HDFC Life SL Crest - ULIP for Short Term Investment Planning
Investing as early as possible is important to ensure a financially secure future. Depending on the time, investments are either classified as long-term or short-term products. Both types of investments must be included in the overall financial portfolio to ensure investors achieve their goals at various life stages.
Short term investment optionsÂ are expected to provide excellent returns within a small time period. Investors in such instruments do not want to wait for several years to enjoy capital appreciation. Furthermore, these products are designed to assist investors to achieve financial goals in the near future.
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The above discussion shows that investments in several short-term products are possible. Conducting research before making any investment decisions will be beneficial for the investors as it helps lower the risk of capital loss while maximizing the returns.
Gold or silverInvestments in precious metals like gold and silver are popular amongst the Indian population. Such investments are beneficial for both short term and the long term. This is because the prices of these precious metals increase constantly, thereby providing good returns on the investment.
Savings accountRisk-averse individuals are advised to invest in savings accounts. Even though the returns on these accounts are not high, they are completely risk-free and highly liquid instruments.
Bank fixed deposits (FDs)Another popular and risk-free financial product is the bank FD. Investors may invest their surplus funds for a short duration of 30 days. FDs are offered with various maturities with a maximum duration of 10 years. On maturity, the investors receive their capital investment along with the accumulated interest. The returns on these products are fixed and remain unaffected by any change in the economic interest rates. Although premature withdrawal is not advisable, in the case of emergency, investors may withdraw the money by paying a penalty and foregoing their returns.
Fixed maturityFixed maturity small investments are close-ended debt funds. These financial products are completely transparent in their working. Furthermore, these are versatile with a specific end date. Additionally, investing in these instruments is income taxÂ efficient because only Dividend Distribution Tax (DDT) is applicable on the returns.
Money market accountAlso known as liquid funds, these accounts provide security of the investment capital while also ensuring good returns on the money. These are amongst the most liquid investments because the maximum maturity period is 91 days. Investors may withdraw their money at any time as there is no minimum lock-in period.
Investments in non-convertible debentures (NCDs)Companies often issue NCDs to raise money from the public. These are debt-paper securities offering a fixed rate of interest with a pre-specified maturity date. Unlike convertible debentures, investors do not enjoy the option of converting NCDs to equity shares at the time of maturity. Secured NCDs are backed by issuing company assets and if the company fails to meet its obligations, investors may liquidate these to recover their investments. On the other hand, unsecured NCDs do not have any such provision or backing. Investors are advised to consider the ratings offered by credit rating agencies like Credit Rating Information Services of India Limited (CRISIL) to determine the riskiness of the NCDs. Lower ratings must be avoided as these are riskier than other products.
Corporate or company deposits (CDs)Similar to bank FDs, corporate deposits are held with companies. These financial products have a fixed maturity date and returns are pre-determined through fixed interest rates. Financial institutions and non-banking finance companies (NBFCs) may also provide these types of deposits. The investments mobilized through CDs are regulated under section 58A of the Companies Act, 1956. CDs are unsecured, which makes these a risky investment option since they cannot be sold in case the company defaults.
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"The thumb rule for retirement planning is - the earlier you start, the more you save. However, with age, your priorities change too. So, you need to factor in the cost of living in the present vis- a -vis future."
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