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- To improve your short-term financial situation, a smart plan is essential. Consider short-term debt funds as an investment since they offer a range of choices suited for different lengths of time you want to invest.
- These funds, which are organized by investment duration, provide a reliable option for those who want to keep their investment safe, earn some profit, and have the flexibility to access their money when needed.
- Short-term debt funds invest in government bonds and short-term corporate loans that are due to be paid back relatively soon. They’re a good middle ground because they’re generally safer than stocks and can earn more money than a savings account or fixed deposits. Plus, you can quickly sell these funds if you need cash, making them quite flexible.
- In simple terms, if you’re looking to invest your money for a short period and want a mix of low-risk and decent returns, short-term debt funds could be just what you’re looking for. They’re designed to meet the needs of those with specific financial goals for the near future.
What Are Short-Term Investments?
- Short term investments are types of financial assets that can quickly be turned into cash, usually within a brief timeframe that can range from just a few days up to three years.
- These assets are characterized by their high liquidity, meant to offer a secure temporary haven for capital until it can be moved into opportunities that yield higher returns.
- Such investments typically encompass high-yield savings accounts, money market accounts, treasury bills, and government bonds.
- Due to their nature as high-quality, easily liquidatable assets, they are favored by investors looking to safeguard their capital or achieve moderate gains over a short duration.
Short-Term Investments vs. Long-Term Investments
| Criteria | Short-Term Investments | Long-Term Investments |
| Time Horizon | Held for less than one year | Held for more than one year |
| Risk | Generally lower risk but less potential for high returns | Generally, higher risk but more potential for high returns |
| Liquidity | Highly liquid, easy-to-access funds | Less liquid funds may be tied up for longer periods |
| Tax Implications | Short-term capital gains are taxed as regular income | Lower tax rate for long-term capital gains |
| Investment Types | Treasury bills, money market funds, bank fixed deposits, post office time deposits, recurring deposits | Stocks, bonds, mutual funds, real estate |
| Goals | Suitable for short-term financial goals or emergency funds | Suitable for long-term financial goals such as retirement savings or buying a house |
| Market Fluctuations | More susceptible to market fluctuations | More resilient to market fluctuations due to a longer time horizon |
| Diversification | It can be used to diversify investment portfolio | It can be used to diversify investment portfolio |
| Investment Strategy | Active management, frequent trading | Passive management, buy-and-hold strategy |
What Are the Best Short-Term Investments?
If you’re looking for secure ways to invest your money and achieve consistent, risk-free expansion, the options listed below are perfectly suited to your needs.
The top short-term investment choices in India include:
| Investment Option | Holding Period | Return Rate (in %) |
| Real estate structured debt | 36 months | 12-18% |
| Fixed Deposit | 7 days-10 years | 2.5 to 8% per annum |
| Recurring Deposits | 6 months to 10 years | 4 to 8% per annum |
| National Savings Certificate (NSC) | 5 years | 6.8% per annum |
| Liquid Mutual Funds | A day-No limit | 2 to 6% per annum |
Discover more about these savings plans as you read on, and decide which is the greatest way to increase your savings.
Real Estate Structured Debt
In India, investing in real estate structured debt stands out as a premier choice for short-term investments. This option delivers fixed-income opportunities, supported by real estate assets serving as security. It shines as one of the foremost short-term investment avenues, promising substantial return potential in India. Platforms like Assetmonk allow investors to get involved with a minimum investment period of 36 months.
This investment route is especially appealing to senior citizens in India. It offers a steady flow of monthly income through fixed returns. Moreover, it’s recognized as one of India’s top short-term investments for tax savings.
Fixed deposits
Fixed deposits rank as one of the top choices for short-term investment opportunities. They provide attractive returns, immunity from market swings and fluctuations in interest rates, and considerable flexibility regarding the investment duration. In case of emergencies, it’s possible to access your funds early, albeit with a penalty. Interest earned on FD becomes taxable once it exceeds Rs. 10,000.
The security of the invested principal and the return guarantee have enhanced the appeal of fixed deposits as an investment option.
Recurring deposits
Recurring deposits are an excellent investment option if you prefer not to commit a large sum of money all at once. They allow you the convenience of contributing funds on a monthly basis. You can start a recurring deposit account at a bank or a post office close to you.
The tenure for recurring deposits with financial institutions ranges from a minimum of six months to a maximum of ten years. It’s important to note that the interest income from recurring deposits is subject to taxation.
National Savings Certificate
This investment choice has a 5-year duration. To get started, simply head to your local post office and complete an easy application procedure. A benefit of investing in National Savings Certificates (NSCs) is the possibility of claiming tax deductions under Section 80C of the Income Tax Act. However, it’s important to remember that the interest generated is subject to taxation.
