Financial Investments are on a top priority for people who are concerned about the uncertain future. Money is a necessary evil to live your life comfortably during your lifetime. To maintain a good lifestyle for your family members, dignified living style, and aspirations, you have to plan your financial future.
Fear of uncertainty of the future drives you to park your hard-earned money in financial portfolios which gives you good returns on your investment for the future.
Investment Opportunities for Short Term
Financial investments are classified as Long-Term Investments and Short-Term Investments. A short time investment is putting your money, gold, silver or stocks in an investment portfolio for a period of less than 3 to 5 Years
Short-term investments are preferred as it is considered a liquid investment and can be encashed quickly without any hassles.
Investing your money in short term investments or plans may not yield bountiful of cash but you can be assured of moderate returns, by taking lesser risks and wise planning.
You may be planning short term investments for the near future like: –
Admission of your grown-up children in a renowned engineering, medical, management college in 2 years time. You require a considerable amount of money for college education& hostel expenses, which are exorbitantly high these days
You have to purchase a motorbike for your son, to attend college or a scooter for your daughter.
Your spouse may be interested to buy a dream house in 3 years time which requires careful planning of finances., including down payments and EMI’s.
You have an eye on buying an SUV luxury vehicle costing 15 Lakhs in the next 6 months.
You have planned for a family vacation abroad next year requiring a considerable amount of money.
You may have sold your old house and plan to buy a house in a posh locality within a years time. The money you have received from the sale of the house has to be invested in a short-term financial plan with profit.
Keeping your money idle in any savings account is not a wise decision due to the current rate of inflation, lowering the value of money day by day.
To invest your money, four parameters have to be assessed very minutely. The tenure of your investment, liquidity, returns and income tax applicable to your investments.
You have to decide the tenure, meaning for how long you would like to keep your funds in that particular scheme. When do you want to redeem your funds is liquidity. You have to be careful in your investment so that you do not have to pay any penalty for withdrawing your funds. The rate of interest on your investment portfolio will have to be confirmed so that you are assured of the returns on your planned investments.
6 short-term investment options
People who invest for a short time period are concerned with the safety of the capital invested and return on investment. There are various options to choose from, which can be further categorized into yielding fixed income and the other being market linked return on investment.
Short-term investments give lesser returns on your investments, than long-term investments, but are safe, yielding modest returns.
Savings account in banks and post offices are the preferred choice for the lower and middle-income group class of people in India. Banks and Post Offices are readily accessible and large in number to cater to service your investment requirement.
People who do not want to take risks and are unaware of financial products and want to invest small amounts of cash, go in for savings account investment in banks or post offices which are present in villages too.
The ease of operation, the safety of their funds, easy liquidity charms the masses although the rates of interest may vary from 4-6% per annum. This type of investment gives returns which are one of the lowest in the investment portfolio. If you earn interest for more than Rs 10,000/- you have to pay Income Tax.
Fixed Deposits In Banks
Fixed deposits are financial instruments which are very popular with the Indian masses serviced by Public banks and Private Banks. Fixed deposits in banks are liked as they are safe and have variable investment options for a week, a fortnight, a month, or specific days which differs from bank to bank.
Deposits can be automatically renewed if you want, with minimum efforts at the bank. In case the bank defaults in payment each fixed deposit holder is assured Rs 1 Lakh by the deposit insurance and credit guarantee corporation of India.
Since the term for investment is agreed upon by the customer and the bank, withdrawing funds before the scheduled date of redemption may invite penalty. Please read the prospectus, check all the pros and cons of recurring deposits in the public sector, private sector before investing.
The rate of interest is decided by the Reserve Bank of India, by their repo rate. The returns on fixed deposits are about 6% per annum at present for I year and above. Benefits to senior citizens have been provided by the banks by giving an additional 0.5 % over and above the normal rates of interest.
Income tax is payable if the interest accumulates to more than Rs 10,000 per month, including other investments made. Normally tax is deducted at source if Form 15 G or 15 H is not submitted to the bank.
Offer fixed deposits to the general public
Unlike banks, your investments made in these schemes may not be secure. These companies offer higher interest rates than the banks, hence attracting customers who want to spike their investments in a short period of time.
Normally the tenure for fixed deposits is one year or more. If the company performs badly and is unable to pay you back the promised interest along with your capital, the assets of the company are seized, to pay the money back to you.
This is a lengthy process and your funds may be blocked for a long period. If you want to withdraw your investment before the scheduled redemption date, you may have to pay a stiff penalty. Please read the prospectus carefully before investing in these get rich quick schemes.
Ratings of their performance may be hyped up, read the financial companies reviews. Progress cautiously before investing. Presently the interest rate is around 7.5 % annually, which is more than the banks. Income tax is levied if your annual interest is more than Rs 10,000.
This is another version of Fixed Deposits in banks. Normally your funds which are lying in your savings account, are subject to a bare minimum 4-6% interest rate.
The Fixed Deposit Sweep in facility is given by certain banks, which allows the investor to decide the minimum amount to be kept in their savings bank, and the rest of the money is automatically transferred to a fixed deposit.
Whenever you require money, the amount lying in your fixed deposit is swept to you for liquidity. The interest rate for the fixed deposit–sweep in amount is more than the savings account rates. Most banks allow a 1-year period.
The rate of interest varies from 4- 6.5 % as you are advantaged with a mix of the savings bank and fixed deposit interest rates. This is a safe option to bet on as you are assured of higher returns without any risks.
A very popular financial instrument to accumulate wealth through systematic monthly investment is the recurring deposit scheme.
If you plan for a cumulative deposit in 6, 9 or 12 months tenure and are ready to pay a fixed amount every month. Recurring deposit is an option to realize your dreams by saving money over a period of time and secure higher interest rates than savings bank account rates.
Recurring deposits can be operated for 6 months to 10 years, although the tenure may be different from bank to bank. There are penal provisions for premature withdrawal. If you withdraw your funds within a month no interest is given besides the principal amount.
The rate of interest of recurring deposit is similar to fixed deposits. The rate of interest is around 6.5% at present. Income tax will be deducted if the accumulated interest from all your investments crosses Rs 10,000.
Post Office Time Deposit
Post Offices are present in every nook and corner of the country, which has earned the hearts of lakhs of people by their services for a very long time. Their presence in remote locations is an asset for the people.
The post offices besides delivering mails have entered into financial services like small savings account schemes, insurance sector, money transferring services to a multitude of locations.
Post office time deposit can be invested for 1, 2 ,3 and 5 years and the redemption is annual. A minimum bar of 6 months is applied for premature withdrawal. If you want to redeem your investment back before the scheduled period, you will get a reduced interest amount.
The money market is always volatile and of deep concern for the investors. The money parked in short time investments are normally smaller in amount and give safe but moderate returns. Though long-term investments have a probability of garnering more interest, the lower income group and middle class are benefited to a large interest by short-term investment options.