Best Short Term Investment Plans

Investments made for a short period, i.e., for less than one year, are referred to as short term investments. A few examples of the best short term investment plans in the market are:

The entire process can be accomplished in a few defined steps by invoking the “Buy Online” or “Buy Now” Tab in the portal. The involved steps are:

  • Savings account
  • Fixed deposit
  • Debt instruments
  • Money market instruments
  • Treasury securities
  • Equity or stock market
  • Equity-linked saving schemes
  • Large-cap mutual funds

The above mentioned short term investment plans can be chosen as per the investment objective of a person. How readily a person wants to redeem one's investment and how much risk appetite does one possess determines the investment option. Various schemes are a combination of more than one investment instrument, yielding high returns in a short period.

What are the Types of Various Short Term Investment Plans

  • Savings Accounts

    A savings account is an account in which the money is deposited with the bank or any other financial institution. Savings accounts offer interest on the deposited money. A savings account serves two purposes- inculcates saving habits and earns interest on the deposited amount. Various savings accounts are salary savings account, regular savings account, joint account, senior citizens' savings account, minors’ savings account, etc. Savings accounts have the lowest risk when it comes to short term investment, although the interest amount generated is lower as compared to other instruments.

  • Fixed Deposits

    Another short term safe investment option is fixed deposits or FD. Fixed deposits are a diverse saving instrument. The interest rate received on these instruments starts at 4%. Fixed deposits can have a maturity period from 7 days to up to 5 years. The liquidity of fixed deposits is lesser than that of savings; they provide higher interest. Loan facility against fixed deposits is available if needed, and the interest rate charged on loan against fixed deposits is lower than that charged in personal loans. It is one of the safest short term investment plans in the market.

  • Recurring Deposits

    Another safe short term investment instrument is a recurring deposit. In recurring deposits, the investor has the right to make decisions about the monthly deposit and the tenure of the deposit. Generally, a recurring deposit is made for 6 months to up to a maximum of 10 years. The interest rate charged on recurring deposits depends on the amount and duration of the deposit. The interest rate varies from 4% to 7%. Banks and post offices offer this short term investment instrument to its customers.

  • Equity Linked Savings Scheme

    ELSS are open-ended diversified funds. As the term itself suggests, equity-linked savings schemes are linked to stocks/share markets with a predetermined lock-in period, which is generally 3 years. Upon maturity, the number of units invested in the ELSS is redeemed as per the current net asset value NAV) of the time. The investor or the nominee receives the redemption amount. ELSS are different from mutual funds, and they fall in the medium to a high-risk category.

  • Short-term debt funds

    These are a variation of mutual funds, albeit for a short period with investments made in debt instruments such as government paper, bank papers, or commercial papers like a certificate of deposit. The investment amount is invested in a diversified portfolio. In debt mutual funds, the value of the fund is linked to interest rates. They are inversely proportional- a higher interest rate lowers the value of the fund and vice-versa.

Features and Benefits Of Short Term investment Plans

Investments are made to reap benefits on the investment amount. Short term investment plans are especially recommended to meet short term goals and investing in best short term investment plans give the following benefits to the investor:-

  • Meet financial goals

    Financial needs can vary from being short term to long term. If one needs to pay off for a child’s education, it is a long term financial need, and financial instruments for such needs are long term investments in mutual funds or ULIPS. However, if one needs to get one's house renovated in a year, that is a short term goal for which short term investment instruments such as a fixed deposit or ELSS are the options. It should be kept in mind that premature redemption in any kind of investment instrument hampers financial goals as well as the investment amount. So one needs to be patient while investing money.

  • Stable returns

    Based on instruments chosen, the investor can enjoy stable returns on short-term investment plans. Instruments such as government securities, treasury bills, corporate bonds, and other money market instruments yield a stable and guaranteed return on investment both in the short term and the long term

List of Best Investment Plans in India

Short Term Debt Funds Risk
HDFC Short Term Debt Fund (G) Moderately low
IDFC Bond Fund - MTP (G) Moderate
L&T Short Term Bond Fund (G) Moderately low
Kotak Corporate Bond Fund - D (G) Moderately low
IDFC Bond Fund - MTP - D (G) Moderate

Source: IRDAI Annual Report for FY 2018-19

Disclaimer: *All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply

Short Term Investments v/s Long Term Investments

Apart from the basic period difference of less and more than one year for short term and long term investments respectively, the two types of investments differ in terms such as investment goals, risk carrying capacity, and expectations from either investment. Short term investments must be made to meet short term goals. However, short term investments are also made for purposes such as tax avoidance, to familiarise with financial markets, make long-term investments afterward, and earn extra income from unconventional sources. Long term investments are made for entirely different purposes. The investors in the long term market can be either novice who invest in insurance instruments and mutual funds or experts who know the risks like market volatility and market sentiments who invest in bonds, gold, and PPF (public provident fund).

FAQs

  • Q: What is the tenure of short term investment plans?

    Ans: The tenure of short term investment plans is one year of less than one year.
  • Q: Are short term investments beneficial?

    Ans: Short-term investments can be extremely beneficial if planned well, depending on the investment amount and investment goal. If the investment goal is to be achieved in less than a year, any of the above instruments can be chosen (depending upon one's risk appetite) to achieve the goal.
  • Q: What are the best short term investment plans available?

    Ans: Short term investment plans available are:-
    • Savings account
    • Fixed deposit
    • Debt instruments
    • Money market instruments
    • Treasury securities
    • Equity or stock market
    • Equity-linked saving schemes
    • Large-cap mutual funds
  • Q: What is the difference between debt and liquid funds?

    Ans: Liquid funds are the investments made in the money market instruments like Commercial papers or Certificate of Deposits. The returns on such instruments are not very high. The investment period in this instrument can be as short as 91 days.

    Debt funds, on the other hand, are investments in debt instruments available in the market. The investment period in these instruments is between one to three years. They yield high returns with moderate risk.

  • Q: Where can one make a short term investment for up to one year?

    Ans: Short term investments for up to one year can be made in several investment instruments in the debt or money market. Depending on the period of investment to be made, instruments with a maturity period from 6 months to 1 year can be chosen from.
Written By: Paisawiki - Updated: 26 March 2021
Disclaimer: Paisawiki does not endorse, rate or recommend any particular insurer or insurance product offered by an insurer.