I want to park Rs 12 lakh in safe and stable investment options. Where can I invest?

I started a small business two years ago. I want to park this year’s profits, around Rs 12 lakh, in safe and stable investment options. Please suggest some avenues.
Raj Khosla Founder and Managing Director, MyMoneyMantra.com
replies: Given the initial stage of your business, it is important to conduct a comprehensive analysis of your expected cash flows. You must clearly define your risk appetite, time horizon and goals before setting up an investment portfolio. In case you need the funds within one to three years, you can invest in a mix of liquid funds and bank deposits. For a three to five-year horizon, choose long-term FD which is tax efficient and promises a fixed return and safety of capital. As for a somewhat longer time frame of over five years, you must create an exposure to equity and build a portfolio constituting equity and debt mutual funds. The mix of equity and debt is a function of your risk appetite.

I am a senior citizen. I invested Rs 4.5 lakh in 2017 and Rs 5 lakh in June 2019 in the same fund. I was earning a monthly dividend of around Rs 9,825. Since April 2020, the dividend has been Rs 6,742. The current value of balance units is Rs 6.72 lakh and total dividend paid so far is Rs 1.75 lakh. Therefore, the loss on investment will be around Rs 1.04 lakh if I withdraw from the scheme now. Should I wait for the NAV to improve or withdraw Rs 6.72 lakh and invest it elsewhere for monthly income?
Raj Khosla, Founder and Managing Director, MyMoneyMantra.com
replies, “Investment in equity linked products come with high risk-high return probability. Therefore, a senior citizen should not overexpose to equity, especially when targeting regular monthly income. Markets have been extremely volatile. However, presently the economy seems to be stabilising. Do not book losses and remain invested for 2-3 years. Basis risk appetite and cash flow requirements, you can then switch to fixed return products like Pradhan Mantri Vaya Vandana Yojana and Senior Citizens’ Savings Scheme.”

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