Most people know that if you want to build financial stability in the long term, it is advisable to put your money into investment plans. However, many tend to not consider the same for their short-term goals.
Know that whether you want to build a corpus in the long term or the short term, you can opt for investment plans to help your money grow faster and better. Let’s understand what short-term investments are, and the various avenues you can choose.
What are short-term investments?
You may have some short-term goals to fulfil in the next few months, or ideally, in the next one to five years. You will need to start becoming financially ready to achieve these goals when the time comes. You will need to start putting your money into the right investment options for your money to grow at a pace you like.
In the case of such goals, it would not be appropriate for you to put your money into investment tools that offer long-term results. They may not help you reach your goals. Instead, you should opt for short-term investment plans.
Short-term investments are options that tend to be relatively more liquid and help you create a corpus within one to five years. The results achieved with short-term investment options may not be comparable to long-term investment plans, but they will help you get the results you seek.
Some of the common characteristics of short-term investment plans include:
- Returns within one to five years
- Relatively low risk
- No maturity period
Short-term investment plans can be used to fulfil near-future goals as well as create emergency funds. It will help you stay prepared to face any unforeseen circumstances in the future, without feeling the need to borrow a loan. You can use an investment calculator to help you shortlist and choose from the various available options.
Short-term investment products
You can choose the right short-term investment plan for you based on your goals, requirements, and risk appetite. Here are some of the popular short-term investment plans to consider.
- Fixed Deposits
Fixed-term deposit accounts are one of the most accessible short-term investment options one can opt for. All you will usually need is a savings account, or other such regular accounts, with a bank. You can then easily start a fixed deposit by filling up a form and submitting it to your branch.
These deposits can be started for a term of as low as 7 days. However, the returns earned are not as high as some of the other investment options but may be higher than what you may earn from savings accounts. While you may use an investment calculator to get return estimates, you can also check with the bank about the rate of interest offered on these accounts, as it may vary from one bank to another.
- National Savings Certificate (NSC)
Comparable to fixed deposits, the National Savings Certificate is also a low-risk, fixed-income scheme. It is offered to Indian citizens by India Post and can be purchased via a post office. The minimum investment required to start an NSC is Rs. 1000. The minimum tenure of this scheme is five years. After five years, you will get your initial investment alongside the interest earned over the duration.
As with the National Savings Certificate, Unit-linked Insurance Plans (or ULIPs) also usually come with a lock-in period of five years. It is not a low-risk product as your investments are market-linked, and thus, vulnerable to market fluctuations. While you may be able to choose low-risk funds, you will not be able to eliminate the risk.
Another aspect of ULIPs that may make them more appealing as an investment plan is that they offer a life cover as well. Thus, while you are creating a corpus for your near-future goals, you can also keep a financial safety net for your family.
- Recurring Deposits
While you will only need to make a single, lump sum deposit with fixed deposit accounts, such is not the case with recurring deposits. If you cannot afford to make a lump sum investment, you can opt for recurring deposits where you may be able to deposit an amount regularly.
Recurring deposits are also low-risk plans that can be created with your bank. This can also help you build a savings habit over time.
- Mutual Funds
Mutual funds are also relatively high-risk, but you can choose low-risk fund options. Depending on the duration you seek to create the investment for, you can either choose to invest in mutual funds directly or select a plan (such as SIPs). You can also opt for short-term mutual funds, which can be taken for a duration of 15 days to three months.
Short-term investment plans offer you higher returns. Hence, they are a better option than parking all your money into savings accounts, especially if you are working towards short-term goals, or want to build a corpus to meet any future emergencies.