Everyone wants their hard-earned money to multiply. Salaried persons or the self-employed – all look forward to a better future and in the process they seek the best returns on their investments. However, with the Indian economy not exactly portraying a very bright future, people also look for the safe investment modes.
One of the best processes for money to grow is through short-term investments. But then what are short-term investments? They are designed in such a manner that they will give the best possible returns in a fairly short span of time. There are plenty of investors who look for quick results and are not ready to wait for years for their money to multiply. Instead they look for quick gains.
An investment is called short term when it provides two basic requirements. First it provides liquidity whenever there is a crisis. Secondly the timeframe of the investment can be as low as 12 months. Yes, there are many other investment options which are less than 12 months. But then they do not yield good results always.
The salient features of short-term investments are quite a few. First the turnaround time is short, the investment amount can be as small as even Rs 500 and the risk factor is minimal. Also short-term investments provide optimum returns.
There are many ways to invest money for a short period of time. Orissa POST takes a look at some of the best short-term investment plans.
Recurring deposits: This is probably the most popular one among short-term investment plans. One can choose between Postal or Bank recurring deposit schemes. The minimum timeframe required is six months, but one can have a recurring deposit account for 10 years also. The safest bet however, is one year. Also an individual has the right to withdraw the amount before the maturity date just by paying a small fine. Hence if you seek quick gains, this is one method you can opt for.
Money Market Account: This form of investment offers returns between four and seven per cent. However, the most important thing to know is that this option is risk free. Popularly known as liquid funds, money market accounts are designed to give you the security of your capital and also provide worthy returns. With a maturity period limit of 91 days, money market accounts do not possess any lock-in period and offer high liquidity.
Debt Instrument: Debt instrument is another form of brilliant short-term investment plan for individuals averse to taking risks. Securing capital and providing good results without no fear of market volatility, debt funds are a good place to invest in. At times, these investments offer returns as high as 10.5 per cent. There are three separate investment plans in this category.
Liquid fund: In this fund option, the investment is made into money market and debt securities. The duration of investment is for 91 days.
Ultra-short duration fund: In this the money is invested for a period of three to six months. The minimum investment required however, is Rs 10,000.
Low-duration fund: Under this option, the fund is invested in the money market for a period six to 12 months. At times in the segment, the returns can be more than 10 per cent.
Bank fixed deposits: Here the returns may be low and vary from seven to eight per cent and at times in case of senior citizens it may be nine per cent. However, the most important thing to note is that your hard-earned money is safe and the interest rates don’t change even if there is a slump in the markets. The tenure of fixed deposits usually varies between seven days to 10 years, but to maximise gains one should have a fixed deposit account for at least two years.
Post Office Time Deposits: This is a very popular investment mode and is well-liked in rural India. In this scheme, one can invest money for tenures of one, two, three and five years. Returns are seven per cent if you have a deposit for three years, it goes up to 7.8% if the scheme is for five years. However, premature withdrawal is not allowed till the completion of six months. But again, the money is safe from market volatility.
Public Provident Fund (PPF): This is one product a lot of people put money in. However, this one is of a long timeframe – 15 years. However, the impact of compounding of tax-free interest is huge, especially in the later years. Further, since the interest earned and the principal invested is backed by sovereign guarantee, PPF is a safe mode of investment.