Many a times you may have large amount of resources that need to be deployed immediately as short term investments.
They may need to be liquid, tax efficient as well as offer high returns. We are considering various options under short term investments, including those as low as 15 days to as much as 1 year. Take a look at some of the best short term investment options.
Small finance banks have emerged as an excellent short term investment bets, because of their interest rates. For example, Suryoday, a small finance bank offers you an interest rate of 9 per cent on a 12 month deposit, while offering 8.25 per cent on deposits of 181 days to 240 days. This is not a bad bet at all as the interest rates on these tenures at various commercial banks in the country could be barely 6 per cent. So, small finance banks is the way to go, if you are looking at short term investments. These were recently given license by the Reserve Bank of India.
Bandhan Bank short term deposits
If you have money to place for between 6 and 8 months, Bandhan Bank FDs has to be among the best short term investment plans.
You get an interest rate of 7 per cent on deposits of 6-12 months. No government or large private sector bank in the country currently offers you an interest rate of 7 per cent on a short term deposit. So, this can be a good short term investment option. It can be easily encashed, making it very liquid. Remember, there might be the applicable charges on the FDs for early withdrawals. It is interesting to note that even SBI does not offer you such high interest rate, on even longer term deposits. Please note that bank deposits are very much taxable and hence plan accordingly.
IDFC Bank Fixed Deposits
You get 7.5 per cent interest on 366 days fixed deposit at Bandhan Bank, while you get 7 per cent on 181- 365 days deposit at IDFC Bank. In fact, even if you go slightly beyond 1 year, the interest rate gets plateaued. In short, the best that you can get from an IDFC Bank deposit is 7.50 per cent. Senior citizens would get an interest rate of 8 per cent, which is again rather decent when compared to most other banks in the country.
RBL Bank Savings Account
This is the best place to park temporary money.
Say for example, if you have sold say a property and need to keep the money liquid to buy another property, you can open an RBL Bank Savings Account.
You get interest on savings bank account of up to 7.1 per cent, with other benefits like accident insurance cover of Rs 5 lakhs. You have a choice of placing in bank deposits, but, if you need the money early, you have to pay a pre-payment charges for early withdrawal.
Also remember, that savings bank account are exempted from interest income up to Rs 10,000. If you place money from Rs 1 crores to Rs 5 crores, the interest likely to be earned is 7.1 per cent. Between Rs 10 lakhs and Rs 1 crores it is 6.50 per cent and upto Rs 1 lakh it is 5.50 per cent.
The problem with short term and or long term Fds is that if you withdraw them early there is an unnecessary penalty of 1 per cent levied.
Hence, placing short term requirements in banks that offer high interest rates on savings account is the best bet. Yes Bank offers an interest rate of 6 per cent on its savings account. You can place amounts and not be too worried if your interest is less than Rs 10,000.
Liquid Funds are mutual fund schemes, which invest in short term securities like government securities. They can offer you returns just like bank deposits. They are not as liquid as bank deposits, but can be slightly more tax efficient. Go for them only if you understand them. You need to do adequate research and study the tenure of the funds very carefully before you decide to buy or sell the funds.
Like Yes Bank, Kotak Bank also offers an interest rate of 6 per cent on its savings account, which makes it a decent proposition for investment. However, the interest rate of 6 per cent per annum is applicable on savings account balance over Rs. 1 lakh and up to Rs. 5 crs. You get an interest rate of 5 per cent p.a. interest on savings account balance up to Rs. 1 lakh and 5.5 per cent below Rs 1 lakh.
Ultra Short Term Funds
They are also like liquid funds and are mutual fund schemes. Look for them, as they offer good returns in the short term. Again, variation in short term interest rates could affect the returns from these investments. Bulk of the money by the mutual funds are invested in high quality security. Slightly complicated to understand as compared to bank FDs, but can offer superior returns. One of the best short term investment options in a falling interest rate scenario.