Short-term investment plans are in which investors can deposit their money for short periods ranging from 3 months to 12 months. The primary criteria of short-term investors are the safety of capital and returns and the fast growth of wealth, considering the same short-term investments are excellent.
If you are investing only for one year, then you have a short-term investment horizon. Therefore, considering the unstable nature of the market, you should stay away from the equity options. For investments having a short-term plan, capital protection is important as there isn’t much time left to recover if there are any adverse developments in the market.
Best Investment Plans for 1 Year
If you want to opt for investment plans for 1 year, there are the top 7 investment schemes that will surely help. The schemes are discussed below in detail. Let’s have a look at these plans.
- Debt Mutual Funds
- Fixed Deposit
- Post Office Term Deposit
- Arbitrage Mutual Funds
- Fixed maturity plans or FMPs
- Liquid Funds
- Recurring Deposit
Let’s discuss these plans one by one.
Debt Mutual Funds
Debt funds are short-term investment plans that invest in fixed-income securities consisting of corporate bonds, money market instruments, treasury bills, and other debt securities. There is low risk as compared to equity mutual funds. You can decide to invest in debt funds if you’re looking for a high amount of liquidity, earn a regular income, and tax benefits.
Benefits of Debt Mutual Funds
The benefits of investing in Debt Mutual Funds are listed as under:
- Debt Mutual Funds can be acknowledged for an investment horizon of 1 day to up to 3 years
- They give better post-tax returns compared to FDs if you stay invested for at least 3 years
- Liquid Debt Funds are a great choice to park your emergency funds. You can get better returns than a savings bank account without taking too much risk.
Fixed Deposit
Fixed deposits are one of the traditional investment options. If you have a lump amount at your disposal, then you can invest that in a fixed deposit. FDs offer an attractive interest rate and are much higher than what a regular savings bank account provides. Also, the investments made in fixed deposits are regarded to be highly secured as there is no chance of flight.
Benefits of Fixed Deposits
The benefits of investing in Fixed Deposits are listed as under:
- No matter how interest rates move or the market performs, you will get the returns fixed at the time of investing.
- At the end of tenure, you receive back the amount you put in along with the accumulated interest
- You receive interest on the interest amount too. This benefits you accumulate a big amount with ease
- Senior citizens can get more from their life’s savings.
Post Office Term Deposit
Post Office Term Deposit is considered one of the most secured investment options. Post office term deposits come with tenures of 1, 2, 3 and 5 years. The sovereign guarantee backs the investments in POTD. The government sets the rate of returns every quarter. The whole investment made will get returns at the prevailing rate. Any new investment made after the release of the new interest rate shall earn returns at that rate.
Benefits of Post Office Term Deposit
The benefits of investing in Post Office Term Deposit are listed as under:
- Post office FD interest rates are relatively higher than what market has to offer. Nowadays, the rate of interest ranges from 6.9% to 7.3%.
- Post office deposits are backed by the government of India and are thus totally safe to invest in and ensure guaranteed returns on the investment.
- Alike banks, post offices also have a deposit lock-in period. But, deposits can be withdrawn prematurely in case of any emergency.
- Whenever the inflation rate falls below the term deposit interest rate, the depositor earns more
- Post office fixed deposit is an entirely risk-free investment as it does not depend on the market state; you will receive complete returns on maturity.
Arbitrage Mutual Funds
Arbitrage Funds are a type of mutual fund that leverages the difference between derivatives and cash to generate profit. The returns rely on the volatility of the market. If you have surplus cash, a low-risk appetite, and want to enjoy tax deductions, you can place your money in Arbitrage Funds. For taxes, Arbitrage Funds are treated as equity mutual funds. For funds sold within a year, you need to pay 30% of the tax for short-term capital gains, while 10% tax charges are applicable for long-term capital gains on arbitrage funds sold after a year.
Benefits of Arbitrage Mutual Funds
The benefits of investing in Arbitrage Mutual Funds are listed as under:
- No stock market risk as the buying and selling price of a stock is identified to fund manager
- Fit for an investment horizon of 1-3 years
- Equity taxation implies more tax-efficient returns when compared to Fixed Deposits.
