FIVE SHORT-TERM INVESTMENT OPTIONS THAT CAN DELIVER HIGHER RETURNS THAN FIXED DEPOSIT

Financial planning often creates a notion among people that you need to end up with a lot of money when all is said and done. While, that may be true, it brings along a notion that if you want to win big, you have to invest big as well. However, it depends on the investment options you have available with you. A long term is best suited for someone that can diligently invest for year to create a bigger payoff at the end of their career. On the other hand, short term investments are simply done to use whatever money you have and make the most out of it.

Short-term investments are made by people who do not want to dedicate their money to an investment for too long. While short or long term usually depends on the investor’s willingness and ability to stick with an investment, short term investments can be as short as 7 days or 3 years.

Usually when you have a good amount of money, the first thought you have is of putting it into an FD or other option that have a longer term and earning the interest off it. However, that means that your money is locked in for a longer time and you have no option of leaving if you find a better opportunity. However, do you know any other short-term options you can invest in? If not, here are some of them.

Arbitrage funds

Arbitrage funds are a type of mutual funds that not a lot of people know about. It tries to put you in a an advantageous position by capitalizing on the difference between the actual price and the derivative of a stock. It buys a particular stock and sell it at a future price of the stock. This way, it may also account for inflation. The fund has a lower investment risk and falls under the category of equity-based mutual funds.

Fixed maturity plans

Fixed maturity plans are debt-based mutual funds that look to invest your money into corporate bonds, government securities, and other money market instruments. The tenure for these plans ranges from 30 days to 395 days. Moreover, you can invest in fixed maturity plans for earning dividends or to simply let your funds grow. In the case you go for the dividend plan, you will receive your earnings once Dividend Distribution Tax (DDT) has been deducted. On the other hand, capital gains tax applies to the progress of your investment in the growth option of the fixed maturity plan.

Treasury bills

You can invest in the treasury bills that are issued by the central government. They have a maturity period of a year. However, there are options to invest for a maturity periods of 91 days and 18 days as well. They are usually offered at a lesser price than the actual currency bill. However, when you choose to redeem the bills, you are offered their actual value. This discount that you initially receive at the time of investing later converts into your profit.

Short-term debt funds

With a maturity period of 1 to 3 years, short term debt funds are a low-risk investment option. However, these funds can be redeemed before their maturity period is over. Moreover, they do not have any penalty or additional fees that you may have to pay for redeeming your plan early. Moreover, these plans have the chance of giving you much more returns than fixed deposits. If you really want a short-term investment option, you could also look into ultra short-term debt funds. These funds are almost similar to their larger counterpart. However, their maturity period can be somewhere between 3 months and 6 months.

Liquid funds

Liquid funds are type of mutual funds that invest your money in monetary market instruments like commercial papers, T-bills, etc. Liquid funds usually have a maturity period of 3 to 6 months. With a low risk profile, it can give you much better return than a fixed deposit.

Before you decide to invest in any of the above-mentioned investment options, ensure that your financial objectives and risk profile are in line with your investments. Happy investing!