Short-term investment plans have their place in helping an investor achieve their financial goal within a limited timeframe – usually a few months to a few years. They are not long-term in nature but rather adhere to short-term investment definitions of being more stable and lower-risk investments that retain capital while earning modest returns.
At Moneyplantfx, we know all investors are different. Whether it is for your next vacation, a major purchase or holding surplus funds, we have compiled a list of the top short-term investment plan options.
Listed below, are some solid and low-risk investment options with short-term goals in high consideration:
A high-yield savings account is a fantastic option for people who want to earn money while keeping accessibility. The money is not locked up.
Interest Rate: The accounts are going to be an interest rate up from a traditional savings account. The high-yield is significantly higher.
Liquidity: These accounts are easily accessible and funds are quick to retrieve. Easy choice.
Good for: Tallied up for emergency funds or some other short-term savings goals.
Fixed Deposits are one of the safest and most reliable investment products in India.
Interest rates and terms: FD rates vary according to the bank and tenure (7 days to 10 years).
Safety and returns: Since FDs are backed by banks, you are guaranteed returns with very little risk.
Penalties: If you withdraw your FD before the maturity date, you will usually incur a small penalty.
Liquid mutual funds invest in short-term debt instruments with a validity of up to 91 days.
Liquidity and Returns: Withdrawable within 24 hours; returns are generally higher than savings account interest.
Risk: Low-risk, as the fund invests in quality debt papers.
Suitability: A good option for parking surplus funds or putting cash that is currently idle to work.
A disciplined way to save money, a recurring deposit is established with a fixed amount deposited on a monthly basis for a period that you set.
Terms and Interest Rates: RDs are fixed term deposits and the interest payable is slightly more than the savings account rate. Terms for RDs vary from 6 months to 10 years.
Regular Savings: RDs help create financial discipline because the individual is required to commit to a fixed amount each month over there for the set period.
Maturity and Taxation: Once the RD matures, at maturity you will receive the amount deposited, principal, plus interest earned, and you will need to pay taxes on the interest earned.
The NSC is issued by the Indian Post Office and is backed by the government, making it a safe option for conservative investors.
Interest Rates and Tenure: Fixed interest rates available over a 5-year lock-in period.
Tax Benefits: Allows for tax deduction under Section 80C.
Security and Refunds: Secured and backed by the government with guaranteed returns.
Deciding which short-term investment plan to pursue depends on your:
At Moneyplantfx, we advise you to create a blend of short-term instruments to optimize returns and reduce your risk profile. There is a short-term plan that’s suited to any conservative saver or smart investor.
Q1. What is the safest short-term investment?
A: Fixed Deposits and NSCs are the safest investments. They provide guaranteed returns and are backed either by banks or the government.
Q2. Can I lose money in liquid mutual funds?
A: Liquid funds are typically low-risk but they can still have risks. Market movements can impact your returns, but actual losses are uncommon, and are usually minimal.
Q3. Are returns from RDs taxable?
A: Yes, the interest you earn on Recurring Deposits is taxable based on your income tax slab.