Best Investment Plans for 1 Year in India 2025

Best Investment Plan for 1 Year

A short-term goal requires a short-term investment strategy. If you want to invest funds for a year, there are several options available. The best investment plans for 1 year should include financial instruments that offer solid short-term returns without you having to take up substantial risks. This way, you can ensure your funds are growing in the right direction with limited risk exposure and a good level of flexibility.

Whether your goal next year is to go on an international vacation, pay fees for your child’s higher education, or build an emergency fund, you can create an investment plan for 1 year to get closer to it.

What Are the Best Investment Plans for 1 Year?

An investment plan should ideally include several options to ensure portfolio diversification. While putting all your funds into one investment option is not harmful, it may lead to more risks. If a particular instrument does not fare well, all your funds may be at risk.

By diversifying your investments, i.e., parking money into different instruments, you can reduce this risk as a single product’s low performance does not affect the whole investment amount. You can use an investment calculator to help you decide the best split to achieve your goals, keeping your risk appetite in mind.

This leads to the question: What are the options for the best one-year investment plan? We list some options you can consider.

Debt Funds

Debt mutual funds are investments where your money is parked in fixed-income instruments like bonds, debentures, treasury bills, etc. These are ideal for conservative investors as they come with a lower risk compared to equity options. With equity, it is better to opt for a longer term as the increased tenure balances the frequent market fluctuations. As debt funds are not subject to market fluctuations, they can be an ideal part of an investment plan for 1 year.

Fixed and Recurring Deposits

A fixed deposit (FD) or a recurring deposit (RD) can be a great option if you want to invest funds in a safe, fixed-income, predictable-return option for a year. In an FD, a lump sum amount is parked for a set period, which makes it ideal for one-time investment plans. You earn interest on your deposit at a predetermined rate. You can use an FD calculator to help you determine the amount to invest for your 1-year investment plan.

On the other hand, an RD requires you to invest a specific amount at regular intervals for a set duration. An RD calculator will help you decide whether an RD will be better suited to achieving your financial goals over an FD. In both cases, the interest you earn depends on the tenure you choose, which will be 1 year in this case. You can also invest in a term deposit for up to 10 years, making it suitable for long-term investments as well.

Arbitrage Mutual Funds

Arbitrage mutual funds take advantage of the difference in price of shares across different market segments. It involves buying shares in one market segment where the price is low and selling the shares right away at a higher price in a different market segment. These are open-ended funds, meaning you can buy and sell the units of the funds at a time of your choice, which makes it suitable for a one-year investment plan.

Gold ETFs

Gold ETFs (Exchange-Traded Funds) are investment instruments that allow investment in gold in a digital form, without holding the physical asset. Each unit of a gold ETF typically represents 1 gram of physical gold. These ETFs are listed and traded on major stock exchanges in India, just like shares of a company. You can buy and sell them during market hours to make your investment plan for 1 year profitable.

Here is a comparison table that looks at the various aspects of the above options to help you make an informed choice:

Parameter	Debt Funds	Fixed and Recurring Deposits	Arbitrage Mutual Funds	Gold ETFs
Liquidity	Debt funds are highly liquid; you can redeem the mutual fund units within a short period of time after investing. Usually, there will not be a lock-in period, and you can withdraw the funds at your preferred time.	FDs and RDs offer limited liquidity; you can partially withdraw funds, subject to terms and conditions. Penalties might apply in some cases.	You have the option to sell the units at any stage during your investment. A small lock-in period, usually around a month, may apply, after which you can sell/redeem the units and withdraw your funds.	Since they are traded on stock exchanges, you can enter or exit your position anytime during trading hours. This makes them highly liquid and ideal for a one-year investment plan.
Returns	Debt mutual funds may offer decent returns in a one-year investment plan. The returns may be less than those of an equity fund. However, the risks associated with the fund may also be less.	The returns on the term deposit depend on the issuer. The interest rate for a 1-year FD or RD usually stands at 6-7%, depending on the bank. These returns are guaranteed, as FDs/RDs are not subject to market volatility. You can use an FD calculator or an RD calculator to assess potential future returns.	Due to the frequent buying and selling of units, there is no predicting what the exact returns of an arbitrage fund can be. The returns may come with considerable risk.	Returns from gold ETF directly match the price of physical gold. If you believe gold prices will rise in the short term, they can be ideal. However, gold prices can fluctuate, so returns are not fixed.
Taxes	Before you add debt funds to your investment plan, you should know that the returns from debt mutual funds are subject to taxation. For debt funds purchased on or after 1st April 2023, the gains will be taxed at the applicable slab rates of the investor. **	The interest you earn on a term deposit is considered income and is tagged under the ‘income from other sources’ category. Investing in a specific type of FD, called the tax-saver FD, can help you claim tax deductions under Section 80C of the Income Tax Act of 1961 (if you have opted for the old tax regime). However, these FDs have a 5-year lock-in period. So, they may not exactly suit the strategy of your investment plan for 1 year. **	Before adding arbitrage funds to your investment plan for 1 year, it is important to consider the tax liability they come with. In most cases, an arbitrage mutual fund will be taxed on par with an equity fund. Short-term capital gains have 15% tax, while long-term capital gains without indexation are taxed at 10%. **	If you make a profit off the sale of gold ETFs, you will be subject to capital gains tax. If held for less than 36 months, any gains are treated as short-term capital gains. They are taxed according to your individual income tax slab. If the holding period is 36 months or more, it qualifies as a long-term capital gain (LTCG). In this case, the gold ETF gains are taxed at 20% with indexation benefits.**