Fixed maturity plans or FMPs
Fixed maturity plans (or FMPs) also known as close-ended debt funds, fixed maturity plans invest in corporate bonds, certificate of deposits commercial papers, government securities, money market instruments, and high-rates non-convertible debentures. The basic tenures for this plan range from thirty days to 180 days, 370 days, and 395 days. Fixed maturity plans (FMPs) can be either a dividend or a growth mutual fund option. If it is a set maturity dividend plan then, the fund house levies Dividend Distribution Tax (DDT). But, if it is an FMP growth option, then capital gains tax is suitable with the benefit of indexation.
Benefits of Fixed maturity plans or FMPs
The benefits of investing in fixed maturity plans are listed as under:
- These funds provide lower levels of risk as they invest in high-rated debt and money market securities of well-established companies. The fund managers choose only the top-rated securities to constitute the portfolio.
- Since FMPs are secured for a particular duration, your investment goes through both market ups and downs. This will improve the performance of these funds maintain over time. FMPs are known to be one of the least affected investments by market changes.
Liquid Funds
Liquid Funds are an open-ended debt fund that invests in money market instruments like T-bills, commercial papers (CP), and term deposits. Liquid Funds possess a maturity of three to six months. It is a low-risk mutual fund scheme that offers high returns than your FDs or savings account in the bank. If you are looking for a short-term investment period, liquid funds are the best investment instruments that give returns in the range of 7-9%. The liquidity features of the mutual fund scheme are what make this an engaging option among investors.
If you have surplus cash and desire to invest for a short amount of time, then you can choose any of the investment plans. You can easily achieve stable returns by taking low risks, keeping in mind your short-term financial goals.
Benefits of Liquid Funds
The benefits of investing in Liquid Funds are listed as under:
- Fit for putting money aside for emergencies
- Near zero risk of loss if anyone invests for at least one month
- It offers up to 50% to even at times 100% higher returns than the savings bank account
Recurring Deposit
Recurring deposits (RDs) are fit if you wish to invest a small fixed sum regularly with a bank. You will get a lump sum with interest at the end of the tenure of the recurring deposit. RDs will help you instill financial discipline as you will cultivate the habit of setting aside a fixed sum regularly. This is beneficial in the long run. FDs and RDs give much higher returns than a regular savings bank account. One-year investment plans are not really short, and you shouldn’t park your funds in a savings bank account.
Benefits of Recurring Deposit
The benefits of investing in a Recurring Deposit are listed as under:
- No penalty if you miss an installment.
- Inculcates financial disciplined.
- Easy to open an RD account.
- Minimum deposit of ₹ 100.
Benefits of Investment Plan for 1 year
The benefits of investing in 1 Year Investment Plans are listed as under:
- You can get decent and steady returns
- You will face low or zero risk as an investor when there is no fall in investment value due to market fluctuations
- The money is safe, even if you obtain low returns
- A great liquidity choice during emergencies
Conclusion
Short-term investments offer better returns and liquidity. Short-term investment plans are mostly acknowledged by investors to cover their financial goals soon. Because of shorter maturity periods, short-term investments also have restricted risk exposure. In a short period of time, people can get significant returns. Hence, short-term investment plans provide investors attractive yields, strong liquidity, and a low-risk threshold.
Frequently Asked Questions:
Q1. Where should I invest my money for 1 year?
Ans. Best Investment Plans for 1 Year
- Debt Mutual Funds
- Fixed Deposit
- Post Office Term Deposit
- Arbitrage Mutual Funds
- Fixed maturity plans or FMPs
- Liquid Funds
- Recurring Deposit
Q2. Why should I invest in a one-year investment plan?
Ans. One-year investment plans are useful if you are new to mutual fund investments and are planning to diversify the investment portfolio.
Q3. Do a one-year investment plan produce good returns?
Ans. The one-year investment plan has been gaining popularity amongst young investors as these produce good and quick returns. If you want to understand the mutual funds Market, then a one-year investment plan is a good idea.
