What should you do with ₹10 lakh? Four situations

You have ₹10 lakh: from selling a property, a maturing policy, an inheritance or years of saving. There's no single right answer for what to do with it, because the right answer depends on what's already in place.

Here are four common situations, and where the money goes in each.

Situation 1: your basics are in place

Your emergency fund covers 6 months of expenses, you have no costly debt, and you have health and term insurance. Then the question is only when you'll need the money.

• 7 years or more: diversified equity funds have grown the most over long periods, with big swings along the way.
• 3 to 7 years: a mix of equity and debt, shifting towards debt as the date nears.
• Under 3 years: FDs, debt or liquid funds. A fall just before you need the money is a risk you can't wait out.

Investing at once ends highest when markets rise, but an STP over 12 months softens the regret of investing just before a fall. SIP vs lumpsum compares the two in a steady market and a falling one.

Situation 2: there are gaps to fill first

A thin emergency fund or a credit-card balance changes everything. Card interest runs at 36–42% a year; no investment reliably beats that. Here ₹2.5 L tops up the fund to ₹3 L and ₹2 L clears the card, leaving ₹5.5 L to invest.

Keep the emergency money where you can reach it in a day: a savings account, sweep-in FD or liquid fund. Bank deposits are insured up to ₹5 lakh per bank,^[1] so split larger amounts across banks.

Situation 3: you have a home loan

Prepaying the loan earns its interest rate, guaranteed and tax-free. Investing has to beat that after LTCG tax^[2] and with a margin for risk.

• On a ₹30 L loan at 8.5%, investing wins above about 9.1% a year. Expecting 12% from equity, the planner invests.
• At 9.5% with a cautious 10% expected, the break-even is about 10.2%, and the planner prepays all of it.

Close to the break-even, splitting the money between both is reasonable. If you do prepay, keep the EMI and cut the tenure to save the most interest.

Situation 4: you're close to retirement

The less time you have, the less equity risk you can take. A common approach is to keep the next few years of spending in FDs and debt funds, and only money for later years in equity. How much money you need to retire shows how big the corpus has to be.

What this doesn't mean

• No answer fits everyone. These are rules of thumb; your goals and dates come first.
• Returns aren't guaranteed. 12% is a long-run equity assumption and real years vary widely.
• Don't let it sit idle while you decide. A liquid fund or sweep-in FD earns more than a savings account in the meantime.

New tax regime, so no 24(b) deduction on the home loan. Equity gains taxed at 12.5% LTCG above ₹1.25 lakh; FD interest at your slab. For illustration only, not investment advice. ₹50,000 a month of expenses in every example.