Parameter

Debt Funds

Fixed and Recurring Deposits

Arbitrage Mutual Funds

Gold ETFs

Liquidity

Debt funds are highly liquid; you can redeem the mutual fund units within a short period of time after investing. Usually, there will not be a lock-in period, and you can withdraw the funds at your preferred time.

FDs and RDs offer limited liquidity; you can partially withdraw funds, subject to terms and conditions. Penalties might apply in some cases.

You have the option to sell the units at any stage during your investment. A small lock-in period, usually around a month, may apply, after which you can sell/redeem the units and withdraw your funds.

Since they are traded on stock exchanges, you can enter or exit your position anytime during trading hours. This makes them highly liquid and ideal for a one-year investment plan.

Returns

Debt mutual funds may offer decent returns in a one-year investment plan. The returns may be less than those of an equity fund. However, the risks associated with the fund may also be less.

The returns on the term deposit depend on the issuer. The interest rate for a 1-year FD or RD usually stands at 6-7%, depending on the bank. These returns are guaranteed, as FDs/RDs are not subject to market volatility. You can use an FD calculator or an RD calculator to assess potential future returns.

Due to the frequent buying and selling of units, there is no predicting what the exact returns of an arbitrage fund can be. The returns may come with considerable risk.

Returns from gold ETF directly match the price of physical gold. If you believe gold prices will rise in the short term, they can be ideal. However, gold prices can fluctuate, so returns are not fixed.

Taxes

Before you add debt funds to your investment plan, you should know that the returns from debt mutual funds are subject to taxation. For debt funds purchased on or after 1st April 2023, the gains will be taxed at the applicable slab rates of the investor. **

The interest you earn on a term deposit is considered income and is tagged under the ‘income from other sources’ category. Investing in a specific type of FD, called the tax-saver FD, can help you claim tax deductions under Section 80C of the Income Tax Act of 1961 (if you have opted for the old tax regime). However, these FDs have a 5-year lock-in period. So, they may not exactly suit the strategy of your investment plan for 1 year. **

Before adding arbitrage funds to your investment plan for 1 year, it is important to consider the tax liability they come with. In most cases, an arbitrage mutual fund will be taxed on par with an equity fund. Short-term capital gains have 15% tax, while long-term capital gains without indexation are taxed at 10%. **

If you make a profit off the sale of gold ETFs, you will be subject to capital gains tax. If held for less than 36 months, any gains are treated as short-term capital gains. They are taxed according to your individual income tax slab.

If the holding period is 36 months or more, it qualifies as a long-term capital gain (LTCG). In this case, the gold ETF gains are taxed at 20% with indexation benefits.**

Factors to Consider Before Investing for a Year

When creating the best investment plans for 1 year, you need to do more than just pick the option with the highest return. To ensure you have a hassle-free investment process, make sure to consider these factors before investing:

Risk

Understanding your risk tolerance is of utmost importance when making any investment decision. Short-term investments usually require low to moderate risk exposure. Products like debt funds and gold ETFs carry lower risk compared to equity-oriented options. However, if you want to ensure the safety of your capital within the year, safer avenues like fixed deposits may be better suited.
Diversification

Whether you are investing for the short term or are planning for 10 years of investment plan, diversification is important. It helps manage risk and improve the chances of returns.

For example, if you have ₹1 lakh, you can put ₹30,000 in debt funds, ₹20,000 in a Gold ETF, and ₹50,000 in an arbitrage fund. A diversified portfolio can reduce the impact of market volatility in a short-term investment plan.
Liquidity

Ease of access for your funds is something you should consider before investing. A good investment plan for 1 year should allow you to exit your position without heavy penalties. Debt mutual funds and arbitrage funds tend to offer higher liquidity, whereas options like fixed deposits may lock in your money. Choose an investment based on when you might need access to your funds.
Flexibility

Certain investment options tend to be a bit rigid, while others may allow flexibility in terms of early exits or partial withdrawals. It is advisable to ensure the option offers flexibility if you feel your financial situation might change within the year. Look for plans that come with a low exit charge/penalty and can be easily redeemed.
Financial Goals

Make sure to choose investment options that suit your purposes. It can be to save for a holiday or create a rainy-day fund. When you are clear about what you want and when, it becomes easier to determine the risk you can take and the kind of return you need. Once you have your financial goals decided, you can also take the help of an investment calculator to help you figure out what you need to invest to achieve them.

