Get to know about the 10 best investment plans for 5 years that will multiply your money to fulfil your goals.

Every individual is finding measures to multiply their money. The smartest way to multiply your money is by investing in either a short term scheme or a long term scheme. An investment made for a period of 1-5 years is called short-term investments. There are several advantages in opting for a short term investment as they are risk free, money is not locked in for a long duration and short term goals can be accomplished using the investment returns. To get the best returns out of your investment let us discuss about the possibilities of the best investment plans for 5 years.

1. Fixed Deposits:

Fixed Deposit is among the safest and best investment plans for 5 years that is available in the market.  Here you can deposit a lump sum amount in the bank for a fixed tenure period.

The bank offers a good interest rate for a 5-year deposit. The interest rate is higher for 5 years when compared to a 1 or 3-year plan. The Fixed Deposit offers a rate of interest ranging from 4-9%. The interest rate for senior citizens is much higher. Premature Closure is not allowed, however, if one wishes to close before the tenure period penalty charges will be applied.

The Returns in Fixed Deposits are guaranteed, making it the best short-term investment plan for 5 years.

Tax Saver FD:

Most of the banks that offer a 5-year deposit comes with a tax-saving benefit. The tax saving FD may not allow for premature closure before the end of tenure. The tax saver FD offers a tax-saving, deduction of up to 1.5 lakh under Section 80C of the Income Tax Act 1961. The interest rate for senior citizens is higher with an additional 0.25%-0.5% interest than the regular interest rate.

As per July 2021, the interest rates for Tax Saving FD in the following banks are;

  • HDFC Bank – For a 5-year investment HDFC pays a 5.30% regular interest rate per annum and for Senior citizens, it is 5.80%. It pays a 0.5% higher interest for senior citizen
  • Bajaj Finserv– For a 5-year investment Bajaj Finserv pays a 6.50% regular interest rate per annum and for Senior citizens, it is 6.75%. It pays a 0.25% higher interest for senior citizens. Bajaj Finserv offers a 6.60% interest rate, especially for online customers.
  • SBI– For a 5-year investment SBI pays a 5.30% regular interest rate per annum and for Senior citizens, it is 5.80%. It pays a 0.50% higher interest for senior citizens.
  • India Post Office– For a 5-year investment India Post Office pays a 6.70% regular interest rate per annum and for Senior citizens, it is 6.70%.
  • ICIC Bank– For a 5-year investment ICIC pays a 5.35% regular interest rate per annum and for Senior citizens, it is 5.85%. It pays a 0.50% higher interest for senior citizens.
  • Yes Bank– For a 5-year investment Yes Bank pays a 6.75% regular interest rate per annum and for Senior citizens, it is 7.50%. It pays a 0.75% higher interest for senior citizens.
  • Axis Bank– For a 5-year investment Axis Bank pays a 5.75% regular interest rate per annum and for Senior citizens, it is 6.50%. It pays a 0.75% higher interest for senior citizens.

2. Savings Account:

The savings account is another reliable and safest investment plan mode that can be used for liquidity. It is one of the best investment plans for 5 years. The money can be kept in the banks or financial institutes until required. The interest rates differ according to the amount and duration of the money kept in the account. The interest is credited periodically and is calculated daily. The interest rate for a savings account can range from 4%-7%. The money can be withdrawn anytime.

Effective on 1st April 2021, the interest rate for savings accounts for various banks include;

  • Axis Bank- 3.5% p.a.
  • ICIC Bank- 3.5% p.a.
  • HDFC Bank- 3.5% p.a.
  • Yes Bank- 5%-6.25%
  • Kotak Mahidra Bank- 4%-6% p.a.

The interest gained from a savings account is referred to as “ Income from Other Sources”. The tax deduction is allowed only if the interest income is up to Rs.10,000. If the interest amount exceeds Rs. 10,000 then it is taxable.

3. Gold Investment:

When it comes to investing in Gold the decision never goes wrong. Another best investment plan for 5 years is investing in gold which is worth every penny as the returns on investment are in trend with the rate of inflation. Gold can be bought online through SIP. A small amount can be paid for a fixed period and the gold can be redeemed once the payment for the fixed tenure is complete. According to Economic Times, gold is the best asset which has gained a 50% increase in the last year and a 12.3% annualised CAGR return in the last 5 years.

4. 5 Year National Savings Certificate (NSC):

National Saving Certificate is one of the best investment plans for 5 years. Since this is a Government of India initiative, it is a low risk fixed income scheme. This scheme can be opened at any post office branch.

The NSC VIII Issue comes with a fixed maturity period of 5 years. The scheme gives you guaranteed returns. You can start the investment from as low as Rs. 1000 and gradually increase the investment.

This scheme gives you a tax exemption of up to Rs. 1.5 lakh under Section 80C of the Income Tax Act 1961.

The current interest rate for NSC is 6.8% p.a. The Interest rates will be revised by the government periodically.

