What are the short term investment options in India?
The short term investment is an investment made for a shorter period of time to meet short time goals. The short term of time may vary from a few days up to 3 to 5 years of time depending on the requirement. The investment amount is mostly less as it yields only medium returns with less risk involved. Short term goals are the ones to be achieved within a small duration up to 3 years of time. This varies from person to person.
The main factor to be considered while investing in short-term investment schemes are the flexibility to withdraw the funds and to be converted into cash as and when required.
The following are the 10 short term investment options that give moderate returns and can be withdrawn and en-cashed easily in India.
Saving bank account
This is the simplest form of keeping money safe which yields up to 4-6% based on the banks. The main advantage is its liquidity nature with zero risks. The bank takes insurance on the amount of the account. Any time the cash can be withdrawn to achieve the short term goals. The money can also be withdrawn in any ATMs anywhere at any time. Just some nationalized banks and private banks demand a minimum amount as the account balance.
Short term fixed deposits
The funds can be deposited with the bank under short-term fixed deposits for a specific period ranging from a few months up to 10 years. Under this scheme, the return will be 7-8% per annum depending upon the bank scheme and the duration. This fetches more returns compared to saving bank account.
Auto sweep account
The bank also provides a facility through which the customer can more interest called auto sweep facility. On the excessive money, the customer can earn more money as additional interest. The rate of return may be up to 9% per annum. This can just be done by requesting the bank for an auto sweep facility.
Debt mutual funds
These are a kind of mutual funds that invest the funds in fixed income investment options such as bonds, etc. They are considered safer as the underlying asset is the debt. They provide regular returns for investors. Such funds give a higher return with less risk on the funds.
Balanced mutual funds
This is the best option for people who take moderate risks. This can be done for a shorter duration from which the yield can be expected up to 10 to 12% on investing in well balanced and diversified mutual funds.
These are mutual funds invested in the certificate of deposits and short-term government securities which have the maturity period from 4 days to a maximum of 91 days. These funds are high liquidity in nature and the return on such funds ranges from 4% to 10% depending upon the investment scheme. These funds fetch higher returns compared to fixed deposits and savings bank account.
Equity-linked savings scheme (ELSS)
This is considered as a good long term wealth creation tool by the investors. It is a tax saving mutual fund portfolio with a minimum lock-in period of 3 years. The scheme is linked to the equity as to which this scheme involves risk but with a high return on investment. The return on investment is from 10 to 12 % and the invested amount is eligible for deductions under section 80C of the Income-tax act.
Fixed maturity plans
An investor can choose fixed maturity small investment plans which may invest in debt securities such as the certificate of deposits, treasury bills, etc. After the completion of the maturity period, the funds fetch a decent rate of return. The main drawback may be the lock-in period of 3 years.
This is a less popular way of investment which is relatively good for a conservative investor. In the case of the arbitrage fund, the manager of the funds buys stock in cash and sells in the future market and the difference of which is the return on investment. The return is from the price differences of the same financial instrument in two different markets. These funds are one of the best-suited options for people willing to invest in the short term.
Gold, as everyone knows, is the best investment option for both short term and long term. When the price of gold increases, the investor can take advantage and it can be en-cashed at once. It is always advisable to invest in Gold ETF instead of gold ornaments and gold biscuits which are in the physical form possessing which may endanger lives because of theft. Also investing in gold is commendable when the investment is more than 2 years. Anyways, the risk involved is very high with gold for the reason; the price may fall at any time with that of the market.
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