Best Short Term Investment Options in 2020

Short Term Investment Plans draw a lot of investors, due to their convenience and ease. If you’re wondering where to invest money for a short period and get maximum returns, this blog is for you.

While it is ideal to consult a Cube Wealth Advisor before taking any investment decisions, in this piece we’ll take a closer look at the best short term investment option for 2020!

What Are Short Term Investment Plans?

Any investment option that is for a short duration can be classified as a short-term investment option. The lock-in period for these can be anywhere between 7 days to 12 months.

These short term plans come with the lure of higher returns and shorter lock-in periods. That means, unlike long term investments that require more patience and discipline – short term investment options are easier to commit to.

These offer faster liquidity and are mostly lump sum investments. The risk level on short term plans and funds should be carefully assessed as high-returns often come with higher-risk or lock-in periods. However, most short-term investment plans offer healthy returns and lower risks since the maturity period is shorter.

Examples of Short Term Investment Options

Debt Funds

A Debt fund is a mutual fund that invests only in fixed income securities like bonds and treasury bills. Such funds are considered safer than equity funds and can be invested in for the short term. There are liquid funds and other short term funds that fall under this category. Your returns will be anywhere between 8% to 12% depending on how the fund performs. You can read more about the best debt funds in India here.

Fixed Deposits

Classic Bank Fixed Deposits are safe for short term investment seekers. These can range anywhere between 7 days to 5 years depending on how you define short-term but the ideal duration is at least 3 years. You invest a fixed lump sum and then choose to renew the fixed deposit at maturity or withdraw the funds. 

However, you should know that many banks do not let you withdraw fixed deposits prematurely.

Therefore you must be careful while investing if liquidity is a key driver for you.

Interest payouts for an FD can be monthly, quarterly, half-yearly, yearly or cumulative. You can earn around 6.5 percent per annum for an FD of 12 months or more. Though some banks may offer up to 7.60% to senior citizens. Interest earned is taxable and TDS is cut for interests of over Rs.10,000.

Fixed Maturity Plans

Fixed Maturity Plans are also essentially debt funds but are close-ended. That means an investment here can only be made when a new fund offer is out. These plans invest your money in highly rated securities, corporate bonds, and other debt instruments. Returns are usually higher than a savings account or a Bank Fixed Deposit. Taxation remains similar to debt funds. Read more about debt funds here.

Recurring Deposits

A recurring deposit is almost like a systematic investment plan for a fixed deposit. It offers investors the option to deposit a fixed amount each month and earn a fixed interest on it.

However, compared to an FD it will earn slightly less as you are not doing a lump sum investment. Interest rates are similar to fixed deposits and range from 5% to 7% depending on the bank.

Why Invest in Short Term Mutual Investments?

The key benefits of short-term investment plans are four-fold: they offer healthy returns compared to your savings bank account, they offer easy liquidity, they can aid tax-saving and they have short maturity periods.

What Tax Will I Have to Pay on Short Term Mutual Fund Investments?

The tax implications for a growth mutual fund is no different from a bank fixed deposit. However, if you invest in a dividend based mutual fund then you do have the option of tax exemption.

Best Short Term Investment Options

We’ve picked the best short term investment options for you on the basis of multiple factors listed below:

  1. Qualitative Parameters:

    • AMC comfort Pedigree, Credibility, Compliance, Process and Ability to Retain Top Management & Talent

    • Fund Manager comfort Experience, Reputation, Performance and Continuity Record (We have had 170+ investment and marketing team interactions in the last 1 year)

  • Quantitative Parameters:

    • Scheme Aesthetics – Fund Size & Recent AUM Growth, Concentration Analysis, Clarity of positioning

    • Performance – Historical performances (SIP, Last 20-Quarters, 3-Year, and 5-Year Numbers), Risk-adjusted returns, Sharpe, Beta, and Other Statistical Ratios

    • Negative Criteria – Cash Calls, Outlier Performances, Recent Management Changes, etc.

Given below is a list of some of the best short term investment mutual funds that we recommend. Please contact a Cube Wealth Advisor for a free consultation call.

Best Short Term Mutual Funds

Top 6 Short Term Mutual Funds
Reliance Liquid
HDFC Liquid
SBI Liquid
Axis Strategic Bond
ICICI Pru All Seasons Bond
IDFC Bank & PSU Debt

How to Evaluate Best Short Term Investment Plans?

When investing for the short term you need to have the following things in your mind:

  1. What is my financial goal?

  2. What is my risk appetite?

  3. What is my ideal time period?

  4. What tax implications does an investment have?

  5. Is this the right fund to invest in?

  6. What sum of money will I accumulate?

  7. Are short term investment plans right for me?

We at Cube Wealth know that it can be difficult to get these answers in your own. Which is why recommend you consult one of our wealth coaches for free advice.

How to Invest in Short Term Investment Options?

The best way to invest in a short term investment fund is through an app like Cube Wealth. Here are the steps you need to follow:

  1. Download the Cube Wealth App

  2. Select risk level as low or medium 

  3. Select the time frame as short

  4. Enter the amount you want to invest

  5. Browse recommended funds

  6. Tap Invest

For further assistance with documentation or if you have any questions, please EMAIL A CUBE WEALTH ADVISOR.

Want to start investing?

We know it’s a big decision to start investing, to change advisors or to try new investment options. That’s why we give you the option of a free personal phone consultation.

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