Investment with a short investment period is very liquid and easily convertible into cash without depreciating.
Financially instruments that can be typically turned into cash within five years are referred to as short-term investments. These are often extremely liquid investments with early withdrawal options and a maturity date of less than five years. These investment plans come in pretty handy if you need to safeguard your wealth for an upcoming or unspecified. These investment plans also aid in the maintenance of liquidity for businesses, banks and even the government. Investors can also receive interest on money that might otherwise sit dormant.
The most popular and adaptable short-term investing choice is a savings account. The best thing about investing in savings accounts may be the debit cards that are connected to them. In India, savings account holders get an interest of 2% p.a to 7%p.a. It is preferable to use alternative investment choices, nevertheless, if you are setting aside money to be used for particular expenses down the road. Your lump sum amount can inadvertently be impacted because most cost payments are also made from a savings account.
In India, fixed deposits are among the most well-liked safe investment options. The fact that you may invest in FDs straight from your bank account is the finest part. As such, putting extra money away for brief periods gets very simple. FDs with terms ranging from seven days to ten years can now be opened. Now, you can open FDs at post office locations closest to you. The return rate for FD is 2.5% to 8% depending on the duration. Post office FDs have no TDS and similar returns.
Short-term money market assets backed by the government are known as Treasury securities or T-bills. T-bills are issued by the Reserve Bank of India as part of its open market operations. These bonds have zero coupon periods of 91, 184 or 364 days. The rate of return in the case of treasury securities is 7.5%p.a. T-bills, which have a maturity of less than a year, provide capital security and consistent yields. If you require money more quickly, you can trade the banknotes at the same moment.
Another type of conventional safe investment is recurring deposits. You can use RDs to make frequent, little investments that add up to a sizable corpus. RDs can be opened in a post office or through your bank's savings account. With PORDs, you can invest tiny sums of money and accumulate a corpus over more than 60 months. The rate of return is 4%-8% depending on the duration of RD.
Derivates, stocks and commodities can all be very profitable short-term investment strategies. There is no minimum holding period for investments made in stocks, commodities or derivatives. As a result, these investments are flexible and can be used as short-term solutions. You should exercise caution while making investments because these come with a lot of danger. Therefore, you should stick to investments with more steady returns until your risk tolerance permits you to engage in these possibilities.
If you intend to invest for longer than three years but less than five, debt mutual funds are the best choice. Variable returns tied to the market are provided by debt mutual funds. Nevertheless, despite volatility, the majority of debt funds can protect your capital. The rate of return is 6% to 9% annually, based on the type of fund and length of investment.
If you are looking for suitable investment options, you should choose your investment options based on requirements, liquidity and risk appetite.
