Short Term Investment Plans

Table of Content

1. What is short term investment?

2. 15 Best Short Term Investment Options in India

3. Top Short Term Investment Plans with High Returns

4. How does a Short-Term Investment Plan Work?

5. Who Should Invest in Short-Term Investment Plans?

6. What are the features of short term investment plans?

7. What are the benefits of short term investment plans?

8. Highlights of the Best Short-Term Investment Plan

9. Related Terms to Short Term Investments Plan

10. How to Choose the Best Short-Term Investment Plan in India

11. Beyond Short-Term Investment: Complementing Your Portfolio with HDFC Life's Long-Term Solutions

12. Related Terms to Short-Term Investment Plans

13. What is the Tenure of Short Term Investment Plans?

14. How to Calculate Returns from Short Term Investments Plans?

15. Conclusion

16. Frequently asked questions (FAQs)

What is short term investment?

A short term investment is a financial strategy where you invest funds in different assets for a shorter period of time, typically ranging from a few days to upto 3 years. Unlike Long Term investment where the goal is wealth creation, short term investment prioritizes capital preservation and liquidity.

Key Characteristics of Short-Term Investments:

• Defined Horizon: Typically 7 days to 3 years.
• Capital Safety: Prioritizes preserving your initial investment.
• High Liquidity: Funds are easily accessible when needed.
• Modest Returns: Offers competitive yields compared to savings accounts, though generally lower than long-term, high-risk investments.
• Flexibility: Ideal for managing various short-term financial needs.

A short term investment plan is perfect when you want to access your funds quickly—ideal for emergency needs, school fees, travel plans, gadget upgrades, or even building a rainy-day fund. Short Term investments are also excellent for parking money temporarily while you decide on a proper long term investment strategy such as a life insurance plan that combines protection with savings, or a ULIP Plan for market-linked growth, while ensuring your idle funds earn modest returns in the meantime.

15 Best Short Term Investment Options in India

Below is a curated list of the best short term investment plans that can offer you the right mix of safety, liquidity and returns. 

Note: Rates are subject to market fluctuations and specific bank/fund policies. Senior citizens often receive higher FD/RD rates (typically 0.25% - 0.75% more).

Top Short Term Investment Plans with High Returns

 Let’s dive a little deeper into the most popular short term investment plans and understand them in detail.

Savings accounts

A savings account is the simplest and safest way to park your idle money while earning modest returns and one of the most effective money saving tip. Most banks offer interest rates between 2% to 7% per annum, with very high liquidity — your money is available anytime, instantly. It’s ideal for emergency funds, daily expenses, or short-term savings goals. 

However, returns are quite low and fully taxable, which means they won’t help much in beating inflation. Think of it as a parking lot for convenience, not wealth creation. If you’re just getting started or want quick access to funds, this is your go-to option — but not the best for growing your money.

• Best for: Emergency funds, daily expenses, maintaining liquidity for immediate needs.
• Pros: Very high liquidity, zero risk, easy accessibility.
• Cons: Low returns that often fail to beat inflation, interest is fully taxable.

Liquid Funds 

Looking to earn more than a savings account without taking big risks? Liquid funds are a smart step up. These are low-risk debt mutual funds that invest in short-term instruments like T-bills, commercial papers, and certificates of deposit, usually with maturities of up to 91 days.

They offer returns between 4% to 7% depending on the market, and are great for parking surplus money for a few days to a few months. While they're not for emergencies (withdrawals usually take 1 working day), they strike a solid balance between safety, liquidity, and returns.

• Current Returns: Many liquid funds have recently offered annualized returns in the range of 2% to 6%, depending on market conditions and the fund's portfolio.
• Liquidity: Generally high, with redemption requests often processed within one working day.
• Risk: Low, as they invest in high-quality, short-term instruments. However, NAVs can still fluctuate slightly.
• Taxation: Gains from liquid funds are taxed as short-term capital gains (STCG) at your applicable income tax slab rate, regardless of the holding period (for investments made on or after April 1, 2023)#. This is similar to FD taxation.
• Best for: Parking surplus cash for a few days to a few months, building an accessible contingency fund (second layer after immediate cash).
• Pros: Better returns than savings accounts, high liquidity, diversification benefits.
• Cons: Not risk-free (though very low risk), returns are market-linked (not guaranteed), gains are taxed at your slab rate.