For example, if you want to save for your child’s higher education, you can opt for child investment plans with a more debt-focused approach. Your plan will be different from that of someone who is investing to take advantage of market gains.
Market Conditions

Along with the micro-, it is also important to look at the macro-economic perspective. Many factors that are beyond your control, like inflation, interest rates, and changes in government policies, can affect your returns to a great degree.

For instance, when interest rates are falling, debt funds may yield better returns. Hence, it is important to review the market trends during your investment process.
Tax Efficiency

The tax liability and benefits of your chosen investments can have a significant impact on your actual returns. Debt funds and FDs have different tax treatments compared to arbitrage funds or Gold ETFs.

For example, arbitrage funds are taxed on par with equity options even though they offer debt-like returns. That is why you must consider the taxation aspect of an instrument and compare it with the returns they are likely to provide. This can help you maximise your net gains.
Costs and Charges

You must also factor in the overall costs when curating your investment plan for 1 year. Factor in the brokerage fees, fund management charges, exit loads, and other costs you are likely to come across. These charges can significantly affect your returns, especially in a short-term period like a year.

How to Choose the Best One-Year Investment Plan?

After you have considered the above factors, creating the best one-year investment plan will become a little easier.

To proceed, start by defining your goal. Do you want growth, safety, liquidity, or something else? Once you have decided, take your risk appetite into consideration.

Next, create a simple investment plan: shortlist 2–3 eligible options, and compare their features, risks, and past returns. Also, consider the costs and charges as well as any lock-in periods/exit loads that may apply. Then, allocate your funds accordingly. Consult a financial advisor if needed.

It is advisable to review your investments at different periods, especially if you have opted for highly liquid options.

Whether you are dipping your hands into investments for a small period or have a short-term goal in sight, an investment plan for 1 year is the right way to get started.

Choosing the right options is important. Debt funds, gold ETFs, fixed deposits, or arbitrage funds - each have their distinct benefits. Make sure to diversify your portfolio and ensure the returns come along with tax efficiency, flexibility, liquidity, and safety of capital. If your 1-year investment experience is good, you can extend your short-term plan into broader goals like an investment plan for 3 years or a 5-year investment plan.

Best Investment Plan

Types of Investment

Which is the best investment for 1 year?

Answer

The best investment plan for 1 year is the one which balance returns with all other financial factors important to you, whether it be liquidity, flexibility, tax efficiency, and more.

While returns are important, they should not come at the expense of your peace of mind. Ideally, the best options for a short-term plan are safer options like FDs, debt funds, and arbitrage funds. These have a low-to-mode rate risk with moderate returns.

Which investment is best for high returns?

Answer: If high returns are a priority for you, then consider adding arbitrage funds or mutual funds to your investment plan for 1 year. However, these are not guaranteed and carry risks. Gold ETFs may also perform well in uncertain times. However, high returns usually come with higher risk, so always balance your investment plan. You can allocate a small portion of your funds to a safer, guaranteed-return option like an FD to balance out the high risks that come with larger gains.

What are the 7 types of investments?

Answer

There are no fixed seven types of investments. However, you can consider the following as seven common investment types: Mutual funds, stocks, bonds, real estate, gold, fixed deposits, and insurance-linked investment plans.

Insurance-linked investment plans combine the benefits of life insurance and investment under one product. These can form a part of your investment plan for 1 year or be added to a more extensive investment plan for 3 years, depending on your financial goals.

** Tax exemptions are as per applicable tax laws from time to time.

Best Investment Plan for 1 Year

What Are the Best Investment Plans for 1 Year?

Debt Funds

Fixed and Recurring Deposits

Arbitrage Mutual Funds

Gold ETFs

Factors to Consider Before Investing for a Year

Risk

Diversification

Liquidity

Flexibility

Financial Goals

Market Conditions

Tax Efficiency

Costs and Charges

How to Choose the Best One-Year Investment Plan?

FAQs

Best Investment Plan

Types of Investment

Which is the best investment for 1 year?

Which investment is best for high returns?

What are the 7 types of investments?

Most Searched Terms

Best Investment Plan for 1 Year

What Are the Best Investment Plans for 1 Year?

Debt Funds

Fixed and Recurring Deposits

Arbitrage Mutual Funds

Gold ETFs

Factors to Consider Before Investing for a Year

Risk

Diversification

Liquidity

Flexibility

Financial Goals

Market Conditions

Tax Efficiency

Costs and Charges

How to Choose the Best One-Year Investment Plan?

FAQs

Best Investment Plan

Types of Investment

Which is the best investment for 1 year?

Which investment is best for high returns?

What are the 7 types of investments?

Most Searched Terms

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