are a facility extended to investors to redeem mutual fund units and withdraw a fixed amount regularly. Individuals who are wondering how to invest 20 lakhs for monthly income should consider this plan that provides the flexibility to choose the payout intervals. The units are sold on a set date and the funds are transferred to the investor at regular intervals.

7. REITs

Real Estate Investment Trust owns and manages high-profile real estate to generate income. They lease or rent out properties and distribute the rent collected among shareholders as dividends. This is where to invest 20 lakhs to enhance capital value and generate returns at the same time.

8. Stocks

Stocks and equity schemes provide income in the form of dividends. The dividend yield depends on the performance of the stock in the market. Dividend payouts are generally quarterly or annually. However, some companies pay dividends monthly.

9. Debt Mutual Funds

Debt mutual funds are professionally managed investment options. The funds are invested in securities that generate fixed income, like corporate bonds, treasury bills, government securities, commercial papers, etc. Investors can choose short-term funds or long-term funds depending on their risk tolerance and financial goals.

10. Post Office Monthly Income Scheme

Individuals looking for how to invest 20 lakhs in a low-risk savings plan can choose the Post Office Monthly Income Scheme. It is a safe monthly income-generating option with an investment period of 5 years. 

How to select the best investment option to invest ₹20 lakhs?

Selecting the best investment option is crucial, especially if you are looking for how to invest 20 lakhs which is a substantial amount. The following have an important role in the selection process:

  • Considering factors like your financial goals, risk tolerance, return on investment, and effect of inflation on the returns 

  • The nature of your financial goals has an important role.  For instance, if investing in your child’s future is the goal, then allocating funds to child insurance plans will be a smart move. 

  • The capacity to absorb risk is higher when you are younger as you have time to your advantage. Staying invested in options like stocks, mutual funds, etc., yields higher returns in spite of the risk being high.

  • If you are a risk-averse investor, then safe options like NPS, PPF, Fixed Deposits, etc., are what you should consider. 

Key Factors to Consider before Investing ₹20 Lakhs

Consider the factors mentioned below before investing 20 lakhs:

  • Financial Goals

Jot down your financial goals and allot a timeline for each goal. You can include both short-term and long-term goals and allocate the funds accordingly.

  • Risk Tolerance

If you have a low-risk tolerance and prefer capital protection to returns, go for safe options like fixed deposits, money market accounts, pension plans, etc., depending on the time horizon. Market-related assets like stocks, mutual funds, ETFs, etc., are ideal if your risk tolerance is high.

  • Investment Period

If you can stay invested for a long time, you can employ aggressive strategies. A conservative approach is better if the tenure is shorter. Choose savings schemes to suit the time horizon allotted for your goals.

Summary

If you are new to the investment arena and wondering how to invest 20 lakhs, you need a financial plan to deploy it for profitable returns. Assess your risk tolerance levels, financial goals, returns you need, and the impact of inflation for an informed decision. 

Individuals open to high risk can invest in multiple market-related assets to balance the risks and avoid potential losses. Similarly, risk-averse individuals have safe options like NPS, PPF, Fixed Deposits, Money market accounts, etc., to grow their money over time. For a calculated plan and smart investment, you can consult experts in the field and make the most out of the 20 lakhs.

FAQs on How To Invest 20 lakhs 

Q. How much can I earn monthly by investing 20 lakhs?

How much you can earn monthly investing 20 lakhs depends on various factors like the choice of assets, the investment period, the rate of returns, and the associated risk. You should consider the extent of returns you need, the liquidity, and the risk associated before making an investment decision. 

Q. What is the monthly interest on 20 lakhs?

The monthly interest rate of 20 lakhs depends on the rate of interest fixed for the plan. You can use an investment calculator to assess the monthly interest you earn from various plans and choose the one that provides the expected returns.

Q. Best way to invest 20 lakhs?

The best way to invest 20 lakhs depends on your financial goals, the returns you expect, your risk tolerance, and the time horizon. For instance, PPS, NPS, and EPF are the best investment options for retirement planning. If you need to create a huge corpus within a given time for big-ticket goals like buying a home, you can invest in market-related assets, provided you are open to tolerating risks. 

Q. What are the risks of investing ₹20 lakhs in fixed deposits?

Fixed deposits are safe investment options. However, there are some risks as well. The returns earned may not beat inflation. The financial institution may fail to honour its obligation, which generally does not happen. However, the fixed deposits are covered under DICGC up to Rs. 5.00 lakhs. 

Q. What are the tax implications of investing ₹20 lakhs?

The tax implications of investing 20 lakhs are:

  • ULIP policies issued on or after 01-02-2021 exceeding premium payable of Rs 2.50 lac shall be treated as Section 10 (10D) non-compliant & the proceeds shall be taxable. 

  • For Pension Plan - Any payment received in commutation of pension as a lump su   m on vesting (maturity) is exempt under section 10(10A) (iii) of the Income-tax Act, 1961, subject to fulfilment of various conditions under the current income-tax law. 

  • Regular annuity received under the annuity plan will be taxable in the hands of the recipient. Insurance policies other than ULIP and pension are taxable if the premium exceeds Rs 5 lac. At the time of maturity or surrender, the policy proceeds after reducing the premiums paid would be chargeable to tax as 'Income from Other Sources'

  • Interest earned on fixed deposits and post office is taxable and liable to TDS at 20% if there is no PAN and 10% if there is a PA

  • Capital gains apply to mutual fund returns, REITs (Real Estate Investment Trusts), Stock (equity).

  • Dividends on stocks will be taxed as per the applicable income tax slab

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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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2.Save 46,800 on taxes if the insurance premium amount is Rs.1.5 lakh per annum and you are a Regular Individual, Fall under 30% income tax slab having taxable income less than Rs. 50 lakh and Opt for Old tax regime.

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