Short term investment options for high returns: Gold, Fixed deposits, Short term debt funds, liquid funds

Looking to earn maximum returns in a quick and easy manner? Here are 6 short term investment plans with high returns in India

Short term investment options for high returns

Your wedding, your first home, or your first car might be two years away. But if you don’t start putting the money together now, those two years may turn into five or 10 or 15.

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Your go-to option might be a regular savings bank account but the returns these instruments offer are lower than most others, with the primary benefit being only safety.

Short-term investments are designed to provide good returns in a short period of time, which could be a few months or even a year. If you’re going to get married in the next two years, you’re definitely not interested in waiting forever for your money to multiply.

Here are six great short term investment plans with high returns that you need to look into now:

1. Bank fixed deposits

Bank fixed deposits are secure investments, and you can park your money in a fixed deposit anywhere from 30 days to 10 years. While you have the option to withdraw the money before the maturity date it’s advisable to hold on till the deposit matures, as you could lose out on interest income on foreclosures. 

For example, if you invest in a two-year fixed deposit, which yields a 10% interest rate and you decide to withdraw the funds after six months then the bank will pay you an interest rate that was valid for a six-month fixed deposit, which could be 6% at the time you had invested. Plus, if you withdraw money before the maturity date, depending on the bank, you could end up paying up to 1% of the interest charged as penalty.

A similar option is a Recurring Deposit with banks which were created to inculcate the habit of regular savings. These usually have a lower interest rate than FDs, but have the benefit of being more liquid, since withdrawals are allowed, albeit with certain penalties.  

Therefore, know what your investment horizon is before proceeding.

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2. Recurring Deposit

As mentioned earlier, Recurring Deposits focus on promoting the habit of regular savings. They allow investors to credit a fixed amount into their Recurring Deposit account on a monthly basis and earn interest at a rate that varies between 5.25% and 9.50% for a tenure of one year. The tenure ranges between six months and in multiples of three months, going up to 10 years. It comes with a one-month minimum lock-in period, wherein only the principal amount is charged on premature closure of the account within a month.

The interest rate applicable remain usually lesser or the same as fixed deposits.

3. Savings account

If you hate risks and you’re okay with less-than-substantial returns but need high liquidity, then consider opening a savings bank account. Different banks offer different interest rates, so that’s something you might want to keep in mind.

Some banks even offer up to 6% and 7% interest on savings account balance, where beyond a certain threshold funds automatically ‘sweep’ into a 181 day deposit, while these funds are completely liquid for you to use.

4. Liquid funds

Also known as money market accounts, liquid funds money are a special category of mutual funds, which invest in several money market instruments such as term deposits, commercial papers, etc.

The underlying assets in liquid funds usually have maturity periods of less than 91 days enabling high liquidity. The tenure of a liquid fund is always less than a typical mutual fund and offers higher interest than savings accounts.

Usually, large institutions invest their money in liquid funds but as an individual investor if you want to earn above-average returns and beat inflation then this is the best investment plan with high returns and minimal risk.

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5. Gold or silver

Have you noticed your parents love to buy gold during Diwali? Gold and silver are considered great investments for both the long term and the short term. If you are on the lookout for an uncomplicated and hassle-free way to earn returns, then this is one of the best investment plan with high returns for you.

Both buying and selling of gold, however, incurs a ‘making charge’, which may make it a little difficult to cut a profit when looking to invest for a very short tenure.

6. Short term debt funds

Short-term debt funds are managed conservatively with the sole aim of securing capital and providing good returns without the fear of market volatility. However, debt funds are complicated and if you really want to make money, you need to understand how they work. If you wish to invest for more than a year, debt funds are more tax-efficient than bank fixed deposits.

7. Large-cap mutual funds

Large-cap mutual funds invest in equity or stocks of large companies to achieve good growth in a short period of time. For short investments with high returns within one to three years look at these mutual funds.

Equity markets can be highly volatile, and there is no security of capital, so be aware of your own risk appetite before you invest.

To summarise:

Types of short term investment options Risk level Tenure for investment
Bank fixed deposits Low-risk Minimum of 7 days and maximum of 10 years
Recurring deposits Low-risk Minimum of 6 months and maximum of 10 years
Savings account Low-risk No tenure here
Liquid funds Low-risk As little as one day to as much as 90 days or higher
Gold or Silver Low-risk Any
Short term debt funds Low-risk Anywhere from a month to six months or more depending on your goals
Large-cap mutual funds Higher risk compared to the others Start with a minimum tenure of 3 years

The best way to invest money is to create a separate goal-oriented short-term portfolio that finds a sound balance between risk and return. Learn about these short term investment plans with high returns to make your money grow and successfully meet your financial goals.

Disclaimer: This article is intended for general information purposes only and should not be construed as investment, insurance, tax or legal advice. You are encouraged to separately obtain independent advice when making decisions in these areas.


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