Short term investments are financial assets that can be easily converted to cash within a short period, ranging from a few days to 3 years. Short term investments are highly liquid assets specifically designed to provide a safe and temporary place to invest the excess cash. Some popular short term investments include high-yield savings accounts, money market accounts, treasury bills, and government bonds, which are quality products with highly liquid assets.
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Investment Plans
Generate wealthEarn 1 Cr# in maturity with Zero LTCG tax¶
Double tax savings^On premiums (under 80C) and on maturity (under
10(10D))
Short term investment options are financial assets or instruments that are acquired with the intention of holding them for a short period, usually ranging from a few days to a few years. These investments are described by their liquidity and low risk compared to long-term investments. Examples of short-term investments include savings accounts, bank fixed deposits, recurring deposits, etc. Short-term investments are preferred by investors who seek to preserve capital or earn medium returns over a short time horizon while maintaining the flexibility to access their funds quickly.
Best Short-Term Investment Options
Here are some top short term investment plans to help clear up any confusion about where to invest your money for the short term.
Short Term Investment for 1 Month
Savings Accounts
Liquid Funds
Short-Term Investment Options for 3 Months
Recurring Deposit
Bank Fixed Deposits
Treasury Securities
Money Market Account
Stock Market/Derivatives
Short Term Investment for 6 Months
Large-Cap Mutual Funds
Post-Office Time Deposits
Debt Instrument
Gold or Silver
Investments in NCDs/ Corporate or Company Deposits
Short Term Investment Options
Average Returns (approx)
Savings Account
0.25% - 3.5%
Liquid Funds
4% - 6.5%
Recurring Deposits
4.5% - 7.0%
Bank Fixed Deposits
4.5% - 7.5% (depending on tenure)
Treasury Securities
4.0% - 7.0% (depending on maturity)
Money Market Account
3.5% - 5.5%
Stock Market /Derivatives
Highly Variable (can be negative or very high)
Large Cap Mutual Funds
8% - 12% (long-term)
Post-Office Time Deposits
6.9%-7.5%
Debt Instrument
5% - 8% (depending on type and credit rating)
Gold or Silver
Volatile
Investments in NCDs/ Corporate or Company Deposits
Flexible Tenure: Open RDs for short durations, from 6 months up to 10 years, in multiples of 3 months.
Minimum Lock-in: A short 1-month lock-in period applies. Premature closure within this period forfeits all interest earned.
Competitive Interest: RDs offer interest rates comparable to Bank FDs, currently ranging from 3.25% to 7.50% p.a. for tenures of 12 months and above. Use an FD calculator for return projections.
Taxable Interest: Interest income is added to your total income and taxed as per your income tax slab. TDS is deducted if interest exceeds Rs. 10,000.
Bank Fixed Deposits
Lump-sum Investment: Deposit a single amount for a predetermined period.
Safe Investment: Considered one of the safest short-term investment options.
Fixed Returns: Offers guaranteed returns at a fixed interest rate.
Flexible Tenure: Investment periods range from 7 days to 10 years.
Renewable Deposits: FDs can be renewed upon maturity.
High Liquidity: Easy access to funds before maturity (subject to penalties).
Competitive Interest Rates: Current rates typically vary between 3% and 9%.
No Tax Deductions: No tax benefits are offered on FD interest income.
Treasury Securities
Treasury securities or treasury bills are another good short term plan offering high liquidity, safety, and satisfying returns. Maturity dates range from 91 days to 365 days.
Money Market Account
Safe & Short-Term Returns: Liquid funds offer capital preservation and competitive returns over short periods.
91-Day Maturity: Investments mature in a maximum of 91 days, providing quick access to funds.
No Lock-in: Withdraw your money anytime without penalties.
Highly Liquid: Redemption is typically very fast, often within one business day.
Low Risk: Invests in low-risk, short-term debt instruments.
Ideal for Short Term: Suitable for investment horizons of less than 13 months.
Variable Returns: Returns are not guaranteed and can fluctuate; currently around 3.35% per annum.
Taxed as Income: Profits are added to your income and taxed at your applicable tax slab.
Long-Term Gains Tax: Gains from investments held over 36 months are taxed at 20% after indexation.
Stock Market /Derivatives
Shares, commodities, and derivatives are a favorable avenue for people possessing good market knowledge and a high-risk appetite. This investment can be made for a short or long time span, depending upon the financial objectives of the investor.
Debt Mutual Funds
Debt Mutual Funds are open-ended funds that invest primarily in debt securities such as government bonds, corporate bonds, and money market instruments. They offer diversification and professional management, making them a popular choice for investors seeking to invest in debt instruments.
