Investments That Help You Fulfil Your Short Term Plans

A good financial mix of long term and short term investments must comprise your investment portfolio. But before you decide to invest your funds for a short term cause you must consider risk assessment.

There are many low risk short term investment options available in the market. Also any investments in the short term have a low return and profit in comparison to long term investment. So the key to earning a higher return in the short term is to invest a huge corpus simultaneously and see how money attracts money.

Fixed Deposit

FD is the safest and low-risk investment where you can park your money for a period of 1-5 years. This investment option gives you higher rate of interest hence higher returns than what you get when your money in lying in a savings account. And as per the recent trend, Fixed Deposit options offered by smaller banks are better as they offer higher interest rates.

Recurring Deposit

Also known as term deposits, it is similar to Fixed deposits but has a maturity period of 6 months to 10 years. You should opt for this option if your goal involves saving money in the short term say over a period of few months. The interest is compounded on a quarterly basis. However if you withdraw the amount from your RD before the due date, you will be subjected to a penalty. Additional benefit of RDs is that you can use this as collateral security when getting a loan.

Debt Fund

This option can be availed by those who want to invest for a super short term say 3-6 months or less than 3 months. If you intend to invest for such a short time period it is best to invest your money in liquid funds. No tax benefit can be availed on such investments however if the money is invested for more than 36 months, indexation benefit is there.

Company Deposits

A better option than bank FDs in case you require a higher rate of return is a company FD however there are a few things that you need to take care of eg: you mustn’t stick to one company and must invest in FDs of different companies as diversifying your investment reduces the risk.