You have been given a sum of 10 lakhs. Explain at least 3 ways in which you will profitably invest the said amount.

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krishna-agrawala | College Teacher | (Level 3) Valedictorian

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A sum of money of the order of Rs. 10 lakhs (i.e. 1 million Indian rupees) can be invested a combination of one or more of the dozens of available investment avenues. Some of the main of such avenues of investment include:

  • Fixed Deposits in bank. This can be for different maturity periods and with options to receive interest periodically or at maturity.
  • Investment in government saving schemes such as National Saving Certificates.
  • Fixed deposits in joint stock companies. These deposit generally give higher interest rates as compared to bank fixed deposits, but also carry a high risk of default in repayment.
  • Buying debentures in joint stock companies. These carry lower interest rates as compared to company fixed deposits, but can be traded easily on the stock market. This also means that there can be gains or losses due to price fluctuations in the stock market.
  • Buying shares in joint stock companies. The return on these depends very much on the correct choice of stocks and the timing of their sale and purchase. On average, a careful investor can expect to make higher profit than fixed deposits in joint stock companies.
  • Buying shares of mutual funds. This is similar to buying shares. In his case with both returns as well as risks are lower as compared to shares.
  • Investment in public provident fund (PPF). This requires opening of a PPF account in a bank. Maximum amount that can be deposited in the account is limited to rs 60,000 per year.
  • Investment is special government scheme schemes open for senior citizens. These schemes generally offer higher returns as compared to fixed deposits in banks or other government bonds. The maximum amount that can be invested is limited to Rs. 10 lakhs.
  • Investment in fixed assets like a house or land. Like share, this requires correct choice of the property purchased and the time of purchase.
  • Investment in gold or some other precious commodity like silver or diamond. Among these gold and silver rank as investment with fairly good appreciation and easy to sell off as and when required.

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