Short-term investment options are popular among investors who are not very comfortable with taking a lot of risk with their money. Keep reading to know what they are.
An investor is always on the lookout for viable investment instruments. Short-term investment options are popular among investors who are not very comfortable with taking a lot of risk with their money.
Why are short-term investment options popular?
Short-term investment options are popular for two primary reasons:
- Safety of capital
- Assured returns on invested capital
What is the investment tenure for short-term investments?
The investment tenure for short-term investments is generally less than 12 months.
What are your options?
Let us give you three options if you are looking to invest for a short period.
Short-term Fixed Deposits
You can open a Fixed Deposit for a minimum tenure of 7 days. Fixed Deposits are a very secure investment instrument for investors looking for the safety of their capital. Remember, the interest on a Fixed Deposit is added to your income and taxed as per your tax slab.
Additional Reading: Everything You Need To Know About Fixed Deposits
Liquid Funds are a type of Mutual Fund that invests largely in money market instruments such as Bonds and Treasury Bills. With Liquid Funds, you can choose to remain invested for as little as a day to 90 days or more.
Liquid Fund investments are considered to be a very safe option with regard to the safety of capital. This is because Liquid Funds do not see a decrease in net asset value very often.
Investment options under Liquid Funds
You can choose to get dividends on your investment or opt for the growth option for investments in Liquid Funds. Dividends are taxed at more than 28% (this is paid by the fund house) and capital gains are added to the investor’s income and taxed as per their tax slab.
If you fall under a higher Income Tax bracket, it would be a good idea to opt for the growth option.
Additional Reading: Liquid funds – quick money when needed!
Short-term Mutual Funds
If you are willing to remain invested for at least a few months, short-term Mutual Funds are a good investment option for you to consider.
People invest in short-term debt funds with the aim of safeguarding capital. Short-term debt funds give investors moderate returns on their investments.
Additional Reading: Why Debt Mutual Funds Are Better Than Fixed Deposits
Now that you have an overview of the popular short-term investment options, invest wisely.
If you’re thinking about investing in Fixed Deposits or Mutual Funds, we can help.