Saving up for a Car, that dream Bike, a piece of jewellery or just an exotic holiday – short term goal oriented planning is a must. In the financial world, asset allocation is crucial. Long term with risk and short term with liquidity is often the mantra. Any investment which is for a period of less than 1 year is a short term investment, such investments are good if you have a goal to fulfill in the near future or are just plain risk averse and want liquidity as an option. If you are the one who is just beginning your investment journey maybe going at it slow and steady will help you gain that confidence.
a. Flexibility & Liquidity – One of the biggest advantages is flexibility and liquidity, you can choose to save and grow your money for periods of your choice- 3 months, 6 months or any time withdrawal option.
b. Low Risk- Short term investments give way for a good breathing space to your entire portfolio. Low risk or volatility is a prime feature.
c. Substantial Returns- Another advantage of short-term investing is that you can get substantial returns. With this type of investment, you can often realize great returns after only a very short amount of time
Where to Invest Money in short Term
Our take on the Top 5 Short term Investment schemes
- FD – Fixed Deposits, One of the safest options. Investors can earn an interest ranging from 4 to 11% per annum. Though the money cannot be withdrawn before the maturity period to avail the full benefit, premature withdrawals with some penalty is an option. FD’s attract taxes.
- FMP’s – Fixed maturity plans is a type of Mutual Fund which has a Fixed Maturity date and can have an indicative return on your investment. Usually FMP’s are used by investors as a substitute to bank fixed deposits. FMP’s are close-end funds, means that you can enter when it is launched and exit when the term is over.
- Debt Instruments – A debt instrument is a paper or electronic obligation that enables the issuing party to raise funds by promising to repay a lender in accordance with terms of a contract. Debt funds are high on the yield factor and provide low to negligible risk to investors. If you are planning for a short term goal or looking to grow your money in a short span of time debt instruments is an excellent option.
- Liquid Funds- Aliquid fund is a debt mutual fund that invests in very short-term instruments like commercial papers, treasury bills, certificates of deposits etc. These investments are a good alternative to savings deposit.
- Savings account- Saving Account is a reliable and safe mode to save and get returns (although very less). Opened with any bank or financial institution, money can be kept till required investors can interest, depending on the amount and duration for which money is kept in the account.
While there are a lot of other options available, the one’s mentioned above give substantial returns with very low or negligible risk. Investors should choose carefully by taking into consideration the risk, return and timeline objective.