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Looking For Short-Term Investment? Check Out These Investment Options
Short-term investments are intended to provide significant profits in a relatively short period of time, such as a year or even a few months. These plans are primarily focused on meeting predicted costs in the near future. They are highly liquid assets meant to provide a secure and temporary storage facility for surplus cash. High-yield savings accounts and Liquid Mutual Funds, which are high-quality products with extremely liquid assets, are two popular short-term investments. Let's look at some of the best short-term investment opportunities for 2022.
Recurring Deposits (RD)
Customers may invest an amount of their choice each month and save money with ease because of RD's flexibility. Most banks, Post Offices, and NBFCs in India offer recurring deposit accounts with terms ranging from six months to ten years. For ordinary residents, the interest rate typically varies from 3.50 percent to 5.50 percent each year. On all deposit tenures, senior persons receive extra interest in the range of 0.50 percent to 0.80 percent. The interest rate, once set, does not fluctuate over the term, and at the end of the period, the individual will get a lump sum payment that includes both the regular investments and the interest gained.
Fixed Deposit (FD)
A deposit option is given by banks or non-banking financial businesses to deposit money and receive a set rate of interest is known as a fixed deposit. Along with the interest rate, the time of a fixed deposit booking is critical in determining how much money may be accumulated after the term. An FD account's maturity period might range from seven days to ten years. Interest rates range from 4% to 6% for 90-day deposits and 5% to 7% for deposits up to 180 days. FD interest rates differ from one bank to the next, and they will fluctuate and could be altered. Please be aware that many banks do not provide elderly people with higher rates on short-term deposits of less than 1 year.
Liquid Mutual Fund
Liquid funds are debt funds that make short-term mortgages to companies for up to 91 days. Due to their exceptionally short loan tenure, these funds are the safest of all the mutual fund categories. Investors who might ordinarily consider a savings account or a fixed deposit should consider liquid funds. Liquid funds are debt funds that exclusively invest in assets having residual maturity of less than 91 days. The average portfolio maturity of funds in this category now ranges from three to 52 days. Liquid funds allow you to earn better returns than a conventional savings account or short-term fixed deposit while minimizing risk and maintaining liquidity.
Arbitrage Mutual Fund
Arbitrage funds is another mutual fund that focus on equity share mispricing in the spot and futures markets. It generally takes use of price differences between current and future securities to maximise profits. The fund management purchases shares in the cash market and simultaneously sells them in the futures or derivatives markets. The difference between the cost price and the selling price is the return you get. To produce profits, these funds take advantage of stock market arbitrage possibilities. They are classified as equity funds since they invest largely in equities. Returns are comparable to those of Debt Mutual Funds.
Bottom Line
Your liquidity needs, the quantity to be parked, the possibility for returns, taxes, and risk tolerance can all influence your choice to park extremely short-term money. If you are not finance savvy and come in a higher tax band, the best solution is to open a savings account with a bank that pays a higher rate of interest. You will not be disappointed with the returns if you invest in arbitrage funds or liquid funds if you are more financially educated. Mutual funds investments are subject to market risk. The initial deposit may be a little stressful owing to KYC requirements, but future transactions may be completed quickly and easily through the internet. Redeeming requests can also be made over the internet.
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