Best Short Term Investment Options available now
Every individual would have pressing need of money in short term. There are several other reasons why you may not be able to invest money for long term. If you are one among the investor who is looking for best short term investment options, this article is for you. There are various short term investment options available now which can provide your good returns. I have identified 10 short term investment options which can be invested from 3 months to 3 years period to get high returns.
10 Best Short Term Investments Options available now
1) Debt mutual funds: Debt mutual funds invest majority of the portion in fixed income debt securities. Debt mutual funds are best suitable for those who want to take less risk and get higher returns compared to bank fixed deposits. Invest in debt mutual for a period of 1 to 3 years to get good returns. The returns in the last 3 years are 8% to 10% per annum. This is one of the best short term investment options to get high returns post tax. Some of the good debt mutual funds for short term are indicated here.
Also read: Best Long Term investments for 2013
2) Liquid Mutual fund: These mutual funds would invest in liquid investment options. As the name indicates such investments would have high liquidity. These are best suitable for investors who want high liquidity and want to park money for very short term.
3) Savings Bank account: Gone are the days where you need to park your short term money in bank FD. You can still keep your money in savings bank account and earn interest rates up to 7% per annum. Yes Bank offers 7% returns per annum for savings bank account above Rs 1 Lakh and 6% below Rs 1 lakh investments.
4) Bank fixed deposits: There are several small banks which are offering high interest rates for short term to medium term up to 10% per annum. If you are looking to invest in such small banks, try to invest up to Rs 1 lakh so that your money would be safe. Below are the top banks which are offering high interest rates up to 3 years period.
5) Ultra short term mutual funds: These mutual funds schemes invests majority of the investments in corporate fixed income securities and short term investments. Investor can invest in such ultra short term mutual funds for the period of 1 to 3 years period. The returns in the last 3 years are 8% to 9% per annum. These are one of the good short term investment options. Some of the best short term mutual funds are indicated below.
6) Fixed Maturity Plans (FMP): FMP mutual funds are close ended mutual funds which generally matures in 1 to 3 years period. FMP’s would provide indicative returns. The returns could vary and generally are in the range of 8% to 10% per annum. FMP’s are issued through NFO (New fund offer) almost every month. FMP Mutual funds are tax efficient comparing to bank FD's.
7) Corporate Deposits and NCD: Corporate deposits and Non convertible debentures offer high interest rates comparing to bank FD’s. Though there are several corporate FD’s, choosing highly rated corporate deposit would be a safe investment option. Some of the highly rated company FD's are indicated below
8) Gilt mutual funds (Short term): Gilt short term mutual funds invest in government securities for short term. These provide more or less safe returns of 8% to 12% per annum. Some of the best Gilt mutual funds are indicated below.
9) Post office term deposit: If you do not want to invest in stock market or stock market related instruments like mutual funds and are a low risk investor, you can invest in post office term deposits. The returns are between 8% to 8.5% per annum. This is one of the best short term investment options for those who do not want to take any risk.
Also read: How mutual fund returns are taxed?
10) Pre-launch properties: Thought I have not personally experimented this, but I could able to see several examples through my friends and colleagues. Whenever there is a pre-launch offer for residential property, my friend used to book a flat and within 1 to 2 years, he used to sell them at a premium of 20% to 30%. I felt this is a good strategy if one is looking for short term investment. Yes, I agree there is a risk that the real estate prices can fall. But this can be reviewed and considered by investors as one of the short term investment options.
Conclusion: All these 10 short term investments may not be suitable for everyone. They would depend upon the risk appetite and period of investment. Invest wisely and earn high returns on your short term investments.
Readers, what is your opinion about these best short term investment options? Do you think there are any other investment options which are good for short term?
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Suresh
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Hi suresh,
How much emergency fund should per should keep. I am 30 years old having 2 year child. I can invest 10k per month for next 2-4 years. Need your sggestion on below things:
1. I am planning to take Term isurance. As you suggests HDFC or ICIC.Will this private companies are trutable?
2. Do I need to take separate term insurance for wife. I had taken 1.5 lac Jeevan anad for her and 5 lac for me.
3. Please suggest me which health insurance should I take for family.
4. please provide me some details to make god and strong portfolio for child educatiom, retirement planning and emegency funds.
Rajesh 1) Please refer this to understand emergency money requirement
2) Claim settlement ratio is high for these two private companies after LIC, hence we can trust. I have taken LIC as well as ICICI so that I am not just depending on one of them
3) Consider taking individual term insurance for you and your spouse 4) Start investing in mutual funds. Since you have children, invest 50% in safe investment options and balance mutual funds. Balance 50% look for large cap and diverisifed mutual funds.
Hi Suresh,
I want to invest around 50K per annum for 3 to 5+ years of tenure.Can you please tell me the best way for investing money.Is HDFC progrowth plus kind of schemes/Fixed deposit tax saving schemes will do the need.Compared to both above which would yeild the high returns.I would like to declare the same in 80c annually.
Also finally is there any other scheme that will serve the purpose.Please advice me on this .
Regards,
Manjunath.
