by Sanjeev Kumar Gopalakrishnan, Investing
02 Sep , 2018

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.

 


 About The Author

Sanjeev Kumar G, an IBS Chennai Alumni, is a Certified Financial Planner (CFP) from India, since 2005. He has 22 years of experience and is an expert in various personal finance areas like portfolio construction, investment research, life insurance and financial planning.

 

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