In a comment Srinivas asked
Hello sir can You please guide me about best investment instrument option to park my lumpsum amount for about a year without much risk (as seen in equity shares or equity mutual funds)- liquid funds? debt funds? Money market?Corporate bonds? Govt securities or bank FDs ? . I’m totally confused between all these. And also mention about the tax on the returns from investing or parking lumpsum in such instrument. Thank you in advance. You r doing a nice job for beginners like us. Keep it up. 🙂
Question sounded to me interesting as well as very tricky and this is the problem of many of us where people have quite some dead money ( I prefer calling money in your saving account as dead money ) lying in the bank giving you interest at 3.5% annually and so instead of keeping it dead Srinivas at least thought of making it live and so I would suggest you some options. Remember I am not an investment advisor.
As investment should be without much risk, all out equity investment is not good option but yes you can park 10%-20% into some good mutual funds which I have suggested in my ebook.
Apart from the equity based investment I would suggest you avoid Liquid Funds but you can invest in liquid plus funds. Unlike liquid funds, they will keep some portion of your investment in instruments with a maturity of more than 91 days and hence get classified as debt funds which are more tax-efficient as well. Remember this is for short term and get good returns but should not be left for complete year into them.
Bank Fixed Deposits income is all taxable but if you invest in mutual funds and remain invested for more than one year into a single fund your income is tax free but before investing check the fund details about the taxing information on that particular fund.
For the Definitions of the terms where you have confusion I would suggest read Mutual Fund Terms.