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Short-Term Investment Plans: Best Option for Small Savings

If you are not a planner for the long term, you can still save up on a significant corpus over time by making small yet strategic investments in the short term. However, when you decide on making short-term investments to earn good returns, you must weigh the various options to know which works for your requirements and why short term investments can be one of the most convenient options to earn good returns sooner.  The advantages are several: there is greater liquidity, lesser risk involved and of course the shorter tenure. Also, there are a myriad of options short term investment plans in the market, so which do you choose? Here is a quick lowdown on the best short term investment plans:

A First Timer? You can Consider Large Cap Mutual Funds

Large Cap Mutual Funds are an ideal fit for investors who are relatively new to the stock market as they are largely safer. The portfolio of large cap stocks consists of well-reputed companies, hence lessening the volatilities associated with it.

All that Glitters is Gold

Let’s go back to the roots! And traditionally, in India gold has always emerged as one of the most trusted and safest ways of investment. Although ideally gold is considered to be a good investment plan for the longer tenure, it is also a promising investment if you are looking for an investment period of 5 years or a similar short term. Also, the lower risks associated with gold makes it all the more attractive.

Alongside, you can consider investing in Gold Exchange Traded Funds (ETFs), which are currently trending.  Gold ETFs are funds that invest solely in gold and offer you an easier option to invest in the gold market at reasonable charges.

Fixed Maturity Plans

Fixed Maturity Plans (FMPs)can help you tap the high yields in the debt market. FMPs come with a fixed maturity period and close until maturity after opening for investments for a brief number of days. So if you are looking to make an investment for a period of three years or a similar short term, you can consider FMPs as these can give you better returns than fixed deposits (FDs). Also, FMPs are tax efficient, which makes these attractive.

Fixed Deposits

Perhaps investing in FDs is one of the most conventional and safer methods of saving for short term goals. This is because of the safety associated with FDs. If you are looking to make a short term investment with lesser risks associated with it, a fixed deposit can be your answer.

However, there are several factors associated with FDs that you need to be aware of. Although liquidity is high when you invest in FDs, if you make early withdrawals you will get lower returns. Also if you get a penalty for lower returns, it can cut down your rate by 1%. Also, your tax benefits are lower, since your interest amount is taxable. It is advisable that you spread the amount you are planning to invest in different FDs so that you do not lose out on earning good returns, in case you need to break an FD.

Debt Funds

If you are willing to go off beat and explore new avenues, you can consider investing in debt funds, which are considered a safer bet in times of market volatility. Via mutual funds you can explore a range of debt funds and choose as per your investment needs based on the duration and portfolio. Also, debt funds give your better tax saving benefits in comparison to fixed deposits.

Recurring Deposits

Often the simplest options are the safest and the best. If all you are looking for is a hassle free, no risk investment, there cannot be a better option than investing inRDs. Most short-term investments come with some risk factor, while RDs have none. So if you have short-term goals you are looking to invest for, say you plan to take a vacation in Thailand in a year’s time, you can start saving for it in an RD for even a 9-month period. RDs are considered the best investment for extremely short tenures with a very low risk profile.

Go ahead and take your pick from a plethora of investment options for short-term investments.

Written By: PolicyBazaar - Updated: 29 May 2020
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