Best Investment Options for 3 months to 1 Year

Best Investment Options for 3 months to 1 Year-minBest Investment Options for 3 months to 1 Year

While talking about investments, everybody concentrates on long-term investments. But, sometimes a short-term investment of say 3 months to 1 year becomes very handy when the funds are idly lying and waiting for the right time to be parked for the long term. There could be cases where you want to invest your emergency money. There could be funds lying in your bank account to meet any short term obligation like car loan down payment or home loan down payment, but not sure about a date by when you would go for that. Which are the best investment options for short term of 3 months to 1 year. Which are the investment Plans available for 3 months  to 1 year that can provide higher returns?

Also Read: Best Investment Plans to invest to get higher returns

What does Short Term Investment Plan refers to?

A short-term investment is an investment that will mature to cash within one year of time period and is kept as liquid asset. Short term investment means that it should be readily convertible to cash. It may be a temporary investment or marketable security in debt or equity that is expected to be converted into cash within 3 months to 1 year.

Best Investment Options for 3 months to 1 Year

The following are a few investment ideas that work well in short run. They park your additional funds, ensure income while maintaining liquidity.

1) Liquid Mutual Funds that can give 5% to 8% p.a. returns

Liquid mutual fund invests in short term debt instruments that can be liquidated with in no time. Hence, they offer less returns as compared to other mutual funds. One can get returns from 5% to 8% per annum through liquid mutual funds. In fact, these funds are great options if someone wants to park their funds for 1 month to 6 months. Some of the best liquid Mutual funds are:

i) ICICI Pru Liquid Fund – This is a low risk mutual fund and its main objective is to enable the efficient use of idle cash while maintaining liquidity.     

ii) India Bulls Liquid Fund – This is suitable for investors who have moderately low aptitude for risk and want to seek liquidity with commensurate returns over a short term.       

iii) JM High Liquidity Fund – This is a highly liquid investment with maturity of upto 91 days only. It is suitable for investors who seek for regular income over short term.

iv) L&T Liquid Fund – This fund aims at generating reasonable returns while maintaining safety and liquidity of funds. Investments are made in highly diversified and liquid portfolio of money market instruments, government securities and corporate debt.

2) Ultra Short Term Mutual Funds that can give 6% to 8% p.a. returns

Ultra short-term mutual funds invest in short-term government securities, corporate securities, and money market instruments. They can roughly provide returns from 6% to 8% per annum. These funds are good for those investors who have a moderate aptitude for risk as these funds invest in bonds that can witness low-side. Some of the good funds are HDFC Midterm Opportunities, Birla SL Short Term Fund, Birla SL Treasury Optimizer Fund.

3) Investment in Small Finance Banks / Payments Banks

Generally, people park their funds in the saving bank accounts that yield interest ranging from 4% to 7.5%. However, payments bank on other hand are offering highest returns for short term money between 3 months to 12 months. The highest among these are interest offered by Airtel which is as high as 7.25% per annum. You can explore some of the Best Small Finance Bank / Payments Bank FD Scheme that are offering highest interest rates.

4) Bank FDs offers up to 7.5% interest per annum

These days, banks are lowering interest rates on the FDs. One needs to search for good FD interest rates to park his funds in short run. Bandhan bank and Repco Bank is offering  an interest rate of 8% per annum on a one year FD scheme. RBL bank is offering 7.6 to 7.7% interest for 1-2 year FD.

This option is good for those investors who have a very low appetite for risk and want to park their funds just for 3 months to 1 year for some safe returns.

5) Bank SB Account offering upto 6% returns per annum

Banks like Yes Bank, Kotak Mahindra Bank provide an interest rate of 6% per annum on their Savings Bank Account. One can explore options like this.

6) Post Office Term Deposit

If you are a very safe investor and don’t want to invest in mutual funds or stock market-related instruments, you can invest in Post Office Term deposit in which returns are around 7% to 7.5% per annum. Post office FD schemes are safe as these are guaranteed by Govt of India.

7) Investment in fixed maturity plans (FMPs)

Some mutual funds come with fixed maturity time period of around 1 year to 3 years. They are issued by mutual fund companies at regular intervals. Investors of low-risk aptitude with an expected return of 7% to 9% can invest in these funds. These mutual funds are not redeemable before the maturity period unless they are tradeable on stock exchanges. 

Some Frequently Asked Questions on Best Investment Options for 3 months to 1 Year

1) I want to invest for 1 month, which is the best plan?

The investment tenureis just 1 month, hence liquidity is main criteria. Banks offer low interest rates for just 1 month, hence best way is to invest in liquid funds.

2) I want to invest for 3 to 6 months time frame where I need to pay off for down payment for Car/Home?

Since your objective is that may not need funds for atleast 3 or 6 months, best way is to invest in ultra short term mutual funds.

3) I want to invest my emergency money, where should I invest?

Generally we keep emergency money for any unforeseen critical situations. In such case we may need money within 24 hours. You can invest in liquid funds (where you can redeem within 24 hours) or in Bank FD scheme where you can instantly break the FD and funds can move to SB account to pay off your emergency need.

4) Where can I park my money which I want to invest in equity funds during market crash?

One cannot anticipate stock market crash. However if you are still willing to park money expecting a market crash and want to invest in equity funds during that time, best way, is to invest in liquid funds or ultra short term mutual funds.  

5) I am low risk taker and want to park my money for 6 months to 1 year period, which is the best plan?

Mutual Funds indicated above carry some element of risk as they invest some portion in corporate securities. You can invest in short term debt funds. However, if you still want to eliminate such risk, best way is to invest in bank FD or payment bank FD schemes.

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Best Investment Options for 3 months to 1 Year

Suresh KP


  1. I am NRI. Given some money to wife based in India. She invested in FD. Receiving interest but not more than 1 lakh.
    Is that interest amount is taxable or will it clubbed with my income.

  2. The tax is effective from apr'18 only, but hdfc has already started deducting CG tax? I have written to their customer service, who will keep on repeating cut paste answers with extra dose of respect and tire you down.

    1. Krish, First of all no one is supposed to deduct LTCG tax. It is the individual who need to pay income tax and file ITR. If someone is already deducting by mistake, you can file complaint against them. Is it HDFC Life or HDFC Mutual Fund? You can complain to IRDA / SEBI based on who is deducting them

    1. Hi Aparna, Specific mutual fund taxation rules would apply. Since these would fall under non equity mutual funds category, if you sell them before 3 years time frame, short term capital gain tax would apply and after 3 years, long term capital gains tax need to be payable.

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