Note: NAV (Net Asset Value) rarely dips since they invest in high-quality assets, but returns aren't guaranteed.

Fixed Deposits (FDs)

A time-tested and popular choice for conservative investors seeking guaranteed returns. You deposit a lump sum for a fixed tenure, ranging from 7 days to 10 years, at a pre-determined interest rate.

• Current Returns: Major banks and Small Finance Banks (SFBs) offer varied rates. As of July 2025, general FD rates for short tenures (e.g., 1-3 years) can range from 2.5% to 9%, with Small Finance Banks sometimes offering higher. Senior citizens typically receive an additional 0.25% to 0.75% interest.
• Liquidity: Moderate. While premature withdrawal is possible, it often incurs a penalty (e.g., 0.5% to 1% reduction in interest) or a lower interest rate for the period held.
• Risk: Very low, as returns are guaranteed by the bank.
• Taxation^#: Interest earned on FDs is fully taxable and added to your total income, taxed as per your applicable income tax slab.
• Best for: Assured returns, short-to-medium term goals where capital safety is paramount (e.g., saving for a down payment, school fees due in 1-2 years).
• Pros: Predictable and guaranteed returns, capital safety, flexible tenure options.
• Cons: Interest is fully taxable, premature withdrawal penalties, lower returns than market-linked options.=

Recurring deposits (RDs) 

It is a fixed-term investment where you deposit a set amount each month for a pre-chosen tenure, generally between 6 months and 10 years. Offered by banks and post offices, RDs endow a fixed interest rate (similar to FDs) and are compounded quarterly. 

• Current Returns: RD rates generally align with FD rates, typically ranging from 4.0% to 8.0% p.a. in banks and post offices.
• Liquidity: Low. While premature withdrawal is possible, it often involves penalties similar to FDs.
• Risk: Very low, offering predictable and safe returns.
• Taxation#: Interest earned is fully taxable as per your income tax slab.
• Best for: Cultivating a disciplined savings habit, achieving specific short-term goals that require regular contributions (e.g., accumulating funds for a new appliance, holiday planning).
• Pros: Encourages disciplined saving, fixed and predictable returns, capital safety.
• Cons: Low liquidity, interest is fully taxable, returns can be modest.

They are best if you are looking out for a specific goal—a gadget purchase, vacation or contingency fund. Returns are predictable as well as risk-free, but keep in mind: interest earned is added to your income and taxed according to your income tax slab. If stability and disciplined saving matter to you, RDs are a rock-solid beginning point.

Short-term debt funds

Short-term debt mutual funds basically invest in bonds as well as money market instruments with maturities ranging between 1 and 3 years. Such funds carry slightly more risk as compared to liquid funds (as mentioned above, it is a type of short-term debt fund with a lower holding period of up to 91 days), owing to their longer duration, but offer satisfactory return potential. 

Examples of short-term debt suitable for an investment horizon of 1 to 3 years are Money Market Funds and Short Duration Funds. They are suitable for investors planning to park money for a few months to up to 2-3 years, aiming for more than what savings accounts provide, without exposing themselves to high market volatility. Returns from such funds are moderate, surpassing 7% on an annual basis in favourable conditions.

Following the RBI's rate cut from 6% to 5.5%, top banks slashed their savings rates. In the meantime, 215+ debt mutual funds beat the 7% bank deposit rate. Considering the Indian mutual fund industry’s Asset Under Management (AUM) that stood at ₹74.79 lakh crore in June 2025, and short-duration debt funds delivering 7%+ annual returns, short term investment plans are gaining traction among return-conscious investors.