Focus on Large Companies: Large-cap funds invest in established, large-cap companies.
Growth-Oriented: The primary goal is capital appreciation through stock investments.
Investment Horizon: Suitable for medium-term investments, typically 1-3 years, with options for 3-5 years.
High Liquidity: Easy to buy and sell fund units.
Potential for High Returns: Offer the possibility of substantial returns.
Return Range: Historical returns have varied between 8% and 13%.
Tax Implications: Short-term capital gains tax (STCG) applies to holdings less than 3 years. Long-term capital gains tax (LTCG) applies to holdings of 3 years or more.
Post-Office Time Deposits
Post-office time deposits, also known as post office fixed deposits, are one of the safest and best short term investment plans that offer assured returns to investors. The scheme is offered by India Post and is very popular in rural and remote areas of India.
Tenure- one can open a post office time deposit scheme for a tenure of 1 year, 2 years, 3 years or 5 years.
Liquidity- In a post office scheme, the interest applicable on the deposited amount is on a yearly basis. Before the completion of 6 months, the post office scheme does not allow any premature withdrawal.
Taxation- The interest earned on the deposited amount is added to the individual's income and is taxed according to the income tax slab rate the individual falls under.
Debt Instrument
Debt instruments are best short term investment plans for risk-averse individuals. Debt mutual funds offer stability and good returns without market volatility.
Returns can be as high as 10.5%.
Tenure of debt funds:
Liquid fund: Maturity up to 91 days.
Ultra-short-duration fund: 3 to 6 months.
Low duration fund: 6 to 12 months.
Liquidity: High liquidity, maturity up to 91 days.
Returns: Offers 7-9% interest rate.
Taxation: Short term capital gain tax for holdings less than 3 years, long-term capital gain tax for holdings over 3 years.
Gold or Silver
Gold and silver are just like the ever-growing trees of investment forest, handy for both long and short term investment. These investment plans are sure to give huge returns as the price of gold and silver keeps increasing every day. So, if you are looking for secure and risk-free options and beyond, you’ll need to invest in gold or silver.
Investments in NCDs/ Corporate or Company Deposits
This scheme allows you to select a secured NCD (Non-Convertible Debentures) for securing your capital. Moreover, it offers attractive interest rates varying from 9% to 12%.
Arbitrage funds
They arelow-risk investment optionsthat aim to profit from price discrepancies between the same security traded in different markets. These funds typically invest in pairs of related securities, such as stocks, bonds, or derivatives, and buy the cheaper one while simultaneously selling the more expensive one, hoping to capture the price difference when the prices converge.
Stable returns: These funds generally offer stable returns, making them suitable for investors seeking consistent income.
Tax-efficient: In India, arbitrage funds benefit from long-term capital gains tax treatment, which is generally lower than short term capital gains tax.
Fixed Maturity Plans
FMPs are closed-ended funds that invest in debt securities with a specific maturity date. They offer a fixed return for the tenure of the plan, making them a popular choice for investors seeking predictability.
Fixed returns: Offer a predetermined rate of return.
Closed-ended: Have a fixed tenure and cannot be bought or sold after the initial offer period.
Lock-in period: Investors are typically locked in for the duration of the plan.
Credit risk: Exposure to credit risk of the underlying securities.
Short Term Funds
Short Term Funds invest in debt securities with a maturity of less than a year. They offer relatively stable returns and low risk, making them suitable for investors seeking a safe haven for their funds.
Low risk: Invest in short term debt securities, reducing credit risk.
What are the Features and Benefits of Short Term Investment Plans?
The features and benefits of the best short-term investment plans are:
Features:
Low risk: Prioritize capital preservation over high returns.
Liquidity: Easy access to your money when needed.
Flexibility: Diverse options to match your time horizon and goals.
Benefits:
Grow savings: Earn more than a regular savings account.
Emergency funds: Securely store cash for unexpected needs.
Meet short-term goals: Save for vacations, down payments, etc.
How Short Term Investment Options Work?
Short-term investment options allow individuals and organizations to invest surplus funds in highly liquid financial instruments like certificates of deposit, commercial paper, and short-term government securities. These investments are designed to offer better returns than traditional savings accounts while ensuring that funds remain easily accessible. The primary advantages include attractive interest rates, quick access to capital when needed, and a low risk of loss. By utilizing short-term investment vehicles, investors can make their idle funds work for them, while banks, corporations, and governments benefit from enhanced liquidity and efficient cash flow management.
