Explore the best short-term investment options in India for low-risk and steady returns
Have you been wondering how short term investments can be beneficial for you? While you are looking at options to start investing in mutual funds, it is important for you as an investor to be aware of what short term investments are, and how they can help you gain good returns.
In this article, we will look at how short term money can help you achieve certain financial goals, how they work, and what are some of the examples of short term investments.
Short term investments, or short term money, are assets that you can convert into cash or sell off within a short span of time, which is typically between 1 to 3 years. Some of the common short term money instruments include treasury securities, liquid funds, and other money market instruments. Short term investments aim for capital preservation and/or quick returns instead of wealth accumulation over a long period of time.
Short term investments come with liquidity, which allows you as an investor to access your funds quickly. If you have certain immediate financial goals or are looking for ways to take advantage of market opportunities, short term money could be a great option for you.
The following are some of the benefits of short term investments:
If you are looking for short term money gains, and an option that gives you steady and risk-free growth, here are the options you might want to consider:
Bank savings accounts are among the most popular choices because of their ability to offer maximum liquidity. This allows you withdraw your funds at any point and from anywhere without any trouble.
Fixed deposits are another widely known short term investment option, which come with high return rates, independence from fluctuations in the market, flexibility in terms of the tenor, and interest rate volatility.
If you are looking to invest a lump sum amount at one go, recurring deposits might be a suitable option for you. These offer you the option to keep investing your money on a monthly basis.
With a tenor of 5 years, NSCs are an option that come with the advantage of tax exemptions as per Section 80C, and a simple application procedure at your post office. The interest earned, however, is taxable.
If you are investing in mutual funds but have a short investment horizon, liquid funds could be a great option for you. These are mutual funds schemes that invest your money into short term government securities or certificates, offer higher interest rates of up to 7%, and are a highly secure option.
NCDs and corporate/company deposits come with high interest rates, and are issued by companies for raising capital.
Treasury bills, like any other government security, are a highly secure short term investment option. The RBI issues treasury bills on behalf of the government. These come with several tenures, and are a great choice for you if you are a risk-averse investor.
These come with a fixed interest rate, and several tenure options, and can be opened at any post office branch across the country.
Also read: What Is Compound Annual Growth Rate (CAGR)
While short term investments offer lower returns as compared to long term investment options, they come with stability and capital preservation. With competitive interest rates and ease of management, these investments can help you achieve your short term financial goals.
The Bajaj Finserv Mutual Fund Platform provides a mutual fund calculator, and more than 1,000 mutual funds. You can compare mutual funds on the platform, and choose an option that is best suited for you.
Short term investment plans usually come with a tenure that may range anywhere between a few days to between 1-3 years.
Yes, if your earnings cross Rs. 10,000, then the interest of fixed deposits is taxable.
Short term money options are popular because they offer high liquidity, and offer you the flexibility to withdraw your money quickly in times of need.
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