Short Term Investment Plans
Money plays an indispensable role in all our lives, it runs our household, feeds our family, and kids, and helps fulfill our dreams. But if you are looking to invest your hard-earned money in an option where you can get maximum returns, then look no further than short term investment plans.
A short-term investment is defined as an investment that lasts fewer than five years. Short-term objectives are made to accomplish inevitable events that will occur soon. It might be used to purchase jewelry, a car or a computer, plan a vacation, or anything else you might need shortly. As a result, the most crucial factor to consider while making a short-term investment is safety.
Why Do You Need Best Short Term Investment Plan?
Here are the reasons that you require the right investment plan for your short term goals:
- Patterned Savings: Investing, like anything else in life, necessitates more discipline, which is attained by investing in short-term funds. Make sure you begin investing a tiny amount of money each month in the best short-term investment plans, and it will grow to a significant corpus in no time. Start making short-term investments today and watch as your objectives are realized with pinpoint accuracy if you prepare properly.
- Diversification: No matter how financially stable you are, make sure you don’t invest all your money in one asset class. When you do so, this would ultimately help to reduce the risk of capital loss while allowing you to make the best out of the growth opportunities. For instance, if you are looking to maximize your capital while playing safe, then you may choose the best short term mutual funds.
- Sheer Flexibility: These investments are created for the short term, as the name implies, and thus provide you with the flexibility to withdraw or change your investment objective within that time frame. There are no long-term commitments, so you can change your mind if your investments aren’t performing well or are losing money continuously.
- High Liquidity Rate: You have the advantage of being able to withdraw your money at any time if you invest in a short-term investment plan such as the stock market with a short-term outlook. If you take your money out before the maturity date, most other types of investments may have a lock-in period or may not extend the benefits of returns.
- Ideal for Beginners: Short-term investments can be a good place to start if you’re a new investor. Long-term investments, without a doubt, carry a higher risk profile.
Best Short-Term Investment Plans to Consider
Listed below are the best short-term investment plans to consider:
1. Recurring Deposits (RD)
This is a sort of secured investment that is suited for those who like to invest monthly rather than in a big payment. RDs are viewed as a low-risk yet rewarding investment option by investors as a term deposit. A recurring deposit can be opened for a minimum of 6 months or a maximum of 10 years.
Features & Benefits of Recurring Deposit:
Let’s take a look at the potential features and benefits of RDs.
- Assured Returns: Recurring deposits, unlike other popular investment plans such as mutual funds and equities funds, provide guaranteed returns on the principal amount in the short term.
- Withdrawal Flexibility: Recurring deposits also provide you with the option of withdrawing a portion of your investment at any time. However, you should be aware that if you choose to withdraw before the end of the term, you will be charged a modest cost.
- A Simple Investment Product: RD is one of the simplest financial products to invest in. Even a novice investor with no prior experience in the field can begin investing.
- Loan Facility: The majority of Indian financial institutions that provide a recurring deposit scheme allow investors to take out a loan against their RD investment.
- Fixed Interest Rate: The interest rate on a recurring deposit is set at the time of account opening and remains constant during the term. As a result, you know exactly how much money you’ll get when the deposit matures.
2. Fixed Deposits (FD)
Looking for the safest investment without any risk? If so, your search ends here! Bank fixed deposits, which are safe investments, might be one of the greatest short-term investment possibilities. In addition, several banks provide superior interest rates on FDs, which normally range from 3% to 9.25% each year. Investors can leave their money in the bank for as little as seven days and as long as ten years. Additionally, investors can select from the bank’s existing tenure options.
Features & Benefits of Fixed Deposit:
The following are the salient features and benefits of FDs.
- Interest Rates: A fixed deposit’s interest rate fluctuates depending on the term you choose. The interest rate, on the other hand, is fixed.
- Loan against FD: If you need money right away, you can take out a loan against your fixed deposit. This prevents your FD from being closed prematurely.
- Assured Returns: A fixed deposit’s returns are guaranteed. You will receive the same rate of return that was agreed upon when the FD was opened.
- Flexible Tenure and Renewal: You can just as conveniently renew the FD on maturity, but remember to check the interest rates, as they may be different.
3. Corporate Deposits (CD)
A company term deposit, often known as a company FD, is a type of FD provided by corporations such as finance companies, housing finance companies, and other types of NBFCs. For many firms/companies, company fixed deposits are an excellent means to raise capital from the general public. Those who are willing to take a risk can invest in these corporate FDs and receive higher returns than bank FDs.
Features and Benefits of CD:
Let’s discuss the features and benefits of CD.
- Higher Interest Rates: A firm FD’s strongest feature is its interest rate. The rates paid are far greater than those offered by a typical bank FD.
- Periodic Interest Payment Options: You can choose from a variety of interest payment options, including monthly, quarterly, half-yearly, and yearly.
- Easy Loans: The majority of firm FDs provide easy loans up to 75% of the maturity amount. Premature withdrawal has a low penalty, thus it’s another choice for quick liquidity.
4. Debt Mutual Funds
A debt fund is a mutual fund that primarily invests in fixed income assets such as government bonds, corporate bonds, and Treasury bills. These instruments provide you with a guaranteed rate of return after a specified time. In essence, you’re lending money to the bond issuer, who pledges to reimburse it with interest.
