When it comes to investing, a time period or less is considered to be short term. Short-term investmentoptions, as opposed to long-term investment options, are intended to meet the financial needs of the individuals at hand. Short-term investments are profitable investment options for people who want to achieve their life’s short-term financial goals. There are numerous advantages to making short-term investments.
One of the primary advantages of short-term investments is their high liquidity. This means that investors can invest or redeem their investments whenever they want. Short-term investments provide liquidity, which allows investors to protect their long-term investments and create a financial cushion in the long run. Diversification is another advantage of short-term investments. You can choose to invest a small amount or a large amount based on your needs or suitability. Short-term investments’ flexibility allows investors to invest in multiple investment instruments at the same time. As a result, it can assist investors in developing a diverse portfolio.
Apart from liquidity and diversification, flexibility, optimal returns, and lower risks are other benefits offered by short-term investments. There are a number of short-term investment plans and they are:
Liquid Funds: These are mutual fund schemes that primarily invest in short-term market securities such as government securities, treasury bills, corporate bonds, and so on. The liquid fund is a type of debt mutual fund that invests with the least amount of risk. The liquid fund has a maturity period of up to 91 days. Liquid funds provide investors with a high level of liquidity. This fund is best suited for individuals who want to make a short-term investment and have a low risk appetite, as it has a low risk appetite. This investment option is best for an individual who wants to make a safe investment and earn a medium return on investment because it is the least volatile and risky mutual fund investment.
Short-term Funds: Short-term and ultra-short-term funds are fixed-income instruments that provide investment liquidity and short-term maturities. Ultra-short term funds provide investors withlow-risk investmentoptions that help them avoid interest rate risk. Ultra-short-term funds provide higher returns on investment than money market instruments. The short-term fund has a maturity date of 91 days. Even though these funds help investors avoid the risk of interest rate fluctuations, they are not immune to market fluctuations.
Fixed Maturity Plans: Fixed maturity plans are closed-ended debt instruments in which investments can only be made when new funds are made available. These funds invest primarily in debt instruments such as corporate bonds, highly rated securities, and so on, and have a fixed maturity period. Fixed maturity plans are best suited for individuals who want to achieve specific financial goals in the short and long term. Aside from fixed returns on investment, a fixed maturity plan also provides an individual with a tax benefit.
Treasury Bills: Treasury bills are short-term investment instruments that allow investors to invest in short-term surplus funds while minimising market risk. Treasury bills are government securities that are issued on a regular basis by the Reserve Bank of India. Individuals who want to meet short-term financial needs by borrowing funds from government securities can choose Treasury bills. A treasury bill, as a government-backed investment security, carries no risks and is the safest and best investment option for individuals seeking to achieve short-term financial goals in life.
Fixed Deposit: Fixed deposits are the safest and one of the most profitable ways to accumulate wealth and build a corpus over the short and long term. It is a financial instrument that provides a fixed interest rate until the maturity date. In comparison to regular savings accounts, bank fixed deposits pay a higher interest rate and provide a guaranteed return on investment. Although investors are permitted to make premature withdrawals from fixed deposits, it is recommended that the FD not be broken in order to maximize the return on investment. Banks currently offer maximum rates of interest on fixed deposits ranging from 7% to 8%. Aside from providing profitable returns on investment bank FDs, it also provides flexibility by locking in the money for a set period of time.
Gold: If you are looking to invest in short-term plans, gold is considered to be the best option. Gold investment has numerous advantages, including the ability to provide stability and protection during a bank crisis, as well as the ability to deal with inflation and social unrest. Aside from that, the main advantage of investing in gold is that price increases in the financial market have no effect on the value of gold. Over the last few years, gold investment has provided a phenomenal return on investment of 23.5 percent, making it one of the best short-term investment options available in the market.
Short term investments require a range of services and tools such as trading platforms, Demat account and others. Tradeplus can be your one stop solution to provide all help and required services.