5 Effective Options for a Quick and Profitable Short-Term Investment Plan
Putting all your hard-earned money into long-term investments can be
quite a nightmare, especially when you foresee a huge expense in the near
future. Let’s say, your child is likely to start college within a couple of
years. You really need to place your money in a trustworthy yet short-term
investment plan that will help you with quick gains and an equally quick access
to the money you need it the most.
What you hence need, as critical part of your financial planning, is a
healthy mix of long- and short-term investments. This winning combination helps
you gain from the advantages of a lower risk profile that long-term investments
offer and that of high liquidity offered by a short-term investment. While you
have clear options for long-term investments, the innumerable options and high
risk associated with short-term investments can be quite a nerve-wracking
experience.
So, what are the choices you have for investing for a shorter duration,
preferably for one year? Let’s head forward to finding out some interesting options.
Option 1: Invest in short-term debt
mutual funds
Debt mutual funds are the least risky options in mutual fund. These
funds are managed by experts and give you the flexibility to invest and redeem
anywhere from anytime. You can also benefit from the extensive options
available, from the amount you can invest right up to the ultra-short-term
debt-funds. As they have a maturity period of six months to one year and they
invest in fixed income financial instruments, these funds have higher returns
than the open-ended money market mutual funds.
Option 2: Depositing in bank FDs
Opting bank fixed deposits are a safe bet considering the volatility of
other short-term financial instruments. Bank FDs come with a fixed interest rate
and tenure for deposits. FDs can be selected ranging from 3 months to one year,
depending on your requirement. Though interest rates for FDs in India are
decreasing, better rewarding FDs can be chosen. You can get up to 7% interest
rates in some of the banks. If you want a less risky investment with nominal
returns then FDs are the best-suited option for you.
Option 3: Risk-free savings account
Returns from a bank savings account may be low, but it is simple and
easy way to safeguard your money. You may get an interest rate of 4-6%,
depending on the type of bank you select for SB account. Convenient means like
ATM cards and net banking can be used to using the cash in your SB account.
High liquidity makes it very convenient. However, there is not much benefit if
you are not going to be needing the money immediately and the easy access to
money also increases the tendency to overspend.
Option 4: Recurring deposits
Recurring deposits are indeed popular among Indians because, with this
option, you will not lose your principal amount at any cost. With recurring deposits,
you will have to invest a pre-set amount every month for which a fixed rate of
interest will be added. At the end of the tenure of your investment, you will
receive the set amount invested every month along with the added bank interest
amount. If you are salaried, then this might be the best
solution for a one-year investment plan. A penalty will be imposed for any pre-mature
withdrawal from RD accounts, so there is no risk of the tendency to withdraw
the amount unnecessarily.
Option 5: Post office account
The post office account is managed by the Government of India, and it is
considered one of the least risky investment options. An interest rate of
7%-7.5% can be earned by depositing in post office accounts. FDs in the post
office require fewer procedures to open and have simple rules to be followed.
Unlike bank FDs post office FDs do not calculate monthly interest. But they
calculate quarterly interest and pay you as a total of per annum. Withdrawal of
amount before maturity is allowed, but you are then eligible to a lesser rate
of interest.
Many more short-term investment
options at your service
With many more such short-term investments available to you, such as liquid
funds, ELSS, fixed maturity plans, and many other such options, what you need
is the support of a registered investment advisor. Such an expert can study
your immediate and long-term life goals and financial journey to recommend the
best portfolio of investment plans that will suit your requirement.
Although long-term investment yields higher returns, your personal
constraints and financial needs for the immediate future might force you to
think about short-term investments. In such cases leverage the expertise of
experienced financial advisory services to choose the right type of investment
that fits your specific need.
PrognoAdvisor is your trusted online financial planning service from
India, with extensive expertise in understanding your specific financial and
life goals and guiding you achieve these goals with confidence. Connect with
our financial advisors at Prognoadvisor.com to understand how you can simplify the entire process of personal
financial planning in terms of both long- and short-term investments that help
you achieve smart wealth creation and management, delivering, of course, some
smart tax savings.
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