Liquid Funds
Liquid funds are a category of mutual funds that channels investments into short-term government certificates or securities. Investors can freely withdraw money from these funds whenever required. However, using these funds for emergency finances may not be wise as the complete withdrawal process might take 2 to 3 days.
These liquid funds provide a relatively high-interest rate, reaching up to 7%. Additionally, the money within these funds is invested in money market instruments, which assures you of a relatively greater level of security for your investment.
How Short-Term Investments Work
Short-term investments are financial vehicles tailored for a relatively brief investment timeframe, typically extending from a few months to a handful of years. They generally aim to safeguard capital while yielding satisfactory returns over a shorter duration.
Here’s how they function:
- Liquidity and Accessibility: Short-term investments offer quick and easy access to funds without significant penalties, making them ideal for short-term financial objectives and unexpected expenses.
- Investment Alternatives: Various options like Savings account, Fixed deposits, Recurring deposits, National Savings Certificate, Liquid Funds, NCD’s/ Corporate or Company Deposits, Treasury Securities, and Post-Office Time Deposits fall under the umbrella of short-term investments. Each differs in terms of risk and return potential.
- Returns: While short-term investments might not offer returns as high as long-term ones like stocks, they do provide stability and preservation of capital.
Features of Good Short-Term Investments
Selecting suitable short-term investments can greatly assist in meeting your financial objectives. Key aspects of good short-term investments include:
- Safety: Investments should prioritize the protection of your initial amount.
- Liquidity: Investments should enable easy access to your funds without heavy penalties. Liquid funds and savings accounts are known for their high liquidity.
- Risk-Adjusted Returns: Evaluate potential investments based on their risk vs. return ratio. Remember that equity-linked investments might offer higher returns but with higher risk.
- Suitability: Your short-term investments should complement your financial aspirations and investment timeline.
What makes a good short-term investment?
- Liquidity: Good short-term investments should be readily convertible into cash for quick and easy access to funds.
- Low Risk: Reducing risk is paramount for short-term investments; opt for tools that provide steady returns with lower volatility.
- Short Maturity Period: Choose investments that mature quickly to match your financial targets and minimize exposure to market instability.
- Interest Rates: Choose investments with competitive yields for maximum profit within the desired short timeframe.
- Safety and Security: Prioritize investments issued by credible entities or supported by government assurances.
- Diversification: Distribute short-term investments across various tools to mitigate risk and boost the stability of your overall portfolio.
- Tax Efficiency: Seek out tax-efficient short-term investment options to enhance your post-tax returns.
- Ease of Management: Choose investments that require little ongoing attention and minimal administrative tasks for easy management.
Bottom Line
To sum up, short-term investments play a crucial role in managing your money. They provide flexibility and easy access to your funds and help keep your capital safe.
By learning how they work, understanding what you need, and examining the important features of good short-term investments, you can make smart choices to meet your short-term financial goals. This approach simplifies choosing suitable options.
Assetmonk is a new-age Alternative investment platform that focuses on high-potential structured quality Real Estate products. The platform offers its value investors high-potential long-term and short-term real estate investment opportunities with a high Internal Rate of Return (IRR) and flexible liquidity options.
In addition to asset security, the company goes to great lengths to guarantee that an investor’s experience is enjoyable and rewarding. Assetmonk also promises an annual IRR of 12 to 21% on all its assets.
FAQs
Q1. What is the best short-term investment plan?
A. Structured debt real estate is the best investment option for short-term investing to get monthly income. Via alternative investment platforms like Assetmonk, you can get an assured IRR of 17 percent.
Q2. Can you provide tips for investing money for quick returns?
A. To achieve quick returns, focus on investments that offer liquidity and minimal risk, such as fixed deposits, liquid funds, and treasury bills. Also, consider diversifying your portfolio to balance potential risks and returns effectively.
Q3. What are safe short-term investment plans for beginners?
A. Beginners should look for investments with a straightforward structure and low risk, such as high-yield savings accounts, certificates of deposit (CDs), and government bonds. It’s also beneficial to start with smaller amounts to gain familiarity with the investment process.
Q4. How can I maximize profits with short-term financial goals?
A. To maximize profits, consider a mix of slightly higher-risk options like corporate bonds, a diversified mix of short-duration bond funds, and safe investments. Monitoring market trends and being ready to adjust your strategy is key.
Q5. What short-term investment solutions are there for emergency funds?
A. Liquidity is paramount for emergency funds. High-yield savings accounts, money market accounts, and liquid funds are excellent options as they allow quick withdrawal while offering reasonable returns.
