What are the Options to Invest Money for Less Than a Year?

Sep 19, 2019 | 1 month ago | Read Time: 3 minutes | By iKnowledge Team
money investment, investment options, short term investments

Many a times, people invest in short term investment options alongside long-term investments. But the most important question to ask is, why would investors want to invest in short-term instruments for less than a year? Mainly because they have short-term goals that need to be met early. These goals could be paying for your only child’s school fees, or planning a trip abroad. The second question that investors often ask is where to invest money? OR which investment tool would be a wise choice for them to invest their money?

Here is a list of safe investment options that you can consider or choose from to invest your money:

1. Fixed Maturity Plans  (FMP)
An FMP is a closed-ended debt mutual fund. An FMP usually allows you to invest in instruments whose duration of maturity is similar to the tenure of the asset under FMP. The tenure of an FMP is anywhere from one month to five years. Interest rates do not have an effect on FMPs as the securities are held until maturity. This means that the rate of interest is fixed.

2. Post Office Term Deposits
Post office term deposits typically have a tenure ranging from one year to five years. What you need to make a note of is that for achieving your short-term financial objective you have the option to invest in a one-year time deposit. In the case of a one-year time deposit, interest is calculated quarterly and payable annually. Interest rates are reset by the government every quarter. The reset interest rate is applicable on the fresh set of investments made in that particular quarter of the year.

3. Recurring  Deposits
Recurring deposits are considered to be a fairly useful option when it comes to investing for a  short-term duration. The lock-in period for RD is one month at the minimum. You get back the principal amount after closure.               

4. Debt Mutual Funds
Why would you  want to invest in debt mutual funds? Mainly because the net asset value (NAV) fall is not as steep as in the case of equity fund due to market conditions. Also, debt-mutual funds guarantee a regular income. At the same time, debt-mutual funds shy away from extreme risks. This means they are risk-averse hence they are a safe investment option.

5. Bank Fixed Deposits
As per Deposit Insurance and Credit Guarantee Corporation (DICGC) rules,  every bank deposit holder has insured up to a maximum of INR 1 lakh rupees as both principal and interest amount. The investment tenure for fixed deposit is anywhere between 6 months, 9 months to 12 months.

6. Arbitrage Mutual Funds
Arbitrage mutual funds are open-ended funds which can be held for a period of 12 months. The investments are mainly done in the cash and derivative categories. Returns are earned as a price differential between cash and derivatives market to create returns. Another point to remember is that these are open-ended schemes due to which the liquidity is high.

7. Money Market Fund
In case of a money market fund, the maturity of the securities is upto one year. Do note that that the returns are not assured or fixed in any way but liquidity is comparatively high. If you hold the respective fund for under 36 months then the gains are added and taxed accordingly.

8. Unit Linked Insurance Plan (ULIP)  
ULIP is an investment-cum-insurance policy that provides insurance and investment under a single integrated plan. ULIP offers investors the flexibility for a switch fund and partial withdrawals. Thus the liquidity factor is high in case of ULIPs. Remember that a ULIP plan is linked to capital market and allows investors the freedom to invest in equity or debt funds as per their risk-bearing capacity or risk appetite. ULIPs are categorised as per purpose such as ULIPs for Wealth Collection, ULIP for Children Education and ULIPs for Health Benefits.

Investments done in ULIP have a tax benefit u/s 80C, 80D and 10 (10D). ULIPs is considered to be a transparant investment tool with clear features and charges.

Aegon Life has a number of ULIP plans you may consider while opting for ULIPs as one of the short-term investment tools. To know about Aegon Life’s life insurance products like term insurance and other products, visit our home page. Go ahead, and start investing today!

Points to Consider When Planning for An Early Retirement Points to Consider When Planning for An Early Retirement
money investment, investment options, short term investments
Critical Illness Insurance: How to Deal with Loss of Limbs