Some of the Best Short-term Investment Plans with High Returns

These refer to instruments that can be easily liquidated and converted into cash. The tenure for such investments usually ranges from one day to up to five years. They include low-risk tools like fixed deposits, national saving certificates, and debt mutual funds. 

 

Ideal for those desiring swift returns without committing to an extended investment horizon, short-term investments are safeguarded by reputable financial institutions. These plans provide an avenue to maximise earnings, offering a balance between liquidity and profitability.

 

Long-term investments typically have a tenure exceeding five years and are designed for wealth creation over an extended period. These investments often carry higher risks but offer the potential for significant returns. Some of the common options include equities, real estate, and other growth-oriented assets.

Here’s an overview of some popular short-term investment options available to investors: 

Disclaimer: These interest rates have been updated as of December 2023 and are subject to change.

Here’s an overview of some of the best investment options to consider in the short term:

• Savings Account

A basic bank account that allows you to deposit and withdraw money at any time. It’s ideal for parking funds you may need access to quickly, providing liquidity and security.

• Recurring Deposit (RD)

A type of investment where you deposit a fixed amount every month into an account for a set period. It helps you save regularly, offering disciplined investing with the benefit of earning interest on your contributions.

• Fixed Deposit (FD)

A lump sum deposit made with a bank or financial institution for a fixed period. The investment is locked in for the agreed term, and at the end, you receive your principal along with interest.

• National Saving Certificate (NSC)

A government-backed investment option where you purchase a certificate for a set amount, and at maturity, you receive your original investment plus interest. It is suitable for conservative investors.

• Post-Office Time Deposit

A government-backed savings plan where you invest a lump sum for a specified tenure. The investment is safe and can be redeemed at the end of the term with interest.

• Treasury Bills (T-Bills)

Short-term debt instruments issued by the government. You buy them at a discount, and at maturity, you receive the full face value, with the difference being your return.

• Debt Mutual Funds

These funds invest in a variety of debt instruments like bonds or government securities. They are managed by fund houses and are ideal for investors who prefer safer, low-volatility investments.

• Liquid Mutual Funds

These funds invest in very short-term debt instruments, offering high liquidity and low risk. You can redeem your investment quickly, making them ideal for parking funds temporarily.

• Large Cap Mutual Funds

These funds invest in large, established companies that are stable in the market. They are suitable for long-term growth, providing steady returns with lower risk compared to smaller companies.

• Gold/Silver

Investing in physical gold or silver or financial products related to them allows you to gain from changes in their prices. Precious metals like gold are often used as a store of value during uncertain times.

• Short Term Funds

These are funds designed specifically for short-term investments, typically with a strategy that focuses on low-risk, stable returns. They are ideal for parking money for a year or less.

• Arbitrage Funds

These funds take advantage of price differences in the stock market and other markets. The fund managers buy low in one market and sell high in another, benefiting from these short-term opportunities.

• Equity Mutual Funds

These funds pool money from investors to invest in the stock market. They carry more risk than debt funds but offer the potential for higher returns by investing in equities.

• Commodities, Stocks, and Derivatives Market

This involves trading commodities (like gold, oil, etc.), stocks, or derivatives contracts. These markets allow for high potential returns but come with significant risks due to price fluctuations.

• Corporate Deposits

Similar to fixed deposits, corporate deposits are offered by companies instead of banks. You deposit a lump sum, and the company pays you back at the end of the term with interest.

• Fixed Maturity Plans

These are a type of debt mutual fund where the investment has a fixed lock-in period. The fund invests in debt instruments and aims to return the principal with interest at maturity. It is structured to match the investor's investment horizon.

Just like most investment options, short-term options have their pros and cons. Some of the major ones include:

Pros

• Flexible tenure and liquidity, allowing quick access to cash for future investments

• Lower risk compared to long-term investments, with potential for good returns due to favourable interest rates

• Ideal for building emergency funds with a small tenure

• Provide better returns than traditional savings accounts

Cons

Lower returns compared to long-term investments due to smaller investment amounts

Not suitable for long-term financial goals like pensions or monthly passive income

Limited investment options, with fewer choices for returns under three years.

The tenure of short-term investment plans in India usually ranges from one day to five years. These options offer quick returns and lower risks, providing easy liquidity. These plans are ideal if you're looking for stable, low-risk investments without a long-term commitment.

Short-term investments can be a great way to grow your money quickly. However, it's important to understand the risks involved before diving in. 

Risk Tolerance

Assess your risk tolerance to align investments with your comfort level. While short-term options are generally low-risk, understanding your risk appetite is crucial.

Financial Goals

Clearly define your financial goals. Whether it's saving for a vacation, emergency fund, or a down payment, knowing your objectives helps tailor your investment strategy.

Safety of Funds

Prioritise the safety of your principal amount. Opt for investments with reputable financial institutions to minimise the risk of capital loss.

Liquidity Needs

Evaluate how quickly you may need access to your funds. Short-term investments are known for liquidity, but specific options may have varying redemption periods.

Tax Implications

Understand the tax implications of your investments. Some short-term options may offer tax benefits, contributing to overall returns.

Market Conditions

Stay informed about prevailing market conditions. While short-term investments are less volatile, external factors can impact returns.

Diversification

Consider diversifying your short-term portfolio to spread risk. Explore different investment options to create a well-balanced strategy.

Interest Rate Trends

Keep an eye on interest rate trends. Short-term investments are influenced by interest rates, and being aware of fluctuations can aid decision-making.

 

These types of investments are often held with the government or with trustworthy and reliable corporations. Some of the best short-term investment options include FDs, RDs, treasury bills, government or corporate bonds, and national saving certificates.

 

Understand that investments are heavily dependent on your circumstances and financial goals. However, consider factors such as safety of funds, liquidity and tax benefits before making any investment decisions. Now that you have explored some popular short-term investment plans, choose schemes that align with your goals.

Short-term investments are perfect if you're looking for secure returns with minimal risk and quick access to your funds. Here are some options you can consider:

• Money Market Instruments

Money market instruments have short maturities and are highly tradable. While they’re safe, the returns tend to be modest compared to other investments.

• Financial Assets

Financial assets, such as stocks, bonds, mutual funds, and savings accounts, generate returns through legal agreements or entitlements, offering you a range of investment opportunities.

• Cash Equivalents

Cash equivalents are low-risk, highly liquid investments with strong credit ratings. They provide modest returns and are ideal for short-term, safe investments.

• Cash Investments

These bonds typically last less than three months and offer returns through interest payments. While they yield low returns, they are a secure option for short-term parking of your funds.

• Short-Term Investment Funds (STIF)

STIFs pool savings into short-term, low-risk investments like government bonds and treasury bills. They aim to keep your money safe, offer quick access, and provide modest returns, making them perfect if you value stability and flexibility.

Short-term investment plans offer a practical solution for those looking to achieve quick returns while maintaining liquidity and minimising risk. These investments, which typically range from one day to five years, provide flexible options such as fixed deposits, debt mutual funds, and savings accounts. 

 

Their low-risk nature and high liquidity make them ideal for short-term financial goals, emergency funds, or parking surplus cash. It’s important to align your short-term investments with your specific financial goals and risk tolerance. 

 

By understanding your objectives, assessing your risk tolerance, and considering factors like liquidity and tax implications, you can make informed decisions that maximise your returns.