Hi Manjunath, For 3 to 5 years there are several options like Secured NCD’s which are coming every month. You can refer our analysis before investing. Other options are investing in balanced mutual funds like ICICI Balanced fund or TATA Balanced fund. Investing in Bank RD can also be done. However if you want to invest for tax saving purpose invest in tax saving ELSS mutual funds. Check this article. https://myinvestmentideas.com/2013/11/top-5-tax-saving-mutual-funds-elss-in-india-to-invest-for-2014/
Hi Suresh,
Query abt REC bonds. Suppose I've bought REC bonds for 50000 for 15 years and after 3 years, I need money and so decide to sell it at the exchange – how is the calculation done? Apart from the 50000 that the bond is worth, will I get any trading value? And how abt the interest for 3 years? Will I get that also?
Hi Karthik 1) The maturity of these bonds would be 10, 15 or 20 years. Since you want to buy 15 years, the maturity amount of Rs 50,000 would be paid to you after 15 years completion. Interest is paid annually 2) If you decide to sell after 3 years, you can do that on stock exchanges. These would be traded like any other stock. The valuation would depend on market fluctuations. e.g. if the Rs 1,000 bond date is 1-Oct-13 which contains 9% interest ( as an example). When you want to sell on 31-Mar-14 i.e. after 6 months, your bond value of Rs 1,000 is not just Rs 1,000, it already earned interest of 6 months i.e. 9% of Rs 1,000 for 6 months = Rs 270. Means your bond value should have been Rs 1,270. However in reality it may trade like say Rs 1,200 or Rs 1,300 depending on demand. If interest rates are reducing, then these bonds would trade at higher value. If interest rates are increasing, then less buyers for bonds and the value may be less. 3) Your interest is paid annually. if your bond are allotted on 1-Oct-13, you would get interest on 30-Sep every till the maturity or till the time you hold these bonds.
Very lucid explanation. Thanks a ton!
Hi Suresh,
It's me again. I might've asked you this already, just confirming – planning to invest some money for my mother. Can I do it in my father's name (he is a senior citizen). He doesn't have any other source of income. So should he give Form 15H for the deposit?
Also, while filing taxes, how do I show the interest earned under my mother's name if it was earned by the deposit in my father's name?
Kaushik, You can invest in your father name and submit form 15H. Yes it may fall under “clubbing provisions” and returns on your father investments can be clubbed under your monther income (if any) and you can compute taxable income and pay necessary tax (if any) when your mother files income tax returns. Generally IT dept raise objections when an individual want to avoid tax by depositing FD in their spouse name. Hence IT dept says clubbing provisions apply. But let me know whether mother has any other taxable income ? If so the total amount is crossing Rs 2L ?
Hi Suresh,
Yes, my mother is still working, so she pays IT annually. So just to confirm – my father can submit 15H while opening his account, and when the interest is paid, I need to club it along with my mother's other taxable income right?
That’s correct Kaushik.
Hi Suresh, An informative post, indeed!
I want to invest a large portion of my savings in safe/ less risky instruments for 1-2 years. Intent is to plan for my retirement in next 2 years. Fixed Term Deposits (allocation – 25%), Debt FMPs (allocation – 50%), International (allocation – 12.5%) and Diversified equity (allocation – 12.5%) funds were high on my list (products yet to be decided). However, after new RBI chief taking over and spelling some of his focus areas, I'm not sure about following and would appreciate your advice. Any other advice to optimise the yield is most welcome.
1. Are FD rates going to come down in near term? If yes, I'll go ahead and lock my money for longer period i.e. 2 years else shall renew on quarterly/ half-yearly basis.
2. Is it wise to allocate 50% of total fund in Debt FMPs of at this juncture? If yes, what should be the time horizon, maximum being 2 years?
Rishi, Bank FD, currently the rates are high, hence you should lock it for 3 to 5 years. You can always break in between if required with small penalty or zero penalty. Regd FMP’s, you should allocate only small portion of 10% to 20% and not 50%. You can invest in debt funds if you feel you want to take low risk.
Thanks for your suggestion, Suresh. Appreciate your help to me and the community at large!
I was wondering if I should go for a cumulative interest option for FDs (with 3-5 years locking) or divert monthly earnings to a SIP product. Which one, in your experience, gives higher returns in long term?
Rishi, Your option-2 would be good. If you can get monthly or quarterly interest, you can invest thru SIP in equity funds.
Got it Suresh. Thanks once again!
Dear Suresh
I am a Salaried person employed with IT Company (37 yrs old). As a part of Saving my 3-4 Months Salary as a Security , Planning to park around 3 Lakh . Let me know which would be the best Option Liquid Funds/ FD's. Feel that investing in FD will not fetch me the maximised return as interest on FD would attract Tax. Not sure if by investing in Liquid Funds (say more than Year) can i maximise the returns and there would be no tax or less tax compared to FD returns. Thanks in advace for your help.
Jagan
Jagan, Liquid funds are used mostly for partking short term period. You can do that. You can also look for ultra short term mutual funds for 3 months to 1 year period. Yes FD’s would attract tax, but even such liquid or short term funds attract tax, but it would be minimal