Features and Benefits of Debt Mutual Funds:
Listed below are the important features and benefits of debt mutual funds.
- High Liquidity: Debt funds are easy to liquidate, and you can cash out your investment faster than most other types of investments.
- Lower Fees: When compared to equities and other mutual funds, debt funds have lower transaction fees.
- Stable Returns: Debt funds are more likely to provide a consistent rate of return independent of market conditions.
- Decent Hedge Against Volatility: Debt funds can provide a decent hedge against the equities market’s volatility.
5. SIP In Equity Mutual Funds
It is recommended that you start a SIP in large-cap mutual funds if you have a one-year investing horizon. One of the two ways to invest in mutual funds is through a SIP or systematic investment plan. Another option for investing in mutual funds is to make a one-time payment. Investing in mutual funds through a systematic investment plan (SIP) allows you to spread out your assets and invest a small amount monthly.
Features & Benefits of SIP:
The following are the features and benefits of SIP:
- Affordable: The SIP option allows investors to contribute as little as Rs.500, making it more accessible to different categories of people, irrespective of their economic background.
- Convenience: Investors who invest in SIP mutual funds, unlike most other investments, can find it convenient to invest because it is a hassle-free method.
- Rupee Cost Averaging: Rupee cost averaging is a strategy that involves buying more units when the fund’s Net Asset Value (NAV) is low and fewer units when the NAV is high.
6. Stock Market
Stock markets are the ideal short-term investments for high-risk takers who want to maximize their earnings. If you can spot the correct stocks, you can double your money by investing in them for a few months. If you bet on the wrong stocks, you run the risk of losing your entire investment.
Features and Benefits of Stock Market Investment:
Looking to invest in the stock market? Let’s discuss its features and benefits:
- Diversification: A stock market investment provides a significant advantage to investors who spend their hard-earned money on a variety of different sorts of investments by providing diversification.
- Connecting with Authorized Members: Only licensed members are allowed to sell and buy securities on the stock exchange.
- Obeying the Rules and Bye-laws is Required: While transacting on the Stock Exchange, it is required to follow the Stock Exchange’s rules and bye-laws.
7. National Savings Certificate (NSC)
Anyone looking for a safe way to make a consistent return while avoiding taxes might consider investing in NSC. NSC provides interest guarantees as well as comprehensive capital protection. The dangers of investing in the scheme are low because it is supported by the Indian government.
Features and Benefits of NSC:
The following are the features and benefits of NSC.
- Fixed Income: Presently, the system provides investors with a guaranteed return at a rate that varies. NSC has historically provided higher yields than FDs.
- Start Small: You can start with as little as Rs 1,000 (or multiples of Rs 100) and gradually grow your investment.
- Power of Compounding: By default, the interest you receive on your investment is compounded and reinvested, even if the returns do not outperform inflation.
Functioning of Short-Term Investment Plan
Short-term investments are those that can be converted into cash quickly. For both people and corporations, the major purpose of short-term investments is to protect money while still earning returns. Short-term investments have a better rate of return than a traditional bank savings account.
Short-term investment plans assist corporations in generating additional income to meet their working capital requirements. Companies with a healthy cash flow can afford to put money into short-term investments. Companies typically park their extra funds for a period ranging from one day to twelve months. All of their investments are highly liquid and can be readily converted to cash. Short-term investments are considered high-quality, low-risk investments since they provide predictable returns.
Besides that, investors can also park their surplus cash to meet their short-term goals. Investing in these schemes can help you achieve short-term goals like buying a car, going on vacation, or buying jewelry. Rather than retaining idle funds for a short time, one might invest in short-term investment plans and earn a profit.
What To Check While Choosing Best Short Term Investment Plan?
Here are the things to consider while choosing the right short term investment plan:
- Determine the Risk Profile
True, with higher investment risk and changeable market conditions, an investor is more likely to fumble and choose one with a smaller risk of market growth. It makes more sense to invest in a low-risk profile. You can choose from high-growth, growth, balanced, and secured funds, depending on your risk tolerance. It’s entirely up to you.
- Focus on safety.
In general, if you’re looking to invest for the near term, you should prioritize safety over return. When you need money, it should be there.
- Present Expenses
To find the finest investment program, you must first evaluate your current expenses. If you don’t have any large expenses, such as a mortgage, you can save or invest more for the future. If you have financial obligations that prevent you from saving much, however, investing in a high-return investment plan will be more helpful.
- Planned Upcoming Expenses
If you’re looking for an investing strategy in India, determining your anticipated future expenses, such as your child’s marriage and education, or purchasing a property, is critical. This will give you a better understanding of how much you need to invest now to generate enough returns later to cover any upcoming expenses.
- Not all short-term investments are equal.
The FDIC insures bank products, so you won’t lose any money. However, market-based products, even secure ones like short-term bond funds, can fall in value over time. Recognize the dangers associated with your investing.
Frequently Asked Questions
Here are the frequently asked questions related to short term investment plans:
Short-term investment plans are liquid assets that are designed to save your money in a temporary location so that you can access it when you need it and earn returns.
Every investment strategy in India carries some risk, particularly when the rewards are based on market swings.
In India, everybody above the age of 18 can and should enroll in a savings plan. The earlier you begin investing, the better, as you will be able to build up a big sum of money over time and earn larger returns.