• Current Returns: These funds generally aim for returns slightly higher than liquid funds, often in the range of 4.0% to 7% p.a., depending on their portfolio and interest rate movements.
• Liquidity: Moderate. Redemption usually takes 2-3 working days.
• Risk: Low to Moderate. They carry some interest rate risk (value can drop if interest rates rise) and credit risk (risk of issuer default), though well-managed funds aim to minimize this.
• Taxation#: For investments made on or after April 1, 2023, gains are treated as STCG and taxed at your applicable income tax slab rate, regardless of the holding period. This means the indexation benefit for long-term debt funds is no longer available for new investments.
• Best for: Investors seeking slightly higher returns than FDs or liquid funds, willing to take a little more market-linked risk, with an investment horizon of a few months to 2-3 years.
• Pros: Diversification, professional management, potential for higher returns than FDs for similar tenures.
• Cons: Market-linked returns (not guaranteed), subject to interest rate fluctuations, gains are taxed at slab rates.

National Savings Certificate (NSC)

Are you looking for a safe and 5-year investment with tax benefits? The National Savings Certificate (NSC), offered by post offices, is a government-backed savings scheme with fixed annual interest (basically 7.7%) and compounded annually and paid at maturity. It is just right for conservative investors who aim to save without facing any market risk.

The 5-year lock-in funds cannot be withdrawn early, except in rare scenarios. A major bonus: investments of up to ₹1.5 lakh qualify for Section 80C# tax deductions, and the interest accrued is even eligible under 80C# if reinvested. However, interest is taxable in the year it accrues. If you want guaranteed returns for a medium-term financial goal, then NSC is worth considering.

Fixed maturity plans

Fixed Maturity Plans (FMPs) are closed-ended debt mutual funds that basically invest in fixed-income instruments—corporate bonds, CDs and government securities. You can invest just during the initial offer period, and your money remains locked till maturity—generally 3 years or more.

Note that, as they are treated as debt mutual funds, they are taxed as per your income tax slab rate if the investment is made on or after 1st April 2023. If the investment is before that date, a Long-Term Capital Gain (LTCG) tax is levied on the gains.

Post office time deposits

If you prefer guaranteed returns with minimal risk, Post Office Time Deposits (POTDs) are worth a look. Backed by the Indian Government and offered by India Post, these are fixed-term investments having tenures ranging between 1 and 5 years.

• Current Returns: Interest rates for POTDs currently range from 6.9% for 1-year tenure to 7.5% for 5-year tenure. Interest is paid annually.
• Liquidity: Low. Withdrawals are generally not permitted for the first 6 months. After that, premature closure incurs penalties (e.g., reduced interest).
• Risk: Very low, as they are backed by the Government of India.
• Taxation: Interest earned is fully taxable as per your income tax slab. The 5-year POTD qualifies for tax benefits under Section 80C^# of the Income Tax Act (up to ₹1.5 lakh).
• Best for: Conservative savers prioritizing ultimate safety, especially those with a 5-year horizon looking for Section 80C benefits.
• Pros: Highest safety, competitive fixed returns, Section 80C benefit for 5-year deposits.
• Cons: Lower liquidity, interest is fully taxable, no higher rates for senior citizens like bank FDs.

Investments in NCDs/Company Deposits

Company Fixed Deposits and Non-Convertible Debentures (NCDs) are fixed-income products that are issued by corporates, NBFCs or housing finance companies (HFCs). Company FDs are basically unsecured in nature, while NCDs might be either secured or unsecured and can be traded in the market. 

• Current Returns: Can offer higher interest rates than bank FDs, typically ranging from 5.5% to 6.7% p.a., depending on the issuer's creditworthiness and market conditions.
• Liquidity: Low. Corporate FDs are illiquid. NCDs, if listed, can be traded, but secondary market liquidity might be limited.
• Risk: Moderate. They carry credit risk (risk of the issuer defaulting on interest or principal payments). Always check the credit rating (e.g., CRISIL, ICRA, CARE) before investing.
• Taxation#: Interest earned is fully taxable as per your income tax slab.
• Best for: Well-informed investors willing to take moderate risk for potentially higher returns than traditional bank FDs, typically for a 1-5 year horizon.
• Pros: Potentially higher returns than bank FDs.
• Cons: Significant credit risk, limited liquidity, interest is fully taxable.

Treasury Securities:

Are you looking for low-risk solutions to lend to the government? Treasury securities are government-issued debt instruments that come in two types:

• Treasury Bills (T-Bills): They are short-term (91, 182, or 364 days) and are issued at a discount and redeemed at face value.
• Government Bonds (G-Secs): They are long-term (up to 40 years) and provide regular interest payouts.

