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Jun 22, 2018 3

Best Investment Options for any Savings Goal in Short Term

Investment Options

Saving lies in the mind of every person in every household. It doesn’t matter if you’re retired; a student, a working man or woman, saving is an ample part of your future who wouldn’t want their future to be safe and secure? This is where financial planning comes in. Though in most cases, savings or investments are done for the long run, people tend to oversee short term investments and stick to long term plans because they miss out on calculation unforeseen emergencies and repent afterwards.

People who do invest for the shorter time periods, usually do so in order to achieve certain financial goals or to not risk locking up their money for a long period of time in case of any unforeseen circumstances.

Most investors today look for the best investment options to save up for a rainy day or when they need it the most short time. In most cases, their go-to option would be to rely on their savings accounts but there are many different options out there.

What is Short Term Investment?

Any investment choice which is less than three to five years is measured as a short term investment. The short term goals are established to attain unavoidable circumstances that may occur in the near future. For instance, your child is in 10th standard and in two years, when he graduates from school, will need money to go to college. Since not everyone gets into government colleges, paying for private colleges may cost you more than you would like. Therefore, it is best to start investing in short term plans for your child right now.

It does not matter what the occasion, a short term plan always comes in handy some day or the other but it does require a lot of mapping. To obtain the best short term investment plans, you need to sit down with a representative from your bank or a trusted financial advisor.

To accomplish specific goals in the near future, you must not take any risk and be unambiguous about your decision(s).

In a nutshell, you should invest in short term plans if you: two primary objectives:

• Need Safety of capital

• Require Return on capital

The usual investment term for best short term investment plans is usually less than 12 months.

Below are some of the best short term investment plans:

Sr No. Best Short Term Investment Options Benefits/ Ideal For

1 Savings Accounts- Offers Better liquidity (i.e. 4%-7% returns)

2 Liquid Funds- offers secure investments (up to 4%-7% returns)

3 Short Term Funds - These are at parity with Liquid funds

4 Recurring Deposits- Ideal for people who wish to invest on monthly basis

5 National Saving Certificate- Ideal for people with long term goals

6 Arbitrage Funds- 8% interest if Investment is for at least a year

7 Fixed Maturity Plans -Similar to Fixed Deposits.

The Best Short Term Investment Plans With High Returns Explained

• Savings Accounts

Savings accounts are one of the best short term investment plans as they are safe and easy to manage. The chief motive with this plan is obviously liquidity, however not that much on earnings. Banks only provide 4% to 7% return from savings accounts.

• Liquid Funds

Liquid Funds are kind of mutual funds that invest in short term government certificates and securities of deposits. You can go into and exit such funds at any given time as these investments are safe. You should avoid throwing in your emergency funds in these, as the release takes around two days. You can expect 4%-7% post tax return on liquid fund investment.

Some Investors consider liquid funds to store money for a period as little as one day to as many as 90 days or more It is really rare for liquid funds to see a dip in their net asset values or its short form NAV.

Investors can also opt for the dividend option or the growth option. Whilst dividend is taxed at nearly 30 percent, capital gains are added to income and are taxed at marginal income tax rate or rate of taxation.

• Short Term Funds

Such funds invest in securities that mature in 1 to 3 years. These funds are riskier as the maturity of securities is more than ultra-short term and liquid funds. Here, the taxation is the same as any other debt funds.

Banks do offer deposits of changeable time frames starting with a minimum of 7 days. So an investor who is looking to store money for a week can in fact pick a fixed deposit with a corresponding tenure.

Note: The interest on the payment is further included to the income and taxed at the marginal rate of taxation.

• Recurring Deposits (RDs)

This type of short term investment is considered a secured investment and is appropriate to those who do not want to invest in a lump sum and would rather invest on a monthly base.

There are two ways of going about it; you can use Postal RDs or go for Bank RDs. Banks generally offer RDs for a minimum tenure of 6 months to a maximum of 10 years. Also, the interest received on Recurring Deposits is indeed taxable.

• National Savings Certificate (NSC)

Another best short term investment option is to invest in 5 years Postal NSC. Those who are certain that no emergencies may line up in the next few years can opt for this plan. Though your interest will be taxable, you can claim tax deduction under Section 80C of the Income Tax Act.

Arbitrage Funds

This fund is also known as equity mutual funds. Arbitrage funds are generally extra tax efficient if held for over a year. Eight percent of interest can be obtained post tax.

Fixed Maturity Plans (FMPs)

The minimum lock-in period for such investments is 3 years and act precisely like your bank FDs. They are however more tax competent and you can gain improved returns than FDs.

This is the list of the best short term investment plans with high returns to opt for. You can choose a plan or various plans according to your goal and security. In case of doubts, do get in touch with a trusted advisor or your nearest bank advisor. 

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