Where to put your money in India

Most guidance on this question is really a sales pitch with a table attached. The honest answer is duller and more useful: the right home for a sum of money is decided almost entirely by when you need it back and how much of it you can afford to lose. Get those two right and the product almost picks itself.

This is the decision in the order it should be made, with the arithmetic behind each step rather than a league table of returns.

Start with the date, not the return

Every rupee you hold has a date attached, even if you have never written it down. Rent due next month, a deposit on a flat in three years, retirement in twenty-two. That date is the single most important input, because it decides whether volatility is a risk or merely a nuisance.

Money you need inside three years cannot be exposed to the market in any meaningful way. Not because equities are bad, but because three years is not long enough to be confident of recovering from a bad one. Money you do not need for a decade has the opposite problem: keeping it in a deposit guarantees you lose purchasing power slowly and certainly.

Deposits: certainty, priced accordingly

A fixed deposit does exactly one thing and does it perfectly: it returns a known amount on a known date. Nothing else on this page can promise that. You pay for the certainty in the return, and the price is roughly the difference between the deposit rate and what a diversified equity portfolio has historically managed.

Two things about deposits are widely misunderstood. Interest compounds only on completed quarters, which is why odd tenures like 444 days behave strangely — see why a 444-day FD is not the same as 15 months. And the tax is not deducted from your maturity value in the way most people assume; TDS is a withholding, not a final bill.

A recurring deposit is the same instrument for people who have income rather than a lump sum. Each instalment only earns interest for the months remaining after it is paid, so the effective return on an RD is always lower than the headline rate suggests — the last instalment earns interest for one month.

Market investments: time is the whole strategy

A SIP is not a product. It is a schedule — a fixed amount into a mutual fund at the start of every month — and its value comes almost entirely from the fact that it removes the decision of when to invest. You buy more units when prices are low and fewer when they are high, without having to be clever about it.

The arithmetic that matters is not the return, it is the horizon. Money compounding for twenty years does most of its work in the final third of that period, which is why starting late is far more damaging than contributing less. A five-year delay is not five years of missed contributions; it is the removal of the five most productive years at the end.

The mirror image is a systematic withdrawal plan, which is how the corpus turns back into income. The question there is not what it returns but how long it lasts, and that is far more sensitive to the withdrawal rate than to the return assumption.

The one number that decides everything: inflation

A 7% deposit in 6% inflation returns about 1% in real terms, before tax. After tax at 30% it returns roughly minus 1%. That is not a criticism of deposits — for a two-year goal it is exactly the right trade — but it is fatal for a twenty-year one, and it is the reason a retirement plan built entirely on deposits fails quietly rather than loudly.

Any projection that does not restate the final number in today's money is telling you something close to nothing. A corpus of two crore in 2050 sounds transformative and is worth roughly what fifty lakh is worth now.

A sequence that works

1. 1Hold three to six months of expenses somewhere boring and instantly accessible. This is not an investment and should not be judged like one.
2. 2Clear any borrowing costing more than about 10%. Repaying a 14% loan is a guaranteed 14% return, which nothing on this page can beat.
3. 3Match each named goal to a date, and pick the product from the date.
4. 4Put whatever is left after that into long-horizon equity, monthly, and stop looking at it.
5. 5Revisit once a year, or when the date on a goal changes. Not when the market moves.