Smartly Investing 5 Crores In India: A Comprehensive Guide

If you're looking to invest 5 crores in India, there are a few options to consider. One popular option is to invest in Equity Mutual Funds, which offer the potential for high returns over a long period. Another option is to invest in fixed deposits, which offer consistent returns and minimal risk. Additionally, careful planning, considering factors such as age, existing portfolio, asset allocation, and market conditions, can help you make the most of your investments. Diversifying your investments across multiple assets, such as equity-oriented mutual funds, debt funds, real estate, and commodities, can also help you manage risk and maximise returns.

Investing in Equity Mutual Funds

If you are looking to invest 5 crores in India, one option is to consider Equity Mutual Funds. These funds predominantly invest in equity shares (stocks) of various companies, making you a part-owner of the company the fund has invested in.

Equity Mutual Funds are a good option for those with a moderate to high-risk appetite, as they tend to have high to moderate risk levels. They are also suitable for investors who want to start small in equity investments, as they can be entered with a small amount of capital. For example, with Equity Funds, you can start with as little as Rs. 100.

Additionally, Equity Funds are a good option for those who want to save taxes and enhance their overall wealth. Equity funds, especially ELSS Funds, offer the dual benefit of tax savings and long-term wealth creation. Under Section 80C of the Income Tax Act, investors can reduce their taxable income by Rs. 1.5 lakhs by investing in these funds.

When investing in Equity Mutual Funds, it is important to consider the fund's track record, objective, expense ratio, and the fund manager's expertise. The fund's track record should demonstrate a consistent and positive performance over different time periods, reflecting its ability to navigate various market scenarios. The objective of the fund should align with your personal investment goals, and the expense ratio should be reasonable to minimise your investment expenses. Lastly, checking the fund manager's history, performance, and expertise is crucial, as their role is vital in the fund's performance.

• ICICI Prudential BHARAT 22 FOF Fund
• Motilal Oswal Midcap Fund
• LIC MF Infrastructure Fund
• Bandhan Tax Advantage (ELSS) Fund
• Nippon India Small Cap Fund
• Kotak Infrastructure and Economic Reform Fund
• Nippon India Multi Cap Fund
• Motilal Oswal Large and Midcap Fund
• HDFC Focused 30 Fund
• ICICI Prudential Pharma Healthcare and Diagnostics (P.H.D) Fund
• Parag Parikh Tax Saver Fund

If you are considering investing in Equity Mutual Funds, it is important to remember that these funds can experience ups and downs in the short term. Therefore, it is recommended to stay invested for at least 5 years to ride out the volatility and maximise the potential for long-term gains.

Fixed Deposits

FDs provide the flexibility to choose between short-term gains and long-term growth. For example, investing 5 crores in an FD with a 7% annual interest rate for 5 years will generate approximately ₹2.9 lakhs each month. A higher interest rate of 9.50% for the same amount and tenure will increase your monthly earnings to ₹3.9 lakhs. Therefore, it is crucial to compare various FD schemes and their interest rates before finalising your investment.

The monthly interest earned on a 5-crore FD depends directly on the interest rate offered by the bank or financial institution. As of June 2024, top banks and NBFCs in India offered interest rates ranging from 7% to 9.50% for a 5-year tenure. It is important to note that these rates are subject to change at the bank's discretion. Additionally, some financial institutions may offer higher interest rates for senior citizens, typically 25 to 50 basis points higher than non-senior citizens.

Before investing in an FD, it is essential to understand the tax implications. In India, the interest earned on an FD of 5 crores is taxable under Section 194A of the Income Tax Act of 1961. If the total interest income exceeds ₹40,000 in a year (or ₹50,000 for senior citizens), a Tax Deducted at Source (TDS) of 10% will be applicable. The TDS rate increases to 20% if you do not furnish your PAN details.

When considering an FD investment, it is advisable to use an FD calculator to estimate your potential earnings accurately. Additionally, ensure that you meet the eligibility criteria and have the required documents, such as identity and address proofs, before proceeding with the investment.

Diversified Equity Funds

Diversified Equity Mutual Funds are a good option for investing in India, especially if you are looking for long-term capital appreciation. These funds invest in a combination of assets from various sectors such as Pharmaceuticals, IT, Banking, Real Estate, Oil & Gas, FMCG, and Telecom. The aim is to minimise risk by not restricting the portfolio to a specific sector.

