When everyone is working for money it is now indispensable for you to make your money work for you. Saving money is always good but what if you are able to increase that money too. Any kind of medium that earns you returns on your money is an investment. Even your bank savings account that earns you interests is an investment. Many of you have been saving for your retirement, child’s education and marriage. These are some of the major long term goals in an individual’s life. Along with these you do have some short term life goals like buying a car in 2 years, planning an international trip after 4 years and like that. For such goals in life you need a good amount of money in a short amount of time and short term investment solutions are the way forward to it. Any investment which has a time period of 1 to 5 years is defined as short term investment.
SHORT TERM INVESTMENT OPTIONS
Short term fixed deposits: It is the guaranteed risk free investment option. Fixed deposits can be opened for as low as 7 days to as long as 10 years. You can go for a fixed deposit for 3-4 years or so depending on your money requirement. Interest is paid 3 months after the commencement of the deposit. Interest is compounded quarterly. Rate of interest depends upon the amount and tenure of the deposit made and currently the interest rate varies from 7.75% to 8.75%. The interest earned on fixed deposits is taxed as per one’s income tax slab on maturity.
Gold investment: Other than the love for this precious metal, it is one of the best investment options available. It is sure to give huge returns as the price of gold is increasing every day and sheen of this metal is never going to fade away. Another benefit of investing in gold is that trends in the financial market do not affect the value of the metal. You can invest in gold by buying jewelry, investing gold bars and coins, Gold ETFs, Gold funds, Gold mutual funds and gold stocks etc.
Five year National Savings Certificates: This scheme is specially designed for Government employees, Businessmen and other salaried classes who qualify for Income Tax assessment. There is no maximum limit for investment and no tax deduction at source. The maturity period is for 5 years. These certificates come in denominations ranging from ₹ 100 to ₹ 10,000. Certificates can be kept as collateral security to get loan from banks. Rate of interest is of 8.10% currently. Deposits qualify for tax rebate and also the interest accruing annually but deemed to be reinvested under Section 80C of IT Act. Investments up to ₹ 1 lac are exempted from income tax.
Liquid Funds: Liquid funds are a type of mutual funds that invest in securities with a residual maturity of a period up to 91 days. Assets invested are not tied up for a long time as liquid funds do not have a lock-in period which means you can opt in and out of this whenever you like. A liquid fund can make use of opportunities in the fixed income market to make additional returns. It is a low risk and low return investment funds but better than your savings account. You can expect around 4% to 7% post tax return. It is suggested to select a fund, which is high in credit quality and low in interest rate sensitivity.
Short term Debt funds: These are for a maturity period of 3 years. There is no tax deduction at source. Keep in mind that interest rates and debt fund’s net asset values (NAV) move in opposite directions. Though they look promising, but they are high risk investment option. For securing capital and providing good results with no fear of market volatility, debt funds are good place to invest. Giving returns up to 10.5%, this is a good choice for short tenure savings. There are different types of short term funds like risk free short term funds which invest in government securities, cash and money market. Then there are corporate bond funds which are mutual funds that invest major component of their portfolio in corporate bonds, they are high risk funds but also provide high returns.
Treasury bills (T-Bills): They offer low risk short-term investment opportunities, generally up to one year. At present, the Government of India issues three types of treasury bills through auctions, namely, 91-day, 182-day and 364-day.Treasury Bills are issued only by the Central Government in India and the State governments cannot issue any treasury bills. Interest on the treasury bills is determined by market forces. Treasury bills are available for a minimum amount of ₹ 25,000 and in multiples of ₹ 25,000. T-bills auctions are held on the Negotiated Dealing System (NDS) and the members electronically submit their bids on the system.
Other short term investments include Recurring deposits, Fixed Maturity Plans, Certificate of Deposits, Short term mutual funds etc.