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Are you saving for a dream vacation or a home renovation, or simply want to maximize returns on your idle funds?
Short-term investment plans and ideas can be the perfect solution for you in 2024.
Short-term investment plans and ideas offer the security of having cash readily available when needed. The key considerations for investors in these plans are safety and security, providing a reassuring foundation for their financial goals.
Why is Short-Term Investment Required?
Some of the prominent reasons why short-term investment plans are required are:
- High liquidity: Short-term investment plans benefit from a high liquidity market, which means they can be easily convertible into cash.
- Short-term Profits: Investors can earn huge profits within a shorter period as these investments are liquid and consistent, making them easier to convert into cash when the market is doing well.
- Quick Returns: Short-term investment plans offer the chance of quick profits because they focus on regular and immediate changes in asset value.
- Flexibility: These instruments do not keep your amount longer with high liquidity; they provide great flexibility to investors, which could be added to achieving short-term financial goals.
So, let’s delve into what are some Short-Term Investment Plans best for you.
11 Short-Term Investment Plans for 3 to 6 Months
1. Certificate of Deposits
One of the best Short-Term Investment Plans is that certificates of deposits or CDs are time deposits, which means that when you open one, you agree to keep money in the account only for a particular time, ranging from a few weeks to months or years, depending upon the maturity.
Similarly, a no-penalty CD charges some fees that a bank charges if you cancel it before the maturity term. Moreover, in exchange for the safety of having money in its vault, your bank will pay you a higher interest rate.
Good for: CDs are good for those seeking access to their cash while earning interest. They may find CDs to be the best short-term investment option.
Rate of Return: You’ll earn up to 4.75 percent Annual Percentage Yield (APY) for seven months.
2. Treasury Bills
Treasury bills, or T-bills, are short-term money-market instruments backed by the U.S. government. Banks provide these deposits, which pay huge rates of interest as they lock up cash for a specific time. These times usually range from months to five years. They are FDIC-insured up to $250,000.
Good for: Purchasing treasury bills is good for investors who know what kind of bond they want because of the associated reward and risk factors.
Rather than purchasing a government bond fund, you may purchase particular securities according to your needs.
Rate of Return: They provide no interest income; instead, they offer capital appreciation.
3. Liquid Mutual Funds
Liquid mutual funds, or short-term funds, are the mutual funds that invest in short-term securities. These funds are excellent short-term investment plans because of the features like:
- Zero exit charges
- Money market-linked returns
- High liquidity
If you want to earn huge returns over an unknown short term, liquid funds are the idle investment option.
Good for: Liquid mutual funds are good for a wide variety of investors, including institutions looking for high liquidity, corporations, trusts, low-risk investment options, and individuals with the potential for earning high returns.
Rate of Return: Earns a return of 7.33% from the Tata Liquid Fund.
4. Debt Mutual Funds
Debt mutual funds are amongst the best short-period investment options if you’re looking to invest for less than five years. These funds provide market-linked variable returns. However, most debt mutual funds can keep your capital secure despite volatility.
Debt mutual funds usually invest in fixed-income instruments, like money market instruments, corporate and government bonds, corporate debt securities, etc.
Good for: Debt mutual funds are good for government, private, and public sector companies because they offer high liquidity, stable returns, and safety.
Rate of Return: ICICI Prudential Medium Term Bond Fund offers 7.4% p.a return.
5. Equity Mutual Funds
An equity mutual fund is a highly managed vehicle and investment that primarily consists of stocks. It may own worldwide stocks issued by companies or restrict its investable universe to companies within the U.S.
The management team of equity mutual funds examines investable universes and strategies, which might take an active or passive investing approach.
Good for: Equity mutual funds allow investors to access specific markets or styles, allowing them to create more portfolios and achieve their goals.
Rate of Return: Bandhan Tax Advantage (ELSS) Fund offers 16.8% of returns.
