When looking at the suitable investment options, you must choose your investment options based on your liquidity requirements, tenor and risk appetite. Safe investment options like fixed deposits are good short-term investment options that provide you with flexibility and safety of deposit to earn assured returns.
What is Short Term Investments?
Marketable securities that can be quickly turned into cash, often within five years, might be considered short-term investments. The extremely liquid assets known as short-term investments were created with the explicit purpose of offering a secure, short-term spot for preserving the extra funds.
8 best short-term investment options in India
If you’re looking for secure ways to invest your money for steady, risk-free growth, the following options are ideal for you.
The best short-term investment options available in India are the following
- Savings account
- Fixed deposits
- Recurring deposits
- National Savings Certificate
- Liquid Funds
- Investments in NCD's/ Corporate or Company Deposits
- Treasury Securities
- Post-Office Time Deposits
Read along to know more about these savings schemes and find out which is the best option to grow your savings.
1. Savings account
As one of the preferred choices of most people, savings accounts offer maximum liquidity. This helps you withdraw funds anytime and anywhere without any hassles. However, with an interest rate hovering around 4%, a savings account is not the best investment vehicle unless you constantly need access to all your funds.
Additional Read: Fixed Deposit Vs. Savings Account
2. Fixed deposits
Fixed deposits are easily among the best options for short-term investments. They offer a high rate of return, independence from market fluctuations and interest rate volatility, and high flexibility in terms of tenor period. You can also withdraw your deposit during times of emergency by paying a penalty. The interest on FD is taxable after your earnings cross Rs. 10,000.
The safety of capital and surety of returns has increased the popularity of fixed deposits as investments. Enjoy additional features like fixed deposit calculator that help you calculate returns and plan your investments accordingly. You can opt for a hassle-free online fixed deposit application with some of the leading financiers. You can check fixed deposit rates in India first before making a decision.
3. Recurring deposits
These deposits can be opted for if you do not want to invest a lump sum amount in one go. Recurring deposits offer you the flexibility to invest money monthly. Opening a recurring deposit account at your nearest financial institution or even at the post office is possible. Recurring deposits from financial institutions have a minimum tenor of six months and a maximum tenor of 10 years. Remember that interest earned on them is taxable.
Additional Read: FD vs RD: Which is the better option?
4. National Savings Certificate (NSC)
This investment option has a tenor of 5 years. Then, all you need to do is visit your post office and complete a simple application process. An advantage of NSCs is that you can claim tax exemptions under section 80C of the Income Tax Act. But, again, the interest earned is taxable.
5. Liquid funds
Liquid funds are a type of mutual fund that invest your money in short-term government certificates or securities. An investor can withdraw money from these funds at any time. However, it is not prudent to allocate your emergency funds into this option, because gaining complete access to your cash back takes around 2 or 3 days.
Liquid funds offer you a higher interest rate of up to 7%. Moreover, since the money in these funds is invested in money market instruments, you can expect a comparatively higher amount of security for your investment.
6. Investments in NCD's/ Corporate or Company Deposits
Non-Convertible Debentures (NCDs) and corporate/ company deposits are issued by companies to raise capital. They offer higher interest rates than traditional bank FDs. However, it's crucial to research the issuer's creditworthiness before investing in these instruments.
7. Treasury Securities
Government securities, like Treasury Bills (T-Bills), are highly secure short-term investments. They are issued by the Reserve Bank of India (RBI) on behalf of the government. T-Bills come in various tenures and are an excellent option for risk-averse investors.
8. Post-Office Time Deposits
- Liquidity and Accessibility: Short-term investments emphasize liquidity, allowing investors to access their funds quickly and without significant penalties. This makes them suitable for short-term financial goals and unforeseen expenses.
- Investment Options: Short-term investments encompass a variety of options, such as Savings account, Fixed deposits, Recurring deposits, National Savings Certificate, Liquid Funds, Investments in NCD's/ Corporate or Company Deposits, Treasury Securities, Post-Office Time Deposits. These options differ in terms of risk and return potential.
- Returns: Short-term investments typically offer lower returns compared to long-term options like stocks. However, they provide stability and capital preservation.
- Safety: Opt for investments that prioritise the safety of your principal amount.
- Liquidity: Look for investments that offer easy access to your funds without incurring substantial penalties. Liquid funds and savings accounts are known for their high liquidity.
- Risk-Adjusted Returns: Evaluate investments based on their risk-return profiles. Understand that some options, like equity-linked investments, might offer higher returns but come with higher risk.
- Suitability: Ensure that your chosen short-term investments align with your financial goals and investment horizon.
How Do Quick Investments Operate?
The balance sheets of the businesses with high cash flows include accounts for short-term investments. This is due to the fact that businesses with strong cash positions can afford to invest excess funds in bonds, equities, or other investment securities like treasury bills, etc. to earn greater income comparable to a savings account. For both individuals and businesses, having capital protection while generating strong returns on investment is the main goal of short-term investment plans.
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