Backed by the sovereign, such financial instruments are among the safest investments with yields ranging anywhere between 6% and 7.5%. You can purchase them via the RBI Retail Direct platform, brokers or mutual funds. Interest is taxable in nature, and capital gains taxation depends on the holding period. They are a great option for conservative investors who are eyeing stability with moderate returns.Debt Mutual Funds:

Debt mutual funds

Debt mutual funds are prudent if you want predictable returns but can manage some market-linked risk. Such funds invest in fixed-income instruments. These instruments are government bonds, corporate debt, debentures and money market instruments. 

They are less volatile than equity funds, which makes them suitable for conservative to moderate-risk retail investors. Popular types of debt funds are liquid funds (for 1–90 days), other short-duration debt funds (ultra short duration funds, low duration fund, money market funds and short duration funds), corporate bond and gilt funds. Returns are not assured and depend on interest rate movements as well as the credit quality of assets. 

Capital gains are taxed as per your income slab, and indexation benefits no longer apply. Regulated by the Securities and Exchange Board of India (SEBI), debt funds offer transparency, liquidity and diversification.

Stocks and Derivatives Market:

The stocks and derivatives market endows great exposure to company ownership (stocks) and contracts that derive value from assets (derivatives). When you purchase a stock, you actually own a part of that company.

If it grows, so does your wealth. Derivatives, i.e., futures and options, are products for speculation or hedging purposes. But they demand deeper understanding and a higher risk tolerance level. These markets can deliver substantial gains, but losses can be just as steep. 

• Current Returns: Variable and highly unpredictable.
• Liquidity: Very high.
• Risk: Extremely High. This is the riskiest form of short-term investment and can lead to substantial capital losses.
• Taxation^#: Short-term capital gains on stocks (held for less than 1 year) are taxed at 15%. Profits from derivatives trading are typically treated as business income and taxed at your applicable slab rate.
• Best for: Highly experienced investors with deep market knowledge, high-risk tolerance, and significant capital they are willing to lose. Absolutely not recommended for traditional short-term savings goals like emergency funds or planned expenses.
• Pros: Potential for very high returns.
• Cons: Very high risk of capital loss, requires constant monitoring and expertise, emotionally demanding.

Treasury bills

T-Bills are short-term debt instruments issued by Government of India. They are issued at a discounted price and redeemed at face value.

Since they do not pay periodic interest, there is zero reinvestment risk, and the returns are predictable. T-Bills are great for conservative investors or institutions managing liquidity. You can invest via the RBI Retail Direct platform or through brokers. 

• Current Returns: Yields on T-Bills typically range from 4% to 7% p.a. for maturities of 91, 182, or 364 days.
• Liquidity: Very high, especially at maturity. They can be traded in the secondary market, but liquidity might vary.
• Risk: Very low, as they are considered sovereign-backed and virtually risk-free.
• Taxation#: The difference between the issue price and the redemption price is treated as interest income and taxed as per your income tax slab.
• Best for: Ultra-conservative investors and institutions managing very short-term liquidity, seeking absolute safety for periods less than a year.
• Pros: Highest safety, predictable returns, no reinvestment risk (as no periodic interest payouts).
• Cons: Returns are generally lower than FDs, limited tenures.

Commercial papers

Do you require higher returns but still prefer short-term investments? Commercial Papers (CPs) are unsecured, short-term debt instruments issued by corporations, having maturities between 7 days and 1 year. They are generally purchased by institutional investors. But individuals can invest through mutual funds or brokers. 

CPs endow better returns as compared to fixed deposits, but come with credit risk, since they are not backed by the government. They are prudent for investors looking for short-term yield enhancement and who are comfortable assessing issuer credibility. Returns depend on the issuing company’s financial strength, so always check the credit rating (CRISIL, ICRA, etc.). 

Interest earned is fully taxable. CPs aren’t suitable for risk-averse investors but can work well in a diversified portfolio.

How does a Short-Term Investment Plan Work?

