A guide on the best short term investment plans with high returns in India

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

The younger generation is increasingly focused on immediate outcomes, whether it is swiftly bypassing advertisements on platforms like Netflix or enthusiastically adopting strategies like the FIRE (Financial Independence Retire Early) movement to achieve early retirement. However, when you need quick returns, you need to invest in the right short term investment plans.

There are a number of short term investment plans with high returns in India. Here is a detailed list of each of these to give you an idea of how and what you can choose to fuel your short-term goals.

Key highlights

• India offers a range of high-return short-term investment options, including bank fixed deposits, recurring deposits, savings accounts, money market accounts, gold or silver, short-term debt funds, and large-cap mutual funds
• You must carefully select short-term investment plans that align with your risk tolerance and return expectations while considering factors such as liquidity and market volatility

Related: ETFs: 6 Reasons they make an excellent instrument for investors

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.

Related: Simple ways in which you can diversify your financial portfolio

Where to invest money for short term?

1. Bank fixed deposits

A bank fixed deposit is one of the most popular and best short term investments in India. 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.

Related: Simple ways in which you can diversify your financial portfolio

2. Recurring Deposit

As mentioned earlier, Recurring Deposits focus on promoting the habit of regular savings and are suitable short term investment plans with high returns. 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 2.75% and 7.50% p.a. for a tenure of one to five years or above. 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

Savings accounts are popular short term investment plans as they contain minimal risk. 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. Money market accounts

Popularly known as liquid funds, money market accounts are a special category of mutual funds, which invest in several money market instruments such as term deposits, commercial papers, etc. A market account may be the best investment plan with high returns in the short-term category.

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.

Related: How well have you planned your taxes? Are you making the most of your tax saving benefits? 

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.

Related: How well have you planned your taxes? Are you making the most of your tax saving benefits?

6. Short term debt funds

Short-term debt funds can be the best investment plan with high returns for the short-term. These 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:

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.