Five investment options to make money in the short term

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Five investment options to make money in the short term
Photo by Mathieu Stern on Unsplash
  • Short term investment options can be those who have idle corpus and want to park their money in a safe investment option for some time.
  • Most of the short term investment options offer at least 5-6% returns.
  • For instance, if you’re saving money to buy a car or a luxury vacation, then short term investments are good for you.
If you have extra funds but cannot allocate it to long term investments, there is a better option to invest. You can put that money into short term plans rather than keeping your savings idle.

Short term investments can be anything between 3-5 years. For instance, if you’re saving money to buy a car or a luxury vacation, then short term investments are good for you. You just have to ensure the money can be converted into cash after a certain period of time that you decide.

Here are some 5 short term plans that can help appreciate your wealth in a short period of time:

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Short term debt mutual funds

Debt mutual funds are among ideal investment options for the short term as they are not risky products and offer steady returns. Debt mutual funds consist of liquid funds, low duration funds, ultra short duration funds, money market funds and so on.

Debt funds invest in fixed-interest generating securities such as corporate bonds, government securities, treasury bills, commercial paper, and other money market instruments. The returns in such funds are usually not affected by fluctuations in the market, hence they are considered to be low-risk investment options.

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All these debt funds can be used to park funds for the short-term as the maximum maturity of the underlying securities in them is not more than 12 months. Currently, debt fund returns give at maximum 5-6% returns.

Recurring deposits

Unlike fixed deposits wherein a lump sum investment is required at once, recurring deposit (RD) allows you to make monthly deposits. This gives you flexibility to invest money on a monthly basis.

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You can open a recurring deposit at your nearest bank, post office or even online. RDs start with a tenure of six months to 10 years. Usually, RDs offer the same returns as fixed deposits which is around 5-6%. The interest earned on the invested amount is taxed as per your income tax slab.

National savings certificate (NSC)

NSC is more of a tax-saving short term investment plan that you can open with any post office branch. The scheme is an initiative of the government of India and hence is relatively safer. These certificates earn an annual fixed interest of around 6.8% per annum (revised every quarter by the government), thus guaranteeing a regular income for the investor. The scheme has two types of certificates -- 5 year and 10 year. You can also avail tax benefits under Section 80C of the Income Tax (IT) Act. However, the interest income will be taxable.

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Post office time deposits

Another short term plan is for post office time deposits, which have tenures of 1 year, 2 year, 3 year and 5 year. The interest rates in this scheme range from 5.50-6.70%. The scheme is also available for young people above the age of 10 years. Here, you will be able to avail the tax benefits under Section 80C of the IT Act, 1961.

Fixed deposits

Fixed deposits (FD) are another option for a short period of investment wherein you can put a lump sum amount in the bank for a fixed period of time. It is most suited for investors with idle corpus who want to invest in one of the safest options that provides guaranteed returns. Besides, it offers higher returns than your bank savings account. The tenure of investment can be 7 days, 14 days, 30 days, 45 days and up to 10 years. One can earn 5-5.5% returns from FDs. Again, the interest earned is taxed according to the income slab.
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