Short-term investment plans are designed to help you grow your money over a defined period which is normally less than 3 years. Here’s a simplified breakdown:

Investment:

You commit a lump sum or regular amounts (e.g., monthly for RDs) into a chosen instrument like FDs, liquid funds, or T-Bills.

Allocation:

The financial product's manager (bank, AMC) invests your funds in a portfolio of short-term, low-risk instruments aligned with the product's objective.

Returns:

Depending on the product, you earn either fixed interest (FDs, RDs) or market-linked returns (mutual funds). These returns might be paid out periodically or accumulated and paid at maturity.

Liquidity & Withdrawal:

Most short-term investments prioritize easy access. You can typically withdraw or redeem your funds quickly. However, some instruments, like FDs and RDs, might impose minor penalties for premature withdrawals.

Taxation^#:

The income generated (interest or capital gains) is subject to taxation. Understanding the specific tax treatment for each instrument is crucial to estimate your net returns.

Who Should Invest in Short-Term Investment Plans?

Short-term investment plans are best suited for conservative investors who prefer capital protection as well as liquidity over aggressive growth. They are well suited for a variety of financial situations, including but not limited to:

Saving for a near-term goal:

Whether you're planning a wedding, saving for a down payment on a car, or funding a much-needed vacation in the next year or two, these plans keep your money safe and growing until you need it.

Managing temporary surplus cash:

Retirees with extra pension funds or individuals who've received a large bonus can park this money in a short-term plan to earn returns while they decide on a long-term strategy.

Handling predictable expenses:

Freelancers and small business owners can use these plans to set aside and grow funds for upcoming tax payments or other known liabilities, ensuring the money is ready and waiting when the deadline arrives.

Starting an investment journey:

For new or young investors, low-risk, short-term options are a great way to build financial discipline and confidence without being exposed to major market volatility.

What are the features of short term investment plans?

Following are the crucial features of short term investment plans:

• Low risk: Most options give high priority to capital safety over high returns.
• High liquidity: You can generally withdraw funds quickly, often with minimal penalties.
• Predictable returns: FDs and RDs offer fixed returns, while mutual funds might differ slightly.
• Flexible tenure: Select plans that range between a few days and a few years, depending on your financial goal.
• Multiple choices: From liquid mutual funds and FDs to treasury bills and RDs, there is an option for every risk appetite level.

Such features make short-term investments the best choice for temporary savings or near-term goals.

What are the benefits of short term investment plans?

Short-term investment plans offer a prudent balance of safety, flexibility and accessibility. Key benefits are:

• Quick liquidity: Require funds for a contingency or short-term goal? You will not have to wait long.
• Capital preservation: Your initial investment stays secure in low-risk instruments.
• Disciplined saving: RDs and fixed-term plans assist in building consistent saving habits.
• Customisable tenures: Invest for 7 days, 3 months or even 2 years—depending on your needs.
• Diverse options: Mix and match low-risk products—liquid funds, FDs and T-bills to match your goal.

Drawbacks of Short-Term Investment Plans

Short-term investment plans are not without limitations. Here is what you must watch out for:

Lower returns

As the focus is on safety and liquidity, short-term investments usually offer modest returns, often lower than those of long-term investments or equity funds. This might not beat inflation over the long run.

Restricted growth

Short term investment plans do not benefit much from compounding over the long time period, so they are not best for wealth creation. They are better for preserving capital and not multiplying it.

Limited investment options

The universe of short-term instruments is smaller. In case you are looking for diversified and high-growth options, you might find these plans too restrictive.

Charges for early withdrawal

Some instruments—like FDs and POTDs—penalise early exits. You may get reduced interest or even lose a part of your gains if you withdraw before maturity.

Highlights of the Best Short-Term Investment Plan

Selecting the best short-term plan is not just about interest rates—it is about matching your financial goal, time horizon and comfort with risk. Here is what you must focus on:

Safety and preservation

The goal is to safeguard your principal while earning moderate returns. Consider treasury bills, post office time deposits and high-rated bank FDs. Why? Because they are backed by either the government or trusted financial institutions.

Ease of management

Short-term investments must be low-maintenance. Products such as FDs, RDs and liquid mutual funds do not need frequent monitoring. This makes them prudent for passive investors or beginners.

