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5 Best Short-Term Investments For 1-Year To Invest In 2021

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We all have our personal finance goals which are categorized as short-term, mid-term, and long-term. Based on our financial goals there are different investment instruments. Let's say if you have a long-term goal then Public Provident Fund (PPF), National Pension System (NPS), Unit Linked Insurance Plan (ULIP), Direct Equity, Real Estate, and so on can be the best to bet. Similarly, bank fixed deposits, small savings schemes, post office time deposit account, best performing large-cap mutual funds are well preferred for medium-term investments for 5-years.

 

But what if you have a short-term goal that you want to achieve in 1 year.? Making investments for 1 year may include reasons such as higher education, child marriage, housing projects, etc. In order to achieve a personal finance goal in 1-year, you need to have secure instruments in your portfolio as no one will want to take the risk in the short term. By taking this factor in mind we have complied here 5-best instruments which you can pick up for making an investment for 1 year.

Fixed Deposits
 

Fixed Deposits

Undoubtedly fixed deposits are the best investment choice for regular customers and senior citizens. Fixed deposits are well known for flexible tenure which ranges from 7 days to 10 years and assured returns. Talking about flexible tenure, it is the most secure investment which can be picked up for short-term, mid-term as well as long-term. Amid the current low-interest rates regime of leading banks, you may not want to invest in them, but there are some small finance banks that may give higher returns than what private and commercial banks are offering on their fixed deposit schemes.

For 1-year fixed deposits there are small finance banks that currently give you an interest rate up to 6.75% and thus are also insured by DICGC up to Rs 5 lakhs. Talking about 1-year fixed deposits you can also invest in a fixed deposit scheme of private sector banks and post office. In a post office time-deposit account, you can get an interest rate of 5.5% on 1-year deposits. On the other side, private sector banks are offering interest rates of up to 6.10% on 1-year fixed deposits. Here are the top 5 banks which are currently promising higher interest rates on 1-year fixed deposits.

Small Finance Banks
Banks 1-Year FD Rates For Regular Citizens 1-Year FD Rates for Senior Citizens W.e.f.
Utkarsh Small Finance Bank 6.75% 7.25% July 1, 2021
Ujjivan Small Finance Bank 6.50% 7.00% March 5, 2021
ESAF Small Finance Bank 6.50% 7.00% May 2, 2021
Suryoday Small Finance Bank 6.50% 6.75% June 21, 2021
Equitas Small Finance Bank 6.35% 6.85% June 1, 2021
Private Sector Banks
Banks 1-Year FD Rates For Regular Citizens 1-Year FD Rates for Senior Citizens W.e.f.
RBL Bank 6.10% 6.60% July 2, 2021
Yes Bank 6.00% 6.50% June 3, 2021
IndusInd Bank 6.00% 6.50% June 4, 2021
DCB Bank 5.70% 6.20% 15 May, 2021
Karur Vysya Bank 5.25% 5.75% 08.07.2021

Recurring Deposits

Recurring Deposits

Recurring deposits work just like fixed deposits but the twist is, in fixed deposits, you have to make a lump-sum deposit and in recurring deposits, you have to make a monthly contribution just like a mutual fund SIP. Recurring deposits are well known for their safety, higher interest rates, and best for short-term goals. Investing in recurring deposits are highly preferred for risk-averse investors who do not want to welcome market-based returns in their portfolio.

One can make the best out of an RD scheme if he or she stays invested for the entire maturity term, as making a premature withdrawal may lose interest rates. In this scenario making mutual fund SIPs can be a decent choice. But if getting risk-free returns in the short-term is your only goal, then here are the top banks that are currently promising higher interest rates on recurring deposits.

Arbitrage Mutual Funds

Arbitrage Mutual Funds

For new investors or investors with a low-risk appetite, arbitrage mutual funds can be a good pick. These are the mutual funds that have their asset allocation across cash and derivatives markets to provide returns to the depositor. To maximize returns, it primarily exploits price differences between present and future instruments. To take advantage of differing prices, the fund managers of these hybrid funds buy and sell shares in multiple markets simultaneously in order to generate returns.

