Most of the times when it comes to financial planning or investments, people tend to focus on savings or long-term investment plans. Such a trend is prevalent in India because Indians have a habit of saving before spending. While savings and long-term investments are undoubtedly important, they tend to lock finances, or do not provide timely returns.
Also, it is perceived that long-term investments provide higher returns, which is true but not all the time. The exception to this is short-term investments, which provide relatively high returns in a short period of time, and can be beneficial to meet our immediate financial needs. Let’s look at some of these short-term investment options available in India:
Fixed Deposits provided by banks and Non-Banking Finance Companies (NBFCs) stands among the safest investment options out there. You can invest in an FD by opening an FD account and set the tenure of the FD, and you can avail the benefit of interest after the pre-defined period is complete. The upside of investing in FDs is that you can avail an interest rate in the range of 6-8.75%, they are safe for investments, there is flexibility in the amount of money invested, and you can pull out the funds for any emergency financial needs, and a short lock-in period. While you also have the option of investing for 1 year, you can ladder your invested money for multiple terms and receive higher returns. You can also use an FD calculator to obtain the amount of returns that you will receive at the end of the tenure, and FD interest rate that is applicable for the amount. Bajaj Finance is one of the dominant financial provider offering highest Fixed Deposit interest rates ranging from 8.75% to 9.10%. Senior citizen applicants can avail a 0.35% increased interest rates and existing customers can also enjoy higher interests as compared to new customers.
For people who do not want to invest a large amount of money, recurring deposits provide a flexible alternative that provides returns under a short amount of time. In recurring deposits, a specified amount of sum gets dedicated from your account during regular intervals. You can customize the tenure of the RD in the range of 6 months to 10 years, which allows you to plan your investments easily.
Liquid Mutual Funds
Debt mutual funds or liquid mutual funds allow you to invest surplus funds in debt securities for a short to medium term. Compared to equity mutual funds, they carry a lower amount of risk and also offer the benefit of easily withdrawing the amount if required for emergency expenses. While the returns are not fixed and depend on market condition, you can still expect an average rate of returns in the range of 6.5-7% in a single year. Beside from that, another downside of liquid mutual funds is that the returns obtained from this investment are taxable.
Equity Linked Saving Scheme (ELSS)
Equity Linked Saving Scheme is actually an equity-based mutual fund scheme that allows investment with a minimum lock-in period of 3 years. With a minimum amount as low as INR 500, you can invest in an ELSS scheme and avail returns in the range of 12-16%. Some of the key benefits of investing in ELSS are the option to choose between dividend and growth option, tax benefits under section 80C, and that no taxes are levied on the income earned through ELSS. The downside of investing in ELSS is that you cannot withdraw the money before 3 years, and you bear a slightly higher risk as investments are made in the equity market.
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