Drawbacks of Short Term Investment Plans
Lower Returns
Short-term investment plans generally offer lower returns compared to long-term investment options. Because the investment horizon is brief, there is limited opportunity for substantial growth or for compounding to significantly enhance returns.
Limited Growth Potential
The short duration restricts the potential for wealth accumulation. Investors may miss out on higher returns that come with long-term investments, making these plans less suitable for ambitious financial goals or building significant wealth over time.
Lack of Compounding Benefits
Short-term investments do not allow enough time for the power of compounding to work effectively, limiting the exponential growth that can be achieved with longer-term investments
Limited Diversification
Short-term investment plans often provide fewer opportunities for diversification, which can increase the overall risk if the chosen instruments underperform.
Early Withdrawal Penalties
Some short-term investment products, such as fixed deposits, may impose penalties or fees for early withdrawal, which can reduce overall profitability and flexibility.
Things to Consider While Investing in Short Term Investment Plans
Set Clear Goals:
Know why you’re investing and your time frame.
Assess Risk Tolerance:
Choose investments that match how much risk you’re comfortable with.
Match Investment Period:
Pick options that fit your required holding period.
Ensure Liquidity:
Make sure you can access funds quickly without penalties.
Protect Your Capital:
Prioritize safety to avoid loss of principal.
Compare Returns:
Look for the best yields relative to risk and liquidity.
Diversify:
Spread investments to reduce risk.
Check Tax Impact:
Understand how taxes affect your returns.
Consider Market Volatility:
Be aware of possible price fluctuations.
Review Regularly:
Monitor and adjust your investments as needed.
Tenure of Short Term Investment Plans
The tenure of short-term investment plans usually ranges from a few days or months up to 3 years, and in some cases, may extend to 5 years depending on the specific product and provider. Most commonly, short-term investments are designed to mature within a period of a few months to 3 years, making them ideal for investors who need quick access to funds and do not wish to lock in their capital for long durations. Examples include savings accounts, liquid funds, fixed deposits, and short-term bonds, each offering different tenures within this range.
Related Terms to Short Term Investment Plans
Cash Investment
This is a short term bond, generally less than 90 days, offering returns in interest payments. Compared to the other investment options, cash investment generally offers a low return.
Cash Equivalents
These are investment securities which provide high liquidity and have high credit quality. As a short term investment option, these securities have low-risk and low-return profiles.
Money Market
Money market is the segment of the financial market in which financial instruments which have a short term maturity period and high liquidity are traded. Money-market funds are considered a very safe investment option. However, the returns are comparatively low compared to the other investment options.
Financial Assets
These are liquid assets, which derive profit from ownership claims or contractual rights. Stocks, cash, bonds, mutual funds, and bank deposits are some of the examples of financial assets.
Short Term Fund
This is a conservative investment fund offering low risk and high returns. Short-term investment funds are considered a liquid investment fund and a safe investment option to achieve short-term financial objectives.
How to Calculate Returns on Short Term Investment Plans?
Calculating returns on short term investment can be simplified by using an SIP calculator. It is a financial tool used to estimate the potential returns on investments. It helps investors make informed decisions about their investment strategies and financial goals.
Wrapping it Up!
Now, you don't need to worry about issues like where and how much to invest. If you're looking to invest your money in short term investment plans, then above mentioned investment options could be the best destinations for you to stop-think-invest.
˜Top 5 plans based on annualized premium, for bookings made in the first 6 months of FY 24-25. Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
Past 10 Years' annualised returns as on 01-06-2025
^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.
*All savings are provided by the insurer as per the IRDAI approved insurance plan.
Tax benefit is subject to changes in tax laws. Standard T&C Apply
++Source - Google Review Rating available on:- http://bit.ly/3J20bXZ
^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.
#The investment risk in the portfolio is borne by the policyholder. Life insurance is available in this product. The maturity amount of Rs 1 Cr. is for a 30 year old healthy individual investing Rs 10,000/- per month for 30 years, with assumed rates of returns @ 8% p.a. that is not guaranteed and is not the upper or lower limits as the value of your policy depends on a number of factors including future investment performance. In Unit Linked Insurance Plans, the investment risk in the investment portfolio is borne by the policyholder and the returns are not guaranteed. Maturity Value: ₹1,05,02,174 @ CARG 8%; ₹50,45,591 @ CAGR 4%
¶Long-term capital gains (LTCG) tax (12.5%) is exempted on annual premiums up to 2.5 lacs.
**Returns are based on past 10 years’ fund performance data (Fund Data Source: Value Research).
Generate wealth Earn 1 Cr# in maturity with Zero LTCG tax¶
Double tax savings^ On premiums (under 80C) and on maturity (under 10(10D))
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