Short Term Investments Vs Long Term investments–Objective is to get best return on investments

Short Term Investments Vs Long Term investments – Objective is to get best return on investments

Many people often get confused about short term investments and long term investments. In case they do not differentiate them, it is difficult to achieve the financial goals. While you choose a short term or long term, an investor would expect best return on investments.

Best Short term investments

The need for short term investments would be like housing loan down payment, children education, buying car etc. Short term investments are those which can be invested for a period of 1 year to 10 years. In case the investment option selected is not favorable the capital amount itself may get erodes.

Best short term investments

There are various good short term investment options available for an investor:

1. Bank fixed deposits: There are various banks which are offering good interest rates for 6 months to 10 years time period. The Indian banks are offering interest rate of 8.5% to 11% per annum.
2. Bank recurring deposits: In case an investor is looking for monthly recurring investments, he can invest in bank recurring deposits. These days, Indian banks are offering good interest rates of 7% to 9% p.a.
3. Investments in Corporate fixed deposits / NCD’s:  These are various companies which are offering corporate fixed deposits / NCD (Non convertible debentures) where you can invest for the period 1 to 5 years period. Recently, India Infoline Finance Ltd and Shriram Union City Finance Ltd NCD’s were issued in Sep-2012. The interest rates are ranging between 11% to 13% per annum.
4. Short term / Ultra short term mutual funds: There are ultra short term mutual funds which invest in fixed deposits, short term investment options. These are available for an investor to invest for a short term period of 6 months to 12 months.
5. Fixed maturity plans: These are the close ended mutual funds which, matures in the period of 2-5 years period. The dividend tax would be applicable here. The returns depend on the performance of the mutual funds.
6. Investments in gold: Though people have a perception that the investments in gold is only for long-term, we still believe that this option is good for period of 3 to 5 years.

Best Long term investment options

There are various best long term investment options available for an investor to invest for 10+ years of period:

1. Investments in Mutual funds: There are various types of mutual funds like equity diversified mutual funds, balanced mutual funds, sector based mutual funds, ETF's etc. where an investor can invest a fixed amount or through Systematic investment plan. The annualized returns vary based on the mutual funds performance. An investor can expect a return of 15% to 25% per annum if invested for a long term period of 10 years and above.
2. Investments in Stocks: One of the good investment options for long term is investing in stocks/shares. Stocks are the best bet for long term investments. However investments in stocks are risky and there are chances that a bad choice would ruin your capital. Choose good large cap stocks which can provide best return on investments.
3. Investments in gold: Investments in gold is ever green. This is a definite bet for long term investments. However investing in physical gold should be limited and explore the other options of investing in gold.
4. Investments in Real estate: Another top investment option is investing in real estate properties. For a longer period of 5 years to 10+year’s period, this is a best long term investment bet.

Conclusion: The short term investment or long term investment option would depend upon the expected pressing expenses in the near future and the period of investment. Based on this an investor can select appropriate best investment plans to get best return on investments.

Readers, do you invest in any of these best investment options which provide best return on investments? Please give your comments

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Suresh

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Suresh KP

Suresh KP is the Founder of Myinvestmentideas. He is NISM Certified - Investment Adviser and NISM Certified - Research Analyst. He has been analyzing financial markets in the last 20 years.He can be reached at suresh@myinvestmentideas.com

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