These short-term investment strategies are a game-changer
What's the story
In the fast-paced world of today, Indian investors prefer short-term investments as a way to grow their savings without the constraints of long-term commitments. These strategies offer the advantage of quick returns, making them ideal for those with immediate financial goals or who want to maintain liquidity. This article delves into the world of short-term investment options in India, providing you with the knowledge you need to navigate it effectively.
Liquid funds
Liquid funds: A safe bet
Liquid funds are debt mutual funds that invest in short-term instruments such as Treasury bills, with a maturity of up to 91 days. They provide high liquidity and carry lower risk. You can withdraw money within 24 hours on business days. Perfect for parking surplus cash, they offer returns ranging from 3% to 7%, which is higher than what you would get from a regular savings account.
Savings accounts
High-interest savings accounts: Earn more on deposits
Many banks in India provide high-interest savings accounts that deliver superior returns compared to conventional ones. Interest rates vary from four percent to seven percent, depending on the bank and the balance you maintain. Perfect for individuals looking to maximize returns on idle cash without taking on high risks, these accounts offer flexibility and easy access to your funds. There is no lock-in period.
Arbitrage funds
Arbitrage Funds: Low-risk profits from market inefficiencies
Arbitrage funds take advantage of price differences of the same security in different markets. They buy low in one market and sell high in another, making profits from these discrepancies. These funds are low-risk as they invest in equities but hedge positions to protect against market volatility. With returns of six percent to eight percent, they are attractive to investors looking for steady returns with low risk.
FMPS
Fixed Maturity Plans: Predictable returns with fixed tenure
Fixed Maturity Plans (FMPs) are closed-ended debt funds with a predetermined tenure ranging from one month to five years. They invest in bonds and government securities, providing steady returns and acting as a safe haven during market volatility. However, their fixed tenure implies limited liquidity, making them ideal for investors with a clear financial objective within a specific timeframe.