Are you looking for a way to grow your money quickly without locking it in for years? A one-time investment plan in a short-term investment plan can be a smart option. These schemes enable you to earn returns from a few months to a couple of years, thus suitable for investors who seek liquidity along with profit.
Whether you are an employee, business owner, or retiree, the right short-term investment will help you achieve your financial goals much easier. The idea is to invest wisely and get maximum returns with minimum risks. Here are some ways that could help in getting the best returns from a one-time, short-term investment.
Ways to Maximise Returns on a One-Time Investment in Short-Term Plans
Choose High-Yield Investment Options
A short-term investment plan should offer better returns than a standard savings account. Here are some of the best high-yield opportunities:
· Fixed Deposits (FDs): Short-term FDs are offered by banks and NBFCs with tenures from 6 months to 3 years and earn much higher interest than savings accounts.
· Short-term debt mutual funds: They invest in corporate and government bonds, which have shorter maturities and are just as good as or even better than the FDs both in terms of liquidity and return.
· Corporate Bonds: Companies issue bonds that offer higher yields than bank FDs, but investors should opt for highly rated ones to ensure safety.
· Treasury Bills (T-Bills): T-Bills are government-backed and risk-free; they have maturities of 91, 182, or 364 days, thus making them a secure short-term investment.
Understand the Risk-Return Tradeoff
Investors must understand the relationship between risk and return:
· With low-risk instruments like the RBI Floating Rate Bonds and Post Office Time Deposits, one can be assured of returns but with considerably lower interest rates.
· Debt mutual funds are moderate-risk investments, thereby balancing safety with returns.
· Although high-risk investments like stocks can be profitable quickly and also incur losses in market downturns.
The choice of an investment should be in line with your risk appetite and financial goals based on the same.
Invest in Low-Risk Mutual Funds
For investors who look for safety and moderate returns, mutual funds can be a great option.
• Liquid Funds: These provide higher returns than savings accounts and allow easy withdrawal, usually within 24 hours.
• Ultra Short-Term Funds: These are also known as Liquid funds and are ideal for investment in debt securities with maturities of 3-6 months that yield higher returns compared to fixed deposits at a lower risk.
• Among the money market funds are those investing in government securities and short-term corporate debt, which assures capital preservation and steady returns.
Look for Tax Benefits
Tax-efficient investments can help increase net returns:
· These tax-free bonds are issued by government institutions and offer tax-free interest income like NHAI and REC.
· Equity Linked Savings Scheme (ELSS) is a type of mutual fund in India where investments made up to Rs 1,00,000 in a year are eligible for tax benefit under section 80 C (excluding infrastructure and social sector funds for which the limit was upped to Rs 1.5 lakh this year).
· 5-Year Tax-Saving FD: Although offered as a tax-saving instrument, the interest earned is fully taxable.
This will help you to take maximum benefits of your hard-earned money as, in the end, you remain with a big part of what you have earned.
Diversify Your Investment
A well-diversified portfolio balances risk and improves returns:
· Debt Funds with Fixed Deposits is a combination that offers stability along with low to moderate growth.
· Gold ETFs plus government bonds offer the safest form of investment with a good chance of appreciation.
· Corporate Bonds with Liquid Funds: This combination offers higher yields while maintaining access to liquidity.
Diversification reduces risk exposure and ensures financial stability.
Invest in Corporate Deposits with High Ratings
Corporate FDs offer higher interest rates than bank FDs but come with associated credit risks.
• Choose AAA-rated corporate deposits for safety and reliability.
• There are several NBFCs like Bajaj Finance, Mahindra Finance, and HDFC Ltd. who provide competitive rates with minimum / lower risk factors.
• Always check credit ratings (CRISIL, ICRA, CARE) before investing.
A wise investment in highly rated companies can provide better returns on corporate deposits.
Take Advantage of Recurring Payouts
Some investments pay out interest at regular intervals, thus providing a steady income:
· Non-Cumulative Corporate FDs: Offer quarterly or annual payouts.
· Government Bonds: Some bonds pay interest every six months, allowing liquidity without withdrawing from the principal.
This is particularly suited for retirees or those requiring periodic cash flow.
Monitor Market Trends Before Investing
If investing in stocks or mutual funds, track market movements:
• Interest rates are inverse to debt funds – invest in these when rates are falling and, therefore, bond prices are high.
• Equity-oriented short-term mutual funds are affected by the stock market movement. One should not invest when the marketplace is at its peak.
Market analysis ensures that you enter the market at the right time and maximise your returns.
Avoid Lock-in Periods Unless Necessary
If liquidity is a priority, avoid investments with strict lock-ins:
• Ultra-short-term mutual funds offer liquidity without penalties.
• Fixed deposits that allow premature withdrawal are preferable to long-term FDs that impose strict penalties on early withdrawals.
Choosing liquid investments ensures flexibility without financial strain.
Consider Gold-Based Investments
Gold has been a haven investment in India:
· Sovereign Gold Bonds (SGBs) (2.5% annually fixed interest) provide an option to enjoy the appreciation in the price of gold.
· Gold ETFs: Offer liquidity and absence of vaulting fees, unlike physical gold.
Gold investments hedge against inflation and currency depreciation.
Go for the Laddering Strategy
Laddering investments involve staggering maturities to maintain liquidity:
• Split the investment into 6-month, 1-year, and 2-year FDs rather than putting all the money in one particular long-term deposit.
• Invest in short-term bonds that mature at staggered intervals to obtain periodic access to funds.
This ensures that funds are available when needed and eliminates any risk related to reinvestment.
Check for Inflation-Adjusted Returns
Inflation reduces the real value of returns. Some inflation-beating options are:
· RBI Floating Rate Bonds: Periodically adjusts the interest rate to align with inflation trends.
· Debt Mutual Funds with Indexation Benefits: Tax liability is reduced by providing capital gains adjustment for inflation.
Choosing investments that outpace inflation preserves purchasing power.
Use Online Investment Platforms for Better Returns
Digital investment platforms provide higher interest rates and exclusive deals:
• Platforms offer commission-free direct mutual fund investments.
• Online FDs offer slightly better rates than their counterparts.
Using technology can help maximise returns with minimal effort.
Avoid Unverified High-Return Schemes
Many fraudulent schemes promise unrealistic returns in a short time:
• Avoid Ponzi schemes and chit funds that are not regulated by SEBI or RBI.
• For safety, invest in mutual funds that are SEBI-registered, bonds backed by the RBI, and government securities.
Prioritising security over unrealistic profits ensures capital protection.
Conclusion
A one-time investment in a short-term investment vehicle requires planning. The investor can achieve maximum return with minimum risk by selecting the appropriate investment, diversifying within the portfolios, considering tax advantages and ensuring liquidity. Each of the options-mutual funds, fixed deposits, government bonds, and gold ETFs brings its own set of benefits. Investment should be based on financial goals with an element of flexibility and security.
