Do you want to achieve a short-term goal that such as the renovation of your house, buying a favorite car, planning for a child’s higher education, etc? You are required to inculcate the discipline of regular savings and invest it wisely. Meeting a short term goal is feasible when you make a short term investment judiciously.
Very simply put, short term investment plans provide you the flexibility to invest for a period of 1 day to 3 years. An investment made for more than three years is usually considered as a mid-term or long-term investment.
Making a short term investment is the right way to ensure that your surplus money keeps growing with the time to ensure you meet your short term goals.
Following is the list of 6 best short-term investment options available.
- Savings Account
- Fixed Deposit
- Mutual Funds
- Liquid Funds
- Fixed Maturity Plans
- Equity Linked Savings Schemes
Let’s discuss all these investment options in detail.
The common investment people make is to put money in a savings bank account. You can withdraw the money from a savings account anytime by visiting a nearby ATM. The savings accounts carry no-risk and having high liquidity, the returns involved are in the range of 4% to 6% (vary from one bank to another).
This is also one of the most popular investment options in India. You can open a fixed deposit for a short-term of 7 days. By choosing a long tenure for your fixed deposit, you will earn the high interest that will enhance your savings. You can open a fixed deposit online by logging on to the net banking of your bank, or you can just walk into the bank and request to open a fixed deposit. A fixed deposit investment option is one of the best options for those who are seeking the security of the invested amount along with the returns.
Those who are seeking returns higher than the savings accounts and fixed deposits, investing in mutual funds is an excellent option. With the mutual funds, there are various types of funds available with which you can invest in to meet your short term financial goals.
When looking for returns in the short term, you may pick the mutual fund with debt instruments that will help you to boost your invested money with the desired returns. You can invest in a mutual fund with equity funds to generate returns in the long term. Investing in mutual funds carry some sort of risk component, and thus, the returns will be better than what you will receive as returns in a savings account or fixed deposit.
These funds invest your money in short term debt instruments with the maturity periods of up to 91 days. It is one of the excellent short term investment options that will offer you the returns something higher than what you will get in a savings bank account.
Fixed Maturity Plans are short-term investment plans that will invest your money in government bonds, certificates of deposits, treasury bills, and other debt instruments. This investment option comes with a specific maturity date, however, you will not be allowed to withdraw your investment amount before the maturity date.
If you can make the investment for a term like 3 years, you can invest with the Equity Linked Savings Scheme. It is one of the most popular and widely-known mutual funds that help you to earn returns plus tax savings under section 80C.
You need to consider two key aspects while choosing short term investment plans:
Liquidity: The investment option you invest in should work towards adding value to your invested money. You must have the flexibility to withdraw your investments whenever you need it.
Low Risk: When making an investment in a risky asset like in the equity market, you may have to bear losses if the financial market slumps down. You are advised to make investments in a low-risk asset, which will give you a medium to a high level of safety.
Since short term investments are generally made in low-risk assets, the returns in most cases may not be high. However, it is still better than keeping your money idle and not earning any returns on it at all.
Short term goals may include:
- Higher education for your child,
- Buying a car next year
- Booking an apartment
- An overseas trip
- Buying jewelry during the festival season this year, etc.
The golden rule for investment is that if you have surplus money in your hand, don’t keep it idle. Invest in one of these short term investment options and let it grow. Any return that you make on these investments will help you to reach your short term goals faster.