Best Short Term Investment Options for Your Money
Investment priorities may differ from a person to the other depending upon their needs, age, risk factors, etc. Thus, a single investment plan might not be applicable for all. While most of the people have a clear idea about the long-term investments, they do not have a proper understanding of other available investment options – sort term investment.
An investment done for less than a year is generally known as short term investment. The profit of investing in a short-term investment option is that, you would be able to have an easy access to your money in critical situations. So, depending upon the various financial objectives, here is a guide for you to pick an investment option.
Liquid Funds:
Investors can consider liquid funds to store their money for a small period of time. The maturity period of this investment may last from 4-91 days. This is one of the most secured options for the investors. This fund does not have any exit issues so, you can easily enter and exit from the scheme at any point of time. Compared to the other available options of short term investments, liquid funds are quite safe as it can offer you a better return.
Fixed Maturity Plans:
When it comes to pick a short-term investment option, you can also opt for fixed maturity plans to meet all your short-term goals. In reality, these plans are quite similar to your bank FDs, but one can expect better returns here. Generally, these are the debt funds that invest in debt securities like- government bonds, treasury bills, etc. Getting a decent return at the time of maturity is confirmed as a very low amount of risk is associated with this plan. One of the most striking features of these funds are that, they are completely out of interest rate risk.
Money Market Funds:
This is a short term investment, where the amount of risk is very low. You can also think about using this fund as a short-term investment for dividends from your stocks. These types of funds are well known for having a high liquidity of providing the investors with a fixed current income. In order to avoid the interest rate fluctuation, the average maturity period of this fund is less than 90 days. Opt for choosing government ‘T’ bills or the certificates of deposit, which has been issued by commercial banks.
Arbitrage Funds:
Although not many people are aware of this option, it is indeed a good alternative for the conservative investors. Generally these funds are also considered as equity mutual funds. These types of funds have the capability of providing you with at-least 8% post tax return. There is a need for the investors to build a better understanding about the difference in pure arbitrage and arbitrage plus funds. While the former one is completely hedged, the latter one can carry a higher amount of risk with it.
Certificate of Deposits (CD’s):
Different banks are here to offer a variety of terms regarding to their deposit accounts. The length of these deposits may range from 3 months to 5 years. Choose a certain length of CD Depending upon your need. The positive side of picking this deposit is that, you would be provided with a guarantee of getting back your principal investment along with a fixed rate of interest. So, developing a crystal clear idea about how much money you are going to get at the time of maturity is not at all hard. This is indeed a low risk investment, but here you are not allowed to indulge in premature withdrawal. When it comes to wealth protection, a certificate of deposit should be the one of your choice.
Savings Bank Account:
This is one of the easiest and simplest way of keeping your money. One of the biggest advantage of putting your money in savings bank account is that, this is a highly liquid investment. The chances of losing your money in this investment is almost zero. At the time of your need, withdrawing from this account is quite an easy task. Moreover, the availability of such facilities like net banking, ATM cards you can have an easy access to your money.
Ultra Short Term Funds:
These types of funds are well known for investing in short-term debt securities, which will mature within 90 days to 1.5 years. Ultra short term funds are best for you as it has the capacity of providing good protection against interest rate risk. These funds can charge you with an exit load in the range of 0.1-1%, if funds are redeemed before a specified time period.
If, you are thinking about stocking your cash in some short term investment fund then try to think about all the available options. The investors should also be careful about picking a short term investment fund regarding the risk factors associated with it.
Tina Roth is a freelance writer and personal finance blogger who writes about frugal living, entrepreneurship, and innovative ideas on her blog ProFinanceBlog.Com. Find him on Twitter @ProFinanceBlog.
