Explore short-term investments for liquidity and profit.
Short-term investment plans 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.
Here’s an overview of some popular short-term investment options available to investors:
Investment Option |
Minimum Investment |
Potential Return |
Savings Account |
Varies (often minimal) |
Low (2-6%) |
Recurring Deposit (RD) |
Varies (often minimal) |
Moderate (6-8%) |
Fixed Deposit (FD) |
Varies (often minimal) |
Moderate (5-9%) |
National Saving Certificate (NSC) |
₹100 |
Moderate (6-7.9%) |
Post-Office Time Deposit |
₹100 |
Moderate (5-7.5%) |
Treasury Bills (T-Bills) |
₹100 |
Variable, depending on auction yield |
Debt Mutual Funds |
₹1,000 |
Moderate (8-10%) |
Liquid Funds |
₹1,000 |
Moderate (5-8%) |
Large Cap Mutual Funds |
₹1,000 |
Moderate-High (8-20%) |
Gold/Silver |
Varies |
High (variable, risk dependent) |
Disclaimer: These interest rates have been updated as of December 2023 and are subject to change.
Benefits of Short-term Investment Plans
Depending on your financial goals and risk tolerance, short-term investment plans might be the right choice for you. Here are some key advantages:
Lower minimum investment
Many short-term options, like savings accounts and recurring deposits, require minimal investments. This makes them accessible to new or budget-conscious investors as well.
Shorter lock-in periods
Compared to long-term investments, short-term plans offer more flexibility as you can access your money sooner (though potentially with early withdrawal penalties). This is ideal for unexpected expenses or short-term financial goals.
Liquidity
Short-term investments are known for their high liquidity. Investors can easily convert their investments into cash or cash equivalents without incurring significant losses or facing lengthy redemption periods.
This flexibility is especially valuable for those who may need access to their funds on short notice.
Capital Preservation
Short-term investments typically involve lower levels of risk compared to long-term options. While they may not offer the potential for high returns that riskier investments might, they are more focused on preserving capital. This makes short-term investment plans suitable for individuals who prioritise the safety of their principal amount.
Low Volatility
Short-term investments are generally less susceptible to market volatility than long-term investments. This stability provides a sense of security for investors, particularly those who may be averse to significant fluctuations in the value of their investments. The reduced volatility is conducive to maintaining a steady financial position.FAQs on Short-term Investment Plans
What are the top short-term investment options?
You may invest in any of the following plans:
Liquid funds
Short-term corporate bonds
Government bonds
Certificates of Deposit
Money market accounts
Can short-term investments be considered assets?
Yes, whether you invest for a month or a year, short-term plans are assets.
What are the pros of investing in short-term plans?
Here are a few benefits of investing in short-term investments:
Minimal duration
Easy liquidity
Better transparency
High flexibility
What is the purpose of a short-term investment?
When you are looking to utilise funds immediately but also want to generate profits rather than parking them as idle cash, such short-term plans are ideal.
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