Tax-efficiency investments

While returns are taxable, your net gain matters. For example, 5-year POTDs offer Section 80C^# benefits. Debt mutual funds, regardless of the holding duration, are taxed at your slab rate, so plan accordingly to reduce tax impact.

Alignment with goals

Match the product to your purpose. Use liquid funds for emergency savings, RDs for planned purchases, or ultra-short-term funds if you’re parking money before investing long term.

Liquidity

Easy access matters. Go for liquid funds, FDs with partial withdrawal or ultra-short-term funds that allow you to exit when needed without any heavy penalties.

Diversification

Spread your money across multiple instruments to reduce overall risk. For instance, combine a liquid fund for accessibility, an FD for fixed returns, and a T-bill for safety.

How to Choose the Best Short-Term Investment Plan in India

Selecting the best short-term plan isn't solely about the highest interest rate; it's about aligning the investment with your specific financial goal, time horizon, and risk tolerance. Here's what to focus on:

1. Define Your Goal & Time Horizon:

o Emergency Fund (Immediate Access): Liquid funds, Savings Accounts.

o Planned Expense (6 months - 1 year): Liquid funds, Ultra-Short Duration Debt Funds, Short-term FDs.

o Medium-Term Goal (1-3 years): Short Duration Debt Funds, FDs, RDs.

o Tax Saving (5 years): Post Office Time Deposits (5-year).

2. Assess Your Liquidity Needs: How quickly might you need access to your money?

o Instant/Next Day: Savings Account, Liquid Mutual Funds.

o A few days/weeks (with minor penalty): Bank FDs, Post Office Time Deposits.

3. Evaluate Your Risk Appetite: How much risk are you comfortable taking with your principal?

o Zero Risk: T-Bills, Post Office Time Deposits (Government-backed).

o Very Low Risk: Bank FDs, RDs.

o Low Risk (with slight market fluctuation): Liquid Mutual Funds, Short-Term Debt Funds, Arbitrage Funds.

o Moderate Risk (with credit risk): Corporate Deposits/NCDs.

4. Understand the Tax Implications^#: Tax can significantly impact your net returns.

o For FDs, RDs, and debt mutual funds (post-April 2023), gains are taxed at your income slab rate.

o Arbitrage funds, if held for over a year, offer equity taxation which can be more favourable for high-income earners. Always factor in post-tax returns.

5. Consider Diversification: Even within short-term investments, spreading your money across different instruments can help mitigate risk. For example, keep emergency funds in a liquid fund, save for a specific goal in an RD or FD, and park temporary surplus in a T-bill.

Beyond Short-Term Investment: Complementing Your Portfolio with HDFC Life's Long-Term Solutions

While short-term investments are crucial for immediate financial needs and liquidity, a truly robust financial plan requires foresight and long-term solutions. At HDFC Life, we offer a diverse range of products designed to secure your future and provide lasting financial security:

Life Insurance Plans:

Beyond just protection, many of our life insurance plans offer disciplined savings components, helping you build a corpus for future milestones like retirement, your child's education, or a dream home, all while ensuring your family is financially secure in your absence.

Traditional Savings Plans:

Traditional Savings plan provide guaranteed maturity benefits and a steady accumulation of wealth over the long term. They are designed for risk-averse individuals seeking predictable returns and a disciplined approach to saving for their future.

Unit-Linked Insurance Plans (ULIPs):

For those seeking market-linked growth potential combined with life insurance coverage, ULIPs offer a unique solution. They allow you to invest in various fund options (equity, debt, balanced) while also providing protection. ULIPs are best suited for investors with a long-term horizon (typically 10+ years) who are comfortable with some market volatility for potentially higher returns.  ULIP Calculator can help you out with planning for more diverse investments.

Integrating these long-term products into your investment strategy alongside your short-term investments creates a holistic plan that addresses both your immediate needs and your enduring aspirations.

Related Terms to Short-Term Investment Plans

Cash investment

Instruments—government bonds or bank FDs from trusted institutions endow great capital safety.

Cash equivalents

Zero in on investments that permit easy exit when required, especially for contingency funds. Liquid funds as well as short-term debt funds are great options.

