A short-term investment option is a kind of temporary investment or marketable security devised to provide a safe spot for disposable cash while it awaits future deployment into higher-returning opportunities. As the name suggests, a Short-term investment option is held for a year or less.
Short-term investment options are a type of high-quality, high-liquidity instrument used by individuals or professional investors to temporarily store cash. As compared to conventional modes of investments, Short-term investment options have shorter lock-in periods, hence often preferred by seasoned investors. The profits on these sorts of ventures are typically tangible but directed at different end goals.
Short-term investment options are ideal for individuals looking to grow their money in a short time. However, with the multitude of choices available in the market, deciding on one can be an overwhelming task. Additionally, finding the right ones and effectively allocating your funds will help you in the long term.
Here are the best Short-term investment options you can use:
5 Short-Term Investment Options in India
1. Liquid Funds
Liquid funds are considered low-risk investments that always maintain their Net Asset Value (NAV), making them a safer option in an inexorably volatile investment space. This is because liquid funds deal in short-term securities that are offered by the Government. This, in turn, increases the stability factor in these types of investment schemes. However, as opposed to its name, liquid funds aren’t as liquid as traditional bank deposits. The returns are moderate, but its unique selling point is that these funds are tax-effective.
2. Savings Account
The very reason for having a savings account is to have access to disposable cash at all times. These days, banks offer different interest rates for the invested amount from 4-7%. Many banks also provide free accidental coverage to their new customers as a perk of opening a savings account. Having a savings account is one of the safest ways to invest funds as it carries a zero-risk percentage. Although the returns are not that attractive in a savings account, you will have access to cash as and when needed.
3. Short Term Funds
Short-term investment options funds are a type of investment fund that focuses on investment protection with a flexible tenure rate. They are generally utilized by investors to store funds and provide considerable rates of interest temporarily. Short-term funds are often used by individuals looking for a short-term holding to get liquidity, before investing the amount into some other investment vehicle that will reap higher returns. Short-term investment options funds keep up with inflation and earn higher returns as compared to a standard personal savings account.
4. Treasury Bills
Also known as T-bills, treasury bills possess a maximum maturity of 364 days. In India, the Reserve Bank of India (RBI) holds monthly auctions to sell off treasury bills to the general public. Since the Government provides the bills, treasury bills are considered a safe mode to invest. As the bills are given at a discount on the actual value, the actual value of the treasury bill is released in favor of the investor. However, the interest rate on these bills may vary as per market forces.
5. Invoice Discounting
Invoice discounting has transformed the way MSEs function by solving one of the key challenges – access to working capital. Through invoice discounting services, small enterprises can meet their financial requirements without the use of collateral. In invoice discounting, a company can use its unpaid invoices as collateral for a loan. However, what many forget is that invoice discounting makes for an excellent investment opportunity that provides tangible returns for a prospective investor. This is because the invoices that are raised against prominent blue-chip companies offer a very safe avenue for capital accumulation with minimal risks.
Who Should Invest in Short-Term Investment Options?
1. Flexible Timeline
Short-term investment options bode well when you aren’t looking to grow your funds under a stringent time frame. For instance, you want to build your fund within a one- or two-year time frame but later you decide to extend it further. In such cases, the funds can be invested for a longer tenure than initially decided. The most reasonable investors park their assets in Short-term investment options vehicles for short-term goals like education or vacation.
2. Enough Savings
It is crucial to have enough savings aside from a contingency fund. Choose Short term investment options on Financegab only after you have enough savings, to ensure a reasonable financial cushion in case things go south.
Benefits of Short-Term Investment Options
1. Flexibility
Flexibility is one of the critical benefits of Short-term investment options. As compared to traditional investment vehicles, Short-term investment options funds don’t lock up your invested amount for a long period. This means investors can use Short-term investment options to gain quick returns and utilize the returned amount to some other funds. It also allows investors to change the invested sum at certain small periods.
2. Diversification
In Short-term investment options, the invested sum is quite less as compared to long-term investment. This not only allows the investor to use the leftover amount in some other investment option but also helps in fortifying a diversified portfolio, all the while reducing portfolio volatility.
3. Low-Risk
Since in Short-term investment options, the amount is divided among various asset classes, the risks associated with the investment relatively go down. Low returns from one investment will be sustained by a decent return from the other investment option.
4. High-Returns
If you think that it requires 10-30 years to get a substantial ROI on investment, then you couldn’t be more wrong. With the advent of new-age Short-term investment options platforms, individuals can invest a very small amount and earn lucrative returns in a short period.
Characteristics of Short-Term Investment Options
- As a rule of thumb, anything from a couple of months to three years is considered as a Short term investment options
- Short-term investment options are an excellent way to make a profit from your cash savings or liquid assets.
- As compared to long-term investment, Short-term investment options come with the added advantage of high liquidity.
Also Read: 3 Best Long-Term Investment Options in India
Conclusion
To sum up, Short-term investment options are considered to provide high returns as compared to long-term investments and are a suitable option for individuals looking to gain quick returns in a short period. Analysts suggest that investors are opting Short term investment options due to their fundamental benefit, i.e. flexibility. One can take out the return generated in a short period and use it for further investment or any other purpose. Companies like KredX, Money Control, Fintrakk, and Lend Box provide investors with an excellent option to gain remunerative returns in a short time through the power of invoice discounting.