When investing in Diversified Equity Mutual Funds, it is important to consider factors such as historical performance, NAV, AUM, returns, investment horizon, fund manager’s performance, and exit load. These funds are suitable for investors with a long-term investment horizon who are looking for wealth accumulation over time. The expense ratio and Sharpe ratio are also important metrics to consider when evaluating these funds.

• UTI-Focused Equity - Sr I-RP (G)
• Tata Equity Management - Direct (G)
• SBI Magnum Multiplier Fund (G)
• ICICI Prudential Multicap Fund (G)
• Franklin India Prima Plus (G)
• Axis Equity Fund (G)

Small/Mid-Cap Funds

Mid-cap mutual funds are a type of equity mutual fund that enables investors to invest in fast-growing Indian companies with a market capitalization between Rs.5,000 crore and Rs.20,000 crore and a rank between 101 and 250. These funds are suitable for investors with a moderate risk appetite who are willing to invest for the long term.

Mid-cap funds offer the potential for higher growth than large-cap funds, with lower risk than small-cap funds. They are an excellent option for investors seeking diversification in their investment portfolios. The underlying companies of mid-cap funds offer relatively higher returns than large-cap companies, as they are probable future large-cap companies with significant expansion potential.

When selecting a mid-cap fund, it is important to consider the fund manager's expertise, the fund's historical performance, the expense ratio, and the fund's risk profile. The fund manager's market understanding, investment strategy, and management style can significantly impact the fund's performance. It is also crucial to analyze the fund's performance across multiple market cycles, as past performance does not guarantee future outcomes.

• Motilal Oswal Midcap Fund
• HDFC Mid-Cap Opportunities Fund
• Edelweiss Mid Cap Fund
• Mahindra Manulife Mid Cap Fund
• Nippon India Growth Fund
• Baroda Midcap Direct Fund
• Kotak Emerging Equity Fund
• Sundaram Mid Cap Fund
• Invesco India Mid Cap Fund
• Aditya Birla Sun Life Nifty Midcap 150 Index Fund
• Motilal Oswal Nifty Midcap 150 Index Fund
• Nippon India Nifty Midcap 150 Index Fund

The advantages of investing in mid-cap mutual funds include the immense growth potential of the underlying companies, the diversification benefits, and the relatively low investment amounts required. On the other hand, the limitations include heightened volatility, a limited track record of the invested companies, and a strong dependency on the managerial skills of the fund managers.

In terms of taxation, short-term capital gains (within 12 months of purchase) are taxed at 15%, while long-term capital gains (over 12 months) exceeding Rs. 1 lakh are taxed at 10%.

Mid-cap mutual funds are suitable for growth-oriented investors seeking potential high returns and those with a moderate to high-risk appetite. These funds are ideal for individuals with a long-term investment horizon of at least 5 years, providing ample time for the realization of the growth potential of the underlying companies.

Systematic Investment Plan (SIP)

Systematic Investment Plans (SIPs) are a great way to invest in mutual funds without having to time the market. SIPs allow you to invest a pre-determined amount in a specific mutual fund scheme at regular intervals, be it weekly, monthly, or quarterly. This disciplined approach to investing is beneficial during volatile markets as it averages out the market fluctuations and reduces the impact of volatility on your investment portfolio.

SIPs offer a range of benefits, including rupee-cost averaging, disciplined savings, and the potential for compounding growth over time. You can start a SIP with a small amount, such as Rs. 1000, and there is no upper limit on contributions. This flexibility makes SIPs accessible to a wide range of investors, including those with irregular incomes. The key to successful SIP investing is consistency and ensuring that you stick to your investment plan.

When enrolling in a SIP, you can choose from a variety of SIP investment insurance plans offered by different life insurance companies. These plans may include market-linked Unit Linked Insurance Plans (ULIPs) that provide the triple benefits of disciplined savings, rupee-cost averaging, and the power of compounding. Some SIP plans also offer life cover, providing financial security for your family.

To enrol in a SIP, you will need to select a plan that aligns with your financial goals and risk tolerance. You can then decide on the amount you want to invest and the frequency of contributions (monthly, quarterly, or yearly). Once you have completed the necessary paperwork and made the initial payment, your SIP will become active, and your funds will be managed by expert fund managers.

SIP calculators are also available online to help you estimate the potential returns on your investments and determine the right contribution amount based on your financial goals.

Frequently asked questions