Proper financial planning in the short term can reap benefits in the long run. Learn how to make the right short term savings plans.
Financial planning is frequently related to long-term investments.
However, there are numerous immediate requirements that must be handled.
People invest for shorter periods of time because their objective is approaching or they do not want to risk locking their money in for a longer period of time.
Although there is no set time limit for short-term investments, they can range from seven days to fewer than twelve months.
If you decide on a short term investment, you can choose from a variety of instruments.
These products can be divided into two groups: those that provide fixed income and those that provide market-linked returns.
For a long time, stock markets were in choppy waters, keeping investors on edge about their investments.
While external causes such as US inflation, Fed rate hikes, and geopolitical tensions between Russia and Ukraine have played a role, domestic triggers such as WPI inflation and gasoline costs have also played a role.
A good short-term investment plan with high returns in India needs proper analysis of financial decisions that will help them reduce risk and increase returns.
Where to invest money for the short term?
Looking at the current situation, it appears that the markets will remain in this state, at least for the time being.
The need for robust investment solutions that safeguard money and provide assured returns has resurfaced during this period of uncertainty.
Budgeting into a guaranteed return plan, for example, gives not just a fixed rate of return but also increased financial security due to its insurance component.
Let's take a closer look at the plan's features and how they can assist investors in navigating current market volatility.
There are many traders in the Indian market who want to avoid losing money and want to opt for the best short term investment plan to make a quick buck.
The majority of them primarily desire higher investment returns while avoiding risk.
In this scenario, guaranteed return options appear to be the best alternative.
The risk-agnostic character of these plans makes them suited for all types of investors, not just the risk-averse.
These short term investment options have three advantages: they protect your original investment, provide a fixed rate of return, and provide financial security for your dependents.
Regardless of market fluctuations, these proposals keep your money safe and secure while locking in your refund rate at the time of investment.
They also ensure you’re not putting yourself at risk of credit card debt, with a backup that allows you to grow your money effectively.
At a moment when the pandemic continues to threaten not just markets but also life and health, the plan's insurance component provides financial stability to a policyholder's dependents in the event of the policyholder's untimely death.
Increased, tax-free profits
Even if they are risk averse, any investor's primary goal is to increase their returns on investment.
As a result, FDs used to be a popular choice for a group of investors who wanted to lock their money away for a long time while collecting as much as 7-9 percent in risk-free yields.
However, with the rate of return on FDs currently ranging between 4% and 5%, the investor's money can now earn real negative interest due to rising inflation.
Guaranteed return plans, on the other hand, provide the same level of protection but at a higher rate of return.
For example, Bajaj Allianz's Assured Wealth Goal plan, subject to terms and circumstances, pays up to 6.46 percent on an annual premium of Rs 5 lakh for a period of 10 years.
Similarly, with Max Life's Smart Wealth Plan, investors can earn up to 6.20 percent on their money.
To top that off, the interest you earn is tax-free, whereas FD interest is taxable. This automatically increases your earnings.
Though rest assured, plans are best for long-term investments, they now also provide more flexibility for short-term investments.
These programmes allow investors to invest for as long as 45 years. They can, however, surrender the policy at any time without incurring any surrender fees.
Starting in the sixth year, plans like Tata AIA's Fortune Guarantee Plus provide an income for 45 years with a tax-free return rate of roughly 5.8%.
You are eligible to surrender the insurance and receive the original amount without any surrender fees if you do so during the first five years.
If you surrender within the income period, you will be paid at a reduced rate of 7.5 percent, which is still advantageous given the income you get.
Those who keep the coverage can choose between a lump sum benefit and a regular income plan, depending on their preferences.
These advantages make guaranteed return programmes an appealing and popular option for all investors.
These plans ought to be a part of your portfolio if you're trying to park your money smack in the middle of the continuous volatility.
Remember to read the fine print of your policy and verify it with your insurer to be sure you understand everything.
Let's look at the details of these excellent short-term investment projects in India for safe investments in 2022:-
1. Recurring Deposits (RD)
This is the most frequent short-term investment choice, and it is available from all banks, so many people use it to store their money for short-term purposes.
It lets you earn a fixed rate of interest on your investment until it matures. Simply log into your net banking account to start a recurring deposit (RD) account.
Please select the sum to save each month, the duration, and you're done!
Return on investment: 4% to 6% every year
Time frame: 6 months to 10 years
After being added to your income, the interest received from your RD account is taxed according to your tax bracket.
2. Fixed-Income Accounts (FD)
Fixed Deposits (FDs) are another common technique for banks to build a corpus for short-term investments.
The money is invested for a set period of time, usually 7 to 10 years, at a preset rate of return, after which it matures and can be withdrawn.
Although the interest rates go up when compared to savings accounts and RDs, early withdrawal is not possible.
Annual rate of return: 2.5 percent to 5.5 percent
Timeframe: 7 days to 10 years
The interest on your FD is applied to your income and taxed according to your tax bracket.
3. Deposits made by corporations (CD)
Corporate fixed deposits are similar to bank fixed deposits, with the exception that they are collected by corporations for expansion and operations.
Because the danger of default is higher, the interest rates are marginally greater than bank FDs.
Those with a higher risk tolerance can invest in corporate FDs and get higher returns than bank FDs.
Return on investment: 6% to 8% every year
Time frame: 1 to 3 years
Interest is applied to your income and taxed according to the current income tax bracket.
4. Debt Mutual Funds
These mutual funds for short term invest primarily in debt instruments such as government bonds, commercial papers, Treasury bills,corporate bonds, and other money market instruments.
For risk-averse investors seeking higher short term mutual funds, this is one of the greatest short-term investing possibilities.
Return on investment: 8% to 11% every year
Time frame: 6 months to 3 years
Short-term mutual funds are taxed if you redeem the shares within three years, but long-term capital gains are taxed if you hold the units for more than three years.
5. Make a systematic investment in equity mutual funds.
Systematic Investment Plans (SIPs) are best used over the long term, although they can also be used for shorter periods of time to generate decent returns.
If you have a one-year investing horizon and want a good short term investment, a SIP in large-cap mutual funds is recommended because they invest in huge companies that can rise faster in the market.
Return on investment: 8% to 15% every year
Time frame: 6 months to 5 years
Taxability: Like debt mutual funds, equity mutual funds' returns are computed using short-term and long-term capital gains.
6. Stock Exchange
Stock markets are the ideal short-term investment for high-risk takers who want to maximise their earnings.
If you can spot the correct stocks, you can double your money by investing in them for a few months.
If you bet on the wrong stocks, you run the risk of losing your entire investment.
To know which are some of the best stocks to buy in India for the short term, you just need a good broker, and you’ll be good for a year or so.
If you’re looking for the best mutual funds to invest in 2021 in India for the long term, then you shouldn’t be investing in the stock exchange.
Return on investment: 10% to 100% every year
Time frame: one month to five years
Returns are added to your income, and tax is determined according to your income tax gains.
Make the right choice, today:
With these options, you’ll be able to make the right short term investment plans.
Keep an eye out for those that do well, and soon you’ll make good returns within 1-3 years!