Money market

This is a part of the financial market where short-term instruments (under one year) are traded—T-bills, CPs and repos. It is just perfect for low-risk and short-duration investing.

Financial assets

Any liquid or near-liquid resource—stocks, bonds, mutual fund units, or FDs—that has monetary value and can be used to generate income or returns.

Short Term Investment Fund (STIF)

A mutual fund type that invests in short-term instruments—treasury bills, commercial papers or certificates of deposit—endowing stability with reasonable liquidity.

What is the Tenure of Short Term Investment Plans?

Short-term investments typically range from a few days to a maximum of 3 years. These plans are best suited for fulfilling immediate or near-term life goals like building an emergency fund, saving for a vacation, or handling a short-term financial obligation.

For instance, if your daughter is currently in Class IX and planning for higher education in 5 years, this would not be a short-term goal. Instead, it would fall under medium-term planning, a time horizon often meticulously charted within a comprehensive child education planner. In that case, investing in a 5-year FD, corporate deposit, or NSC is more appropriate.

For truly short-term goals, you should look at options like liquid mutual funds, short-term FDs, RDs, or treasury bills, which offer flexibility and quick liquidity. 

How to Calculate Returns from Short Term Investment Plans?

Returns differ from product to product. Here is how you can compute:

• For FDs/RDs: Utilise the formula for compound interest:

A = P(1 + r/n)ⁿᵗ

Here, P = principal, r = annual interest rate, n = compounding frequency and t = tenure in years.

• For mutual funds or T-bills:

Utilise the absolute return formula:

 [(Final Value – Initial Investment) / Initial Investment] × 100

You can also use online calculators provided by banks, AMCs, or government platforms like RBI Retail Direct.

Conclusion

Short-term investment plans are perfect when you want safety, flexibility, and modest returns without locking in funds for the long haul. Whether you're saving for an upcoming wedding, a gadget, or simply parking idle money, these plans let your money work while staying accessible.

While they aren't designed for wealth creation, they play a crucial role in any balanced portfolio, especially for emergency funds, transition periods, and short-term goals. Just make sure you line up the product with your timeline, understand the tax treatment and select based on your risk appetite level. A well-chosen short-term plan can give you both mental peace and financial readiness.

Frequently asked questions (FAQs) 

Q. Which is the best short term investment plan?

There’s no one-size-fits-all plan. Liquid mutual funds, bank FDs, and post office time deposits are among the safest and most popular options.

Q. How short term investments work?

You invest money for a short tenure (a few months to 3 years) in low-risk instruments that prioritise liquidity and capital preservation..

Q. What are the best short term investments?

Best choices for short term investments are liquid mutual funds, Treasury Bills, ultra-short-duration funds, recurring deposits, and post office schemes.

Q. What are some examples of short term investments?

Examples of short term investments are bank fixed deposits (FD), liquid funds, Treasury Bills, corporate deposits and money market instruments.

Q. What are the benefits of investing in short term investment?

Short-term investments endow safety, quick liquidity, low risk, and moderate returns—best for meeting near-term financial goals.

Q. What are the benefits of investing in short term investments?

Short-term investments endow safety, quick liquidity, low risk, and moderate returns—best for meeting near-term financial goals.

Q. Which short term investment plan can give the highest return?

Debt mutual funds and corporate bonds generally offer higher returns among short-term options, though they carry slightly more risk.

Q. How long is short term investment?

Short-term investments generally range between 7 days and 3 years, based on your financial goal as well as the instrument chosen.

Q. Are Prepaid expenses a short term investment?

No, prepaid expenses are not investments. They are advance payments made for services to be received in the near future.

Q.  Which mutual fund is the best for short term investment?

Liquid funds, ultra-short duration funds, and money market funds are among the best mutual fund options for short-term investing.

Q. Is a short term investment an asset?

Yes, short-term investments are current assets as they can be converted into quick cash in a short time period.

Q. What are safe short-term investment options for 2025?

Several low-risk, capital-safe options are available in India for the year 2025. Bank FDs, liquid mutual funds, Treasury Bills, and Post Office Time Deposits are great picks for short-term goals (of up to 3 years). They offer moderate returns (4%–7.5%) as well as easy access to funds.

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