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 Coach before taking any investment decisions in this piece we’ll take a closer look at the best short term investment option for 2023!
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 times 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
1. Liquid Funds
Liquid funds fall under the debt funds category. A liquid fund is considered to be an ideal short term investment because its portfolio matures in 60 to 91 days. Moreover, returns generated by liquid funds are relatively consistent.
Cube gives you access to the Cube ATM feature that lets you withdraw money instantly from Nippon India Liquid Fund investments to your bank account.
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.
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.
3. Fixed Deposits
Classic Bank Fixed Deposits are safe for short term investment seekers. There's 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 funds if. 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 around 6.5 per cent 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 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.
5. 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 lesser 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.
6. P2P Lending
P2P lending on Cube Wealth lets you become a lender with two RBI Certified P2P NBFCs, Faircent and LiquiLoans. The lock-in period ranges from 3 months to 12 months and the returns vary from 8.15% to 12%.
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 have short maturity periods.
Best Short-Term Investment Options
If you're seeking healthy returns over a short term horizon then Mutual Funds are the way to go. We've picked the best short term investment options for you on the basis of multiple factors listed below:
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)
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
What Tax Will I Have To Pay On Short Term Mutual Fund Investments?
The tax implications for a growth mutual fund is is no different than a bank fixed deposit. However, if you invest in a dividend based mutual fund then you do have the option of tax exemption. You can consult a Cube Wealth coach or download the Cube Wealth app.
How to Evaluate Best Short-Term Investment Plans?
When investing for the short term you need to have the following things in your mind:
Ans. There are multiple investment options wherein you can invest for 6 months, including, debt funds, recurring deposits, fixed deposits, post office time deposits etc.
Q. Is short term investment a current asset?
Ans. Yes, short term investment can be a current asset, much like cash, accounts receivable, stock inventory, etc. These are all assets that can be held for a short period.
Q. Where should I invest my short-term money in India?
Ans. As detailed in the post above, you can look at multiple investment options for short-term money in India. The top short term options currently are liquid funds, debt funds, fixed deposits, fixed maturity plans, and recurring deposits. Start Investing Now In Liquid & Debt Funds
Q. What are examples of short-term investments?
Ans. Short term investments are any investment option that is for a short duration. The lock-in period for these can be anywhere between 7 days to 12 months. Some examples of these are classic bank fixed deposits, liquid funds, short term plans, fixed maturity plans, etc.
To sum it up, short-term investments hold a pivotal position in a diversified financial portfolio. They provide liquidity, safeguard capital, and present the opportunity for swift gains, rendering them a valuable resource for attaining precise financial objectives. Nevertheless, it's important to acknowledge that short-term investments usually yield lower returns compared to long-term investments, primarily due to their reduced risk exposure.
In addition to understanding what investments can be good for the short term, you can also work on building some positive investing habits. This video by Team Cube can help you with this.
These are Cube Wealth’s top picks for the best short term investment options in 2022. We update our lists regularly but recommend you connect with one of our experts through the Cube Wealth App before making any investment decisions.
Cube Wealth Investment Quotes
The intelligent investor is a realist who sells to optimists and buys from pessimists. - Benjamin Graham
Note: Always invest after analyzing your financial goals, investment horizon, and risk appetite.
Rishabh P Nair is the Head Of Brand Content at Cube Wealth, the Financial Freedom App with a smart Perfect Portfolio Planner. Rishabh has been weaving stories for over 10 years and prides himself on building brands with a strong identity.
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