Best Short Term Investment Plans in India 2020
There are various investment options in India. Some of them are short term for 1 year and some of them are for medium term of 1 to 5 years and some of them are long term of over 5 years-10 years. If you are looking for some of the good Short Term Investment Options, this article is for you? Which are the Best Short Term Investment Plans in India that can provide higher returns?
What are Short Term Investment Plans?
Short term plans are those that can be invested for 1 week to 1 year time frame. However, all investment options are not suitable for every investor. There are high risk investment options, moderate risk investment plans and low risk options. One can choose based on the tenure and risk appetite suitable to them.
Features and Benefits of Short Term Investment Plans
Here are some of the features and benefits of Short Term Plans what we would be discussing in this article.
1) These Short Term Investment options can provide high returns.
2) These investment options can provide high liquidity. E.g. we would not discuss large cap mutual funds here, as these are for long term investors.
3) These contain high risk, moderate risk and low risk investment plans. One should choose based on the risk appetite suitable to them
10 Best Short Term Investment Plans in India 2020
Let us discuss some of the best short term plans in India. There is no specific order followed in below list of options.
#1 – Liquid Funds – Best for 1 week to 3 month period
Features: Liquid mutual funds are one of the best short term investment plans in India to invest your surplus money for 1 week to 3 month period. You can park surplus money in these funds. If you are accumulating some money for home loan down payment, you can park in liquid funds for the time being. These are for low risk investors.
Returns: Liquid mutual funds can provide 6% to 8% annualized returns though not guaranteed. If you are investing only for 3 month period, such funds can provide up to 2% returns. If you compare with bank FD, you can get only max of 1% returns for 3 month period. Hence liquid funds are best alternative to bank FDs.
Taxation: Since these are invested for short term up to 3 months and falls under debt mutual fund category, returns are taxed based on the STCG (1 month to 3 year period STCG would apply).
If you are looking for Short Term Investments Plans for 1 months or 3 months, liquid funds could be a good choice.
#2 – Invest in Ultra Short Term Debt Mutual Funds for 3 months to 6 month tenure
Features: Ultra Short Term Funds are debt funds that invests in securities that mature in 3 months to 6 month period. Hence, these are suitable for investors who want to invest up to 6 month tenure. These are for moderate to low risk investors.
Returns: Ultra Short Term Debt Funds can provide 6% to 8% annualized returns though not guaranteed. If you are investing for 6 month period, such funds can provide up to 4% returns. If you compare with bank FD, you can get only max of 2% returns for 6 month period (Savings bank account rate would apply if you invest for less than 1 year). Hence, even these funds are good alternative to bank FDs.
Taxation: Since these are invested for short term up to 6 months and falls under debt mutual fund category, returns are taxed based on the STCG (1 month to 3 year period STCG would apply).
If you are looking for Short Term Investment Plans for 6 months in India, investing in Ultra Short Term Debt Funds could be better.
#3 – Invest in Medium Duration Short Term Funds for 1 year period
Features: Medium duration mutual funds invests in securities that gets matured within 1 year time frame. Hence, these are good for investors who want to lock-in their investments for 1 year period. However, debt funds are coming risky these days as they invest in commercial papers of corporates that are delaying the repayment. Hence, these are for high risk investors only.
Returns: These mutual funds can provide 6% to 9% annualized returns though not guaranteed. When Bank FD’s are providing lower rates, these funds can provide high returns compared to them.
Taxation: Since these are invested for short term up to 1 months and falls under debt mutual fund category, returns are taxed based on the STCG (1 month to 3 year period STCG would apply).
If you are looking for Short Term Investment Plans for 1 year, investing in Low Duration Debt Funds could be better.
Also Read: Best SIP Plans for short term of 1 year
#4 – Invest in Secured NCDs that has a high credit rating
Features: There are several companies that are coming up for Non Convertible Debentures (NCDs) these days. You can pick-up some of the best high rated NCDs that are secured in nature. Such secured NCDs can provide some security to your capital. These are for moderate risk to high risk investors.
Returns: Several companies are coming up with secured NCDs with yield up to 11%. One need to choose high rated company NCDs that may offer 8% to 9.5% yield to invest for short term.
Taxation: The returns from such Secured NCDs need to be added to individual income and pay income tax based on their income tax slab.
Secured NCDs are one of the Good Short Term Investments Plans in India for those who want to take risks and expect higher returns.
#5 – Invest in Company FDs that has a high Credit Rating
Features: There are several companies that are offering fixed deposit schemes. They are offering these FDs for 1 month to 5 year period. These are not secured, hence these are relatively high risk compared to secured NCDs. If you are a high risk investor and looking for high returns, you can invest in good credit rating company FD schemes. We reviewed Mahindra FD scheme and Bajaj Finance FD Scheme earlier. You can review and consider them for investment.
