I Have 2 Lakhs Rupees Where to Invest

2. Fixed Deposits (FDs)

Fixed deposit is a famous investment choice in India that guarantees your money’s safety and provides steady returns. You will get a fixed interest rate for a set period. When the term ends, you get back your initial amount along with the interest it earned over the period.

Features:

We have a fixed interest rate for a specific period.

Capital protection and assured returns.

Returns:

In the last 20 years, i.e., from 2000 to 2023, the average interest rate in India dropped from 10.50% to 5.90%.

Pros:

Low-risk investment with guaranteed returns.

Suitable for short-term goals.

Cons:

Lower returns compared to other options.

Interest income may be taxable.

Check out: How to Invest 50 Lakhs for Monthly Income

3. P2P Lending

When banks or financial institutions reject loans due to income, paperwork, or credit score, people often turn to friends or relatives for help. But this limits access to financing.

This is where Peer-to-Peer (P2P) lending comes. It connects lenders and borrowers directly, cutting out banks as intermediaries. P2P lending offers financial inclusion, especially who has low credit scores or lower incomes. It’s accessible through P2P lending platforms.

Question is how it works?

Borrowers and lenders register on a P2P platform. Borrowers’ creditworthiness is assessed, considering various factors. Lenders choose whom to lend based on risk and return preferences.

P2P platforms charge fees, regulated by RBI, but don’t hold onto lenders’ or borrowers’ money. 

It’s a convenient way to bridge financing gaps.

You can diversify your portfolio by investing in Peer-to-Peer lending platforms, where you can lend money to individuals or small businesses, earning interest on your investment.

Features:

Lend money to individuals or small businesses through online platforms.

Earn interest on loans provided to borrowers.

Returns: Around 12% annually

Pros:

Diversify your portfolio with potentially higher returns.

Accessibility to a growing alternative investment market.

Cons:

Default risk as borrowers may not repay the loans.

Limited regulations and platform-dependent risks.

4. Public Provident Fund (PPF)

PPF is a popular and secure investment choice for those looking to grow their money. The 15-year plan is an excellent option for achieving your long-term life goals while keeping your investments safe. The PPF is backed by the government and is a savings scheme with tax benefits that gives you a secure and tax-free return. 

Features:

Long-term government-backed savings scheme.

Earnings are tax-free.

Interest rate:

The current PPF interest rate is 7.1% 

Pros:

Attractive interest rates

A lock-in period of 15 years promotes disciplined saving.

Cons:

Limited liquidity due to the extended lock-in period.

Withdrawals are subject to specific rules.

5. Mutual Funds

Nowadays, mutual funds are top-rated. You get the benefit of diversity and professional management. When you invest in mutual funds, your money is spread across a mix of stocks, bonds, and other things. This can make investing less risky than putting all your money into just one thing.

There are various types of mutual funds, such as large-cap, mid-cap, small-cap, equity, debt, or hybrid funds, to suit your risk appetite and investment goals.

Features:

Professionally managed investment portfolios.

Diversification across various assets.

Returns:

The average return on equity mutual fund schemes over the past 25 years is 17%

Pros:

Potential for high returns, depending on the fund type.

Accessibility to professional fund management.

Cons:

Market risks associated with fund performance.

Expense ratios and fees can impact returns.

6. Gold

In India, many families have used gold as a way to pass down their legacy. But buying gold for this purpose has become really expensive because of the high costs and charges.

Instead, there’s an option called Gold ETFs. They’re like ‘paper gold’ and include investments in gold stocks. You can buy them in smaller amounts according to your budget through the stock market, which makes it more affordable.

You can also invest in physical gold or sovereign gold bonds as a hedge against inflation and economic instability.

Features:

Investment in physical gold, Gold Exchange-Traded Funds (ETFs), or Sovereign Gold Bonds.

Hedge against economic instability.

Returns:

The return from gold from 20 years has been 12%

Pros:

Historically, gold has preserved wealth.

Gold ETFs offer liquidity and no storage hassles. 

Cons:

Lack of regular income (unless in gold jewelry or ETF dividends).

Gold prices are subject to market fluctuations.

Conclusion 

In conclusion, if you have to invest 2 lakhs rupees, two options stand out, one is P2P lending and the second is mutual funds. P2P lending offers direct participation in the growing world of online lending, potentially resulting in higher returns, while mutual funds offer diversification and professional management to help reduce risk and promote long-term growth. In terms of your financial journey, both options can be crucial, depending on your goals and risk tolerance. Therefore, these two options cover all your needs, whether you’re seeking higher returns or a laid-back approach.

In the end, the best option is the one that aligns with your financial objectives. So, consider your preferences and make the choice that suits you best on your financial journey.