5 Best Short Term Investment Plans for 1 year

April 29, 2021

1. Debt Funds:

   Debt funds are low risk, less unstable and are open-ended. These funds invest in securities that mature anywhere between 6 months and a year. The returns are neither constant nor confident but you can expect 7% per annum. Also, under debt funds, you can consider investing in money market instruments that mature within a year. The profits earned are taxable. 

2. Fixed Maturity Plans:

   Fixed maturity plans (FMP) are close-ended mutual funds whose objective is to earn a steady return over a period. These funds invest in instruments with a fixed income that matures at almost the same time and the maturity period can vary anywhere between one month to 5 years. It is a safe investment since it does not get affected by market fluctuations however the liquidity is low and only if you can lock-in your investment for a period you should consider FMP. The gains are taxable.

3. Arbitrage Mutual Funds:

   Arbitrage mutual funds are funds where you invest in derivative segments and cash with arbitrage opportunities in the derivatives segment and equity market. These funds are open-ended, low risk and need you to be maintained for at least 365 days to take advantage of the tax gains. Your returns are dependent on arbitrage opportunities hence they are neither constant nor confident.

4. Fixed Deposit:

   A fixed deposit is one of the most secure and traditional investments for a tenure of 6, 9 or 12 months. If you have a disposable lumpsum amount then you should consider investing in FD's. They also offer attractive interest rates compared to regular savings accounts in banks, however, the interest earned is taxable.

5. Recurring Deposits:

   Recurring deposits (RDs) are investments where you invest a small fixed sum regularly for a set period with a bank to receive a lump sum amount along with the interest at the end of tenure. They offer higher returns than a regular saving account in banks. RDs help instil financial discipline by setting aside a sum regularly. The interest earned on a recurring deposit is taxable.

Conclusion:

Before choosing any investment plans, consider safe and credible options of investment given the short investment horizon.