Returns: Companies are offering FD Schemes with interest rates ranging between 8% to 10%. However, high credit rating company FD schemes come with little lesser interest up to 9% and yield up to 10.5%.
Taxation: The interest received from such company FD schemes need to be added to individual income and pay income tax based on their income tax slab.
#6 – Invest in Bank FD Schemes that are offering highest interest
Features: If you are thinking that banks are reducing FD interest rates month and month and want to avoid them, you may rethink your decision. There are several banks which are still offering higher interest rates. You can invest for 6 months to 1 year period to get some meaningful returns. I would suggest you should avoid < 6 months bank FDs as you would get peanuts in these FDs. These are for low risk investors.
Returns: Banks are offering interest rates ranging 5% to 8% on their FD schemes. If you see, SBI provides worst FD rates. You can check latest bank FD rates that provide higher interest rates before you invest.
Taxation: The interest received from such bank FDs need to be added to individual income and pay income tax based on their income tax slab.
#7 – Invest in Bank Recurring Deposits if you want to save monthly
Features: There are several banks which are still offering higher interest rates on recurring Deposits. You can invest for 6 months to 1 year period to get good returns. I would suggest you should avoid < 6 months bank RDs. These are for low risk investors.
Returns: Banks are offering interest rates ranging 5% to 8% on their RD schemes. You can check latest bank RD rates before proceeding for investment.
Taxation: The interest received from such bank RDs need to be added to individual income and pay income tax based on their income tax slab.
#8 – Invest in Post Office Term Deposit
Features: There are few comments on our blog saying what happens if we invest in bank FD and bank windup. While you would get insurance on your deposit up to Rs 1 Lakh, if you have invested more than this, you need to loose your money. Here comes the Post Office Term Deposit which is a safe investment option.
Returns: Post office term deposit offers 6.9% returns for 1 year time frame.
Taxation: The interest received from such FD need to be added to individual income and pay income tax based on their income tax slab.
Post Office FD is one of the Top Short Term Investments Plans for those who want to invest in safe investment option.
#9 – Invest in Direct Equity / IPO
Features: One of the best high return investment plan is, investing in direct equity or IPO. These are for high risk investors. Many believe that the long term game plan would not work in equity and should go for short-term only. Picking up right stock for investment is the major challenge. Some say investing in blue chip stocks like DMart, Reliance Industries, HDFC Bank has always rewarded investors.
Returns: There are no specific returns that can be estimated about investing in stocks. Some get 20% returns, some people say 50% returns, but some claim 100% returns in a year. However, if you invest in a good stock, 15% to 20% returns in a year could be a reasonable expectation of returns from stocks while it could be always higher.
Taxation: Returns from stocks are taxed like equity mutual funds (< 1 year STCG and > 1 year is LTCG).
#10 – Futures – Only for Very High Risk investors
Features: Can you predict the stock price movement for 1 day to 1 week or 1 month, then you can explore stock futures. In Futures, one can buy/sell a futures lot of a particular stock and need to predict in which direction stock price is expected to go. If you won and stock hits that price, then you can buy/sell futures and make money. These are only for very high risk investors.
Returns: The profit or loss is expected to be anywhere between 20% to 100% that ranges from 1 day to 3 month period (depending on which month futures you are buying).
Taxation: Returns from futures are taxed like direct equity (< 1 year STCG and > 1 year is LTCG).
If you are thinking of short term investment plans for high returns, investing in stock futures could be a a best bet.
Some FAQs about Short Term Investment Options
1) Are there any Good Short Term Investment Plans in SBI?
If you are thinking about any FD schemes in SBI, they are offering low interest rates, hence you should ignore such FDs. If you are thinking about any short term plans in SBI insurance, then you need not avoid them as most of the insurance plans being offered to investors are money back plans or endowment plans where one can get 5% to 6% annualized returns.
2) Which is the best short term investment plans in LIC?
I keep hearing this on FB groups and blog comments. There is nothing like short term investment plans in LIC. Many plans being offered as short term plans in reality, these are long term plans, but the premium payment term is short term for say 5 years. Just avoid such plans.
3) Which are the best short term investment plans for students?
Sometimes I hear that students are earning money either through part time jobs, like home tutor or working a few hours to earn money. If their motive is to pay back their educational fees they should look at safety first. Hence invest in liquid funds or bank FDs that offers the highest safety with moderate returns.
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10 Best Short Term Investment Plans in India 2020
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