Premature withdrawal is not allowed as the money is locked for 5 years, but in exceptional cases like the demise of the investor the money can be withdrawn by submitting the proper documents and a court order.

5. Liquid Funds:

We have been discussing bank fixed deposit and savings account earlier. Although these are the safest way to invest these traditional methods yield low returns. So people have turned to investments like mutual funds to get high returns but it is subject to market risk and it can be a great tool for long term investments.

However, if you need a short term investment that has low risk and can also gain higher returns then Liquid Funds would be the best option. This is one of the best investment plans for 5 years. This not only yields better returns than the traditional savings and FD but is also safer than mutual funds.

Liquid Fund is a type of debt fund. The investments are made in short term securities like treasury bills, corporate bonds, commercial papers, debentures, etc.

This provides high liquidity and is easy to withdraw. The maturity tenure is just 90 days with no exit load after 7 days.

The dividends that are obtained from liquid funds are non-taxable.

The interest rate ranges from 4-8%.

Fund NameInterest for 5 years
SBI Liquid Fund6.49%
HDFC Liquid Fund6.46%
Axis Liquid Fund6.61%
ICICI Liquid Fund6.58%

6. Fixed Maturity Plans:

A Fixed Maturity Plan is a type of debt fund where the investment is made in fixed income instruments like bonds or certificate of deposit. They are closed-end mutual fund schemes with a lock-in period. The tenure can vary from 30 days to 5 years.

This scheme is similar to the bank fixed deposit wherein the invested money stays locked until the maturity date.

This scheme is ideal for individuals who are looking for better returns than bank fixed deposits and are willing to take risks as the interest rate may rise or fall. Though the interest rates are high it is a high-risk scheme.

The dividends offered by this plan are taxable as per the income tax slab.

7. Recurring Deposit:

Another effective and safe investment plan for 5 years is a recurring deposit. This is ideal for the person who cannot invest a lump sum amount. This is the most preferred and risk-free investment where a fixed amount accumulates in the RD account in a bank for a fixed period. The interest rates for RD is similar to Fixed Deposit, but the monthly instalments of money makes it the most preferred scheme.

The tenure can be taken for 6 months to 10 years. The interest amount in an RD is not exempted from tax.

Let us browse through some of the top banks’ RD interest as of 2021.

Bank NameGeneral RD Interest rate for 5 yearsSenior Citizen RD Interest rate for 5 years
HDFC5.30%5.80%
POST OFFICE5.80%5.80%
ICICI5.50%6.30%
AXIS BANK5.50%6.00%
INDIAN BANK5.15%5.65%
SBI5.40%6.20%
INDIAN OVERSEAS BANK6.80%6.80%

8. Certificate of Deposit:

Certificate of deposit has been another yet best investment plan for 5 years. This is government-backed security, hence it is safe and reliable. So what exactly is the Certificate of Deposit scheme? In short, it is an agreement between a depositor and the bank wherein a lump-sum amount is deposited for a predetermined time and is left untouched. In exchange for the premium, the depositor receives an interest rate from the bank. At maturity, the principal amount along with the interest gained is returned to the depositor.

This is a low-risk investment option than investing in bonds and stocks. The interest rate is higher than the traditional schemes.

The tenure for Certificate of Deposit ranges from 1 year to 3 years.

A minimum of Rs. 1 lakh has to be deposited.

Premature withdrawal is not allowed.

9. Non Convertible Debentures (NCDs):

Non-Convertible Debentures is also a type of debt fund that comes under the best investment plan for 5 years. They come with attractive, high-interest rates. These provide a fixed income and are generally issued by high-rated companies in the form of public issues. They have a fixed maturity date.

The interest rate ranges from 7% to 9%. The interests are paid out either monthly, quarterly, half-yearly or annually. 

The interest gained is taxable under “Income from Other Sources”.

10. Treasury Bills:

Last but not least Treasury Bills are one of the best investment plans for 5 years. This is issued by the Government of India and the Reserve Bank of India as a fundraising measure. Here the treasury bills can be purchased during the auctions which are held monthly. The minimum amount that can be invested is Rs.25,000 with a maturity period ranging from 91 days to 364 days. The premium paid by the investor does not gain any interest rather the premium rates are given at a discounted price.

For example: If a 91-day treasury bill is issued with a face value of Rs. 200 then it can be bought at a discounted rate of Rs. 195.50. On maturity, the person receives the entire value of Rs. 200.

It is a risk-free short-term investment option issued by the RBI and are backed by the central government.

To Sum Up:

The above-discussed plans are some of the best investment plans for 5 years. It is essential to make investments and save money for a short period to fulfil certain long term goals. Before taking an investment decision, it is best to consult an advisor to get the maximum returns. The smart way to invest money would be to consider different investment options that best suits your needs.

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Prateek Mahesh

Prateek has 17+ years of experience writing in Investment Strategy and Sales for Life Insurance. He has done MBA in Insurance and Investment.

Their aim is to educate people on various insurance topics so that they can make wise decisions.

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