For the pressing expenses that are expected in near future, short term investments are the best option. This also works as an alternative for the traditional savings account as the savings account give lesser rate of interest than other short term investment options. It can also be chosen as the supplement for the retirement income.
Short Term Investment Options
Savings account – Investing in savings account is the safest option as it is less risky and has high liquidity too. The minimum amount required for this investment differs from one bank to another.
Money Market Accounts - These are also known as liquid funds. It is a form of short term investment that prioritizes on protecting the capital amount along with increasing the returns. Common examples of money market instruments are Certificate of deposit and Commercial paper.
Gold investments - Investing in gold is also a smart option as the price of the gold increases day by day and sheen over the yellow metal never fades.
Debt Instruments –Investing in debt instruments provides good returns and are secured in terms of returns. These are good for the risk-averse investors and the options available in this avenue are plenty beginning with Debt Mutual Funds.
Fixed Maturity Plans – They are close ended funds and the advantage of this fund is, only dividend distribution tax is applicable on it.
Fixed Deposits (short term) - This investment option has different tenures and is offered by both public sector and private sector banks. It is unbeatable in terms of liquidity and security.
Equities/ Commodities / Derivatives - Stock market investment has a high risk rate. For those risk hungry investors this is a good option. Commodities and derivatives are gaining popularity in India and offer good investment avenue.
Short-term floating rate funds – Like FD, these funds do not have fixed interest rates. They keep changing as there are fluctuations in benchmark index rate, which explains that the rate of returns increases or decreases depending upon the benchmark index rates.
Certificate of Deposits (CoDs) - These offer higher returns but only after the duration of the CoDs maturity period comes to an end. It is a safer option for investment.
Treasury Securities – This has high liquidity and offers decent returns as a short term investment option.
Key Points to Remember:
As an investor you should go ahead with investing in short term investments only if you are comfortable with the risks involved in it.
Before you take a decision on these investments, have clarity regarding the terms and conditions of the instrument.
Diversifying your portfolio helps in offsetting the inherent risk of any single option.
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