6. High-yield Savings Account
High-yield savings accounts are safe and easy to access, just like your traditional brick-and-mortar savings account at a big Bank; however, they offer a higher return.
You can be assured that your money is secured by FDIC insurance up to $2,50,000 per depositor per bank. Moreover, you can deposit the amount into your savings account at any time.
A high-yield savings account at a credit union or bank is an excellent alternative to keeping cash in a checking account. A checking account pays a small amount of interest on your deposit, while the bank will pay you the interest regularly in a savings account.
Good for: Performs well for risk-averse investors, and for those who require an amount in the short term and want to avert the risk of not getting their money back.
Rate of Return: 5.10% APY on Bask Interest Savings Account.
7. Government Bond Funds
Government bonds are like corporate bonds issued by the U.S. federal government. These funds buy investments like T-notes, T-bills, T-bonds, and mortgage-backed securities from federal institutions like the Government National Mortgage Association (Ginnie Mae).
Government bonds are low-risk and safe to invest in, making them the best short-term investment option. The U.S. government bonds market is highly liquid, allowing you to access and sell your money easily. The best way to purchase government bonds is directly through the government’s treasury.
Good for: Short-term government bonds are idle for investors looking for safe investment options and a diversified portfolio of bonds.
Rate of Return: You can expect an average yield of 4% to 8% from government bonds.
8. Corporate Bond Funds
Corporate bonds are one of the leading corporations’ best short-term investment plans to fund their investments. They pay interest regularly, usually quarterly or twice a year, and are safe.
Corporate bonds are issued by a firm to increase its capital. The investor who purchases a corporate bond is impressively lending money to the company for a series of interest payments; however, they may actively trade on the secondary market.
Good for: Good for investors who seek a diversified portfolio of bonds without analyzing individual bonds. It is also good for investors with insufficient money to go for individual bonds.
Rate of Return: The U.S. Corporate AAA Effective Yield is 5.01 percent.
9. Money Market Accounts
Money market accounts, or MMAs, are considered stable vehicles for short-term investment plans as they provide FDIC insurance up to $250,000 per deposit per bank.
According to your bank, with money market accounts, you can make cash deposits at any time with the six-per-statement-cycle transfer or withdrawal limit. MMAs offer various interest rates and checking account features like out-of-network ATM fee reimbursement and ATM and debit card access.
Good for: Money market accounts are good for those looking for huge interest rates of a savings account but simultaneously want flexibility.
Rate of Return: The average return falls between 0.01% APY to 3.45% APY, depending on your balance.
10. Money Market Mutual Funds
Refrain from being muddled between a money market mutual fund and a money market account. They both are different in terms of risks.
A money market mutual fund majorly invests in short-term securities like corporate debt, treasury municipal, and bank debt securities. Since it is a mutual fund, you will pay an expense ratio to the fund company from the management of assets.
Good for: Money market mutual funds are ideal for those who want to access their cash while earning a high yield.
Rate of Return: Morningstar’s average rate of return in one year is 5.05%, and in three years, it is 2.47%.
11. Stocks, Commodities & Derivatives Market
Commodities, stocks, and derivatives can be the best short-term investment options with huge returns. Investment in commodities, derivatives, and stocks is not subject to limited holding time. Therefore, you can get in & out anytime and leverage these investments to meet financial needs.
However, they also carry some risks, so you must be careful while investing. Therefore, you should stick to investments with fixed returns.
Good for: Commodities, stocks, and derivatives are ideal for speculators, margin traders, hedgers, and arbitrageurs.
Rate of Return: The average rate of return for stocks is 10% per year.
What Else?
To achieve your short-term financial goals you must consider these short-term investment plans. This can be ideal for corporations and individual investors searching for stable and liquid options to increase their wealth and meet financial goals. Choose wisely from the abovementioned options, such as money market accounts, CDs, high-yield savings accounts, corporate bonds, etc.
Now, it’s up to you which short-term investment plan you should opt for to earn high returns.
Happy Investing!