Since the purchasing and selling price of stocks are well known to the fund manager, arbitrage mutual funds tend to be less risky. Because they are equity funds, they are eligible for the same tax benefits as equity-based instruments. As a consequence, investing in arbitrage mutual funds for a year might be a good option for the tax benefits available for equity funds and reasonable average returns of 4 to 6 percent. Here are the 4 best performing arbitrage mutual funds to invest in 2021, based on rating and returns.

Funds1-year returns3-year returns5-year returnsAUMNAV as of 7 July 2021Rating by Value Research
Edelweiss Arbitrage Fund 4.38% 5.98% 6.32% Rs 5,503 Cr Rs 15.97 5 star
Nippon India Arbitrage Fund 4.37% 5.93% 6.32% Rs 11,792 Cr Rs 22.14 5 star
L&T Arbitrage Opportunities Fund 4.57% 5.85% 6.23% Rs 4,488 Cr Rs 15.80 4 star
Kotak Equity Arbitrage Fund 4.44% 5.80% 6.15% Rs 20,291 Cr Rs 30.71 4 star

Post Office Time Deposit

Post Office Time Deposit

Just like a fixed deposit account of banks, it is a term deposit scheme provided by India Post. Post office term deposit account comes with a maturity period of 1 to 5 years. It is among the best and safe debt instruments to bet for short-term goals, as it is backed by the government of India. In post office term deposit account, interest rates are payable annually but are revised on a quarterly basis. The interest received is added to your income and taxed according to your income tax bracket. One can open a post office time deposit account with a minimum amount of Rs 1000 and in multiples of Rs 100 with no maximum deposit limit.

A post office time deposit account can be opened individually, jointly (up to 3 adults), or on behalf of minors. For the quarter of July to September 2021, the government has recently kept interest rates unchanged for small savings schemes. A post office time deposit of one to three years will earn an interest rate of 5.5 percent. Whereas a 5-year deposit term will earn an annual interest rate of 6.7 percent per annum.

Debt Mutual Funds

Debt Mutual Funds

Investors with a low-risk appetite, short-term goals, and seeking steady income can invest in debt mutual funds. Debt funds are less turbulent and thus less risky than equity funds, mid-cap funds, and small-cap funds. Those looking to invest in market-linked instruments for less than a year can invest in low-duration debt funds. Low duration debt mutual funds are the funds that invest over the course of 6 to 12 months across money market and debt instruments.

4 Best High Rated Debt Mutual Funds Better Than PPF

The reason behind picking-up low duration debt funds for you is, these funds may provide a reasonable level of return for a modest level of risk for your short-term financial goal. But before investing in low-duration debt funds, investors should and should keep in mind various risks such as credit risk, interest rate risk, inflation risk, reinvestment risk, etc. Here are the 5 best performing low-duration debt funds to invest in 2021, based on rating and returns.

Funds1-year returns3-year returns5-year returnsAUMNAV as of 7 July 2021Rating by Value Research
Aditya Birla Sun Life Low Duration Fund 5.45% 8.05% 7.94% Rs 16,526 Cr Rs 559.73 5 star
Kotak Low Duration Fund 5.41% 8.02% 8.16% Rs 12,765 Cr Rs 2811.68 5 star
JM Low Duration Fund 3.75% 5.59% 6.22% Rs 128 Cr Rs 29.76 5 star
Axis Treasury Advantage Fund 4.79% 7.62% 7.56% Rs 10,158 Cr Rs 2512.31 4 star
HDFC Low Duration Fund 5.99% 7.82% 7.73% Rs 24,543 Cr Rs 48.27 4 star

Disclaimer

Disclaimer

The views and investment tips expressed by authors or employees of Greynium Information Technologies, should not be construed as investment advise to buy or sell stocks, gold, currency or other commodities. Investors should certainly not take any trading and investment decision based only on information discussed on GoodReturns.in We are not a qualified financial advisor and any information herein is not investment advice. It is informational in nature. All readers and investors should note that neither Greynium nor the author of the articles, would be responsible for any decision taken based on these articles. