What is the Best Investment for Three Years?

If you are looking to make an optimum output from your investment in a short period, the best option is to proceed with short-term investments. These are investment plans with a tenure of 1 month to 5 years. By keeping a good knowledge of the ideal investment plans in India, you can invest as per your requirements.

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Best Investment Options for Three Years

3-year investment plans are one of the popular short-term investment options. You can treat it like a liquid fund rather than a long-term investment asset. The investment matches your profile if you are into secure funds and are uncomfortable dealing with stocks or stock funds. The best options you can pick from under the 3-year investment plans are as follows.

  • Savings Account - A savings account is the simplest form of the bank account you can possess. It works best for short-term deposit schemes like 3-year plans. You can invest your money securely, earn interest in the funds, and withdraw when you want the amount. A savings account offers you scope for financial growth. You can spend on casual holidays and emergencies alike when you have invested in a savings plan. The return rates offered are 5 to 7%.

  • Liquid Funds - They are a type of mutual fund scheme. Liquid funds are an excellent choice for short-term investment plans. You can use them in Government securities, corporate bonds, and treasury transactions. The risk involved is minimum, with a maturity period of up to 91 days. It is a non-volatile market option with medium returns on your investment. The return rates offered are 5 to 6%.

  • Short-Term & Ultra-Short-Term Funds - These are fixed-income instruments. They offer liquidity on your investment with maturity benefits in the short term. The returns on investment are from 5 to 6%. These are not reliable in market fluctuations like other short-term schemes. The top options in this category are ICICI Prudential Ultra Short-Term Fund, L&T Ultra Short-Term Fund & Aditya Birla SunLife Ultra Short-Term Fund.

  • Fixed Deposits - A fixed deposit is more like a default option for investment schemes. It is a safe option that provides a lucrative chance for you to accumulate wealth. The fixed interest rate you can receive on this scheme until its maturity term is a financial advantage. If you can wait until the maturity period, fixed deposits provide the maximum returns. It is a flexible choice with a 4 to 7% return rate. For some financial organizations, 8% interest is also possible for fixed deposits.

  • Fixed Maturity Plans – Fixed Deposit Plans are a popular way of forming corpus for short term investments provided by banks. In this, the amount is invested for a certain time i.e., from 7 to 10 years for a fixed return rate, after that it matures automatically, and you are allowed to withdraw. Ideal debt instruments in this scheme are corporate bonds and securities. The fixed tenure of this plan enables you to develop a good investment strategy with a return rate of 6 to 8%.

  • Treasury Bills/Securities - Treasury bills help you invest in surplus funds with low risk. They are money market instruments issued by the Indian Government at regular intervals. The investment return rate does not apply to these schemes. You can opt for treasury bills if you need to borrow funds from Government securities. The risk involved is zero as it is a government scheme. It ensures you a hassle-free & secure investment plan for achieving short-term financial goals.

  • Equity Linked Saving Schemes - Equity Linked Saving Schemes (ELSS) is a mutual fund investment type, where you can claim tax benefits & rebate percentages. Three years is the lock-in period for this plan. You cannot exit early on this scheme. It does not hold you back from the wealth creation fixed-income security feature of equities. The return rates are decent for this option. ELSS allows you to invest any amount, thus offering flexibility.

  • Gold Investment - Investing in gold is a preferable option when you look at the return rates in the current times. It is a stable investment and is unaffected by market risks. The financial market fluctuations do not affect the standing of gold investments. With a minimum standard return rate on your investment, you can receive up to 23% on gold plans/schemes.

  • Recurring Deposits - Recurring deposit is another excellent choice to invest in the short term. You don’t have to worry about the investment of the whole amount at once. You can deposit the sum on a monthly recurring basis. The scheme will still ensure you a return interest similar to the fixed deposit, and you can build your investment at low risk. Opt for a recurring deposit scheme for three years to enable safe returns.

  • Money Market Account - Money market accounts work similarly to that of a savings account. They pay interest on your deposits and monitor your money transfer. The difference is that they pay higher than the regular savings accounts. Money market account will support your expenditure limits as well. You can use it for emergency payments or infrequent transactions.

  • Debt Instrument - Debt instruments can be bonds or securities in different forms. It could be corporate bonds, municipal bonds, savings bonds, and debt securities. They are all assets ensuring a fixed payment to you with an interest return. Entities use debt instruments to raise capital. Your risk will be low for these schemes.

  • Post-Office Time Deposits - A POTD is the equivalent of fixed deposits in banks. You can earn a guaranteed sum on reaching the investment tenure. A return interest is also possible and is available with the final amount. It is a safe investment option as the Government takes care of this. Among the schemes, you can choose a 3-year plan to enjoy benefits like income provisions & a savings plan.

  • Arbitrage Funds - Arbitrage funds can offer you profitable returns on your investment. These funds allow a feasible investment horizon of your preferred three years. You can receive a return of 7 - 8% on this scheme. The expense ratio of this plan is high.

  • National Savings Certificate - NSC is a post office savings scheme with low risk & high benefits. NSC is a fixed-income investment scheme. You can save tax in this scheme, which you can manage feasibly. The minimum investment is as low as Rs 1000 with a rate of interest return of 6.8%. The maturity period of this scheme is five years & you can withdraw early in case of necessities.

  • SIP in Equity Mutual Funds - Systematic Investment Plan (SIP) is a scheme that allows you to invest in regular small sums. It is essentially a mutual fund investment plan. It is a convenient scheme with a low initial investment.

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What are the Benefits of Investing for Three Years?

The chief advantages of 3-year investments are as follows:

  • You can get a clear picture of your net worth and financial positioning. It will help you make informed decisions.

  • You can manage your income efficiently. 

  • It helps you raise funds for immediate requirements. It could help you avoid debts/loans.

  • You can prepare better for emergencies and unforeseen eventualities in life.

  • You can train yourself to be financially independent.

  • It will help you set financial goals for the short term. Starting with short-term plans & satisfying them will give you the confidence & courage to move forward in your investment journey.

  • You can prioritize your expenses and spending capacity. It will support you in managing healthy assets against the liability column.

  • A high value of liquidity is a sure deal for 3-year investments.

  • It will protect you from market uncertainties.

  • You can invest in trading instruments too. Ensure your preferred plan supports this benefit without fail.

  • You can withdraw funds easily when losses happen to the market value.

  • The portfolio is diverse for 3-year plans. You can invest any amount by following flexible policies.

  • The risk involved is low.

  • The investment journey is stable and strategically employs low transaction costs.

What are the Factors to Consider Before Investing for Three Years?

The primary factors you need to consider before a 3-year investment is as follows:

  • If you are comfortable with a short-term investment plan.

  • You want to receive liquidity benefits feasibly from your investment.

  • You want to get an optimum return in a shorter period.

  • You want to keep your investment principal intact.

  • You want quick turnovers with low risk.

  • You believe in obtaining tangible results for your investment.

  • You should have a clear idea of the investment tenure, withdrawal possibilities, and return rates.

  • Possess extensive knowledge about the plan you select. Try to communicate with the relevant authorities. Gather information from online & offline resources before investing in a scheme.

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In Closing

Not all short-term or 3-year investments are equal. Choose the plan that suits your needs based on the specific benefits it offers. Always plan and measure the potential returns before making any financial investment.


  • Does a 3-year investment add asset value to my portfolio?

    You can receive liquid asset value from 3-year investments. You can withdraw your cash as per the requirement.
  • What is the most crucial factor in a 3-year investment plan?

    The security of your investment is the primary factor in any short-term plan. Ensure the safety of your funds before making the investment steps.
  • What are the taxation policies on 3-year investment plans?

    Short-term & long-term capital gains taxes apply for 3-year investments. Be aware of the taxation aspects before investment procedures.
  • What are the investment objectives of 3-year investment plans?

    Companies with a strong cash flow bring 3-year investments to you. Their primary purpose with these investments is to generate capital protection without compromising on excellent investment returns.
  • What is my easiest option of short-term investment?

    If you have a savings account, it can act as a short-term plan with similar benefits & features. You could be automatically a part of a short-term plan without even committing to its knowledge.

*All savings are provided by the insurer as per the IRDAI approved insurance plan.
*Tax benefit is subject to changes in tax laws. Standard T&C Apply
^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.
#The lumpsum benefit is calculated if policyholder invested ₹10000 monthly for 10 years in the fund with a policy term of 20 years. This Point To Point past performance data of last 10 years has been used to illustrate a scenario for the customers benefit. It is assumed that the past 10 years returns would have also been delivered in last 20 years. This is not guaranteed and not in anyway indicative of what the customer may actually get 20 years from now. The investment is subject to market risk and the risk is borne by the policyholder.
+Returns Since Inception of LIC Growth Fund
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^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.

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