Looking To Invest For The Short Term?
Investing doesn’t only mean for the long term. You can also invest for a short period to achieve your short-term goals.
Here’s a guide on how you can invest for the short-term and what are some good short-term investment instruments.
Short Term Investments
Any investment option which is less than 5 years is considered a short-term investment. These investments are assets that can be converted into cash or can be sold within a short period of time, typically within 1-3 years.
Common instruments for short-term investing include short-term bonds, Treasury bills, and other money market funds.
If you are someone who isn’t interested in waiting for years to grow your money, then short-term instruments are the right option for you.
With short-term investment plans, you can expect optimum returns to meet your financial goals. However, you might not get massive returns as in the case with long-term investment options.
Meanwhile, they are popular among investors because they come with low risks.
Best Short-Term Investment Options
Below are the best short-term investment options for those who have short-term investment objectives.
Liquid Mutual Funds
Liquid funds invest in extremely short-term fixed instruments with a maturity period of 91 days. The instruments they invest in include Treasury Bills (T-bills), Commercial Paper (CP), Certificates Of Deposit (CD), and Collateralized Lending & Borrowing Obligations (CBLO).
Fund managers invest in these instruments to generate optimal returns while maintaining safety and high liquidity.
When it comes to liquid funds, the aim of the fund manager is to invest only in those liquid instruments, which have a good credit rating and carry a very low possibility of a default.
With liquid funds, the main objective is to provide protection for your money. Hence, they are considered a great alternative to bank savings accounts and fixed deposits.
Typically, liquid funds do not charge any exit loads. Investors are offered growth and dividend options. Within the dividend option, investors can choose daily, weekly or monthly dividends depending on their investment horizon and investment amount.
If you wish to learn more about debt mutual funds and the best debt mutual funds to invest in India right now, please read our recent article about it.
Bank Fixed Deposits
A fixed deposit, also known as FD, is an investment instrument offered by banks and non-banking financial companies (NBFCs).
When you open an FD account, you can invest a sizeable amount of money at a predetermined rate of interest for a fixed period.
At the end of the FD period, you will receive the lump sum amount, along with interest. However, you cannot withdraw the money before maturity and if you wish to withdraw your money, you would have to pay the penalty to do so.
Banks offer different rates of interest for an FD account. The interest rate depends on the type of banks (public sector, private sector, or small finance banks).
Generally, senior citizens are offered higher interest rates. The interest you earn on your FD is either paid at maturity or on a periodic basis depending on your choice.
Fixed deposits’ period ranges from a minimum of 7-14 days to a maximum of 10 years. This is why an FD is sometimes called a term deposit.
There are Corporate Fixed Deposits that offer higher returns than NBFCs (Non-Banking Financial Companies) and banks.
Fixed Maturity Plans
Fixed maturity plans are a special class of close-ended debt mutual funds that carry a pre-determined tenure. Hence, you can make investments in an FMP only during the new fund offer (NFO) period.
Post the completion of the NFO period, you cannot make new investments into an FMP scheme. You can only redeem your investments from an FMP after the scheme has matured and no premature redemption of units is allowed during the interim.
As the majority of the investments made by Fixed Maturity Plans are held until maturity, these schemes tend to carry low levels of interest rate sensitivity.
Also, a majority of investments made by FMPs are made into high-quality debt and money market instruments that feature potentially low levels of credit risk for investors.
One of the most important reasons why FMPs make a good investment option for the short term is that a majority of new FMPs feature a maturity period of 3 years or more.
This makes sure that the long-term capital gains tax rules, which include indexation benefits apply to capital gains from these non-equity investments. Indexation offers investors the benefit of considering inflation, lowering overall tax liability on gains.
Digital gold is your avenue for investing in gold without getting into the hassles of handling it physically. It is a much simpler and cost-effective method of putting your hard-earned money into gold.
When you purchase digital gold from a trusted partner, the company buys it on your behalf and stores it under your name in a safe vault. It is a facility that allows you to invest in gold from the comfort of your home.
There is no restriction on the minimum amount of digital gold that you can buy. You can start by investing as low as ₹100. Every single gram of digital gold that you purchase has a purity of 24 Karat gold.
If you wish to buy digital gold, you can head over to Koshex and purchase gold, knowing that every gram of gold will come with a purity guarantee. Sign up today and watch out for offers as we love giving cash back.
Large Cap Mutual Funds
Although equity mutual funds are said to be good for the long-term, large-cap mutual funds make an excellent investment option for the short-term.
Large-cap mutual funds invest at least 80% of the corpus in the top 100 companies by market capitalization. These funds offer stable returns and have better potential to withstand economic turmoil.
These funds are suitable for less aggressive investors. They can give quick returns within 1 to 3 years of investment tenure.
If you are looking to invest in large-cap mutual funds and make good returns in a short period of time, create an account with Koshex today. Sign up for free and find out how easy it is to start investing in mutual funds.
In The End…
Recurring deposits and saving accounts are not the only short-term investment options and there are many that will help give you higher returns by taking less risk.
You can invest in most of these investment options with Koshex and all you need is a Koshex account. Creating an account with Koshex takes less than 2 minutes and there is no need for any paperwork. Sign up with us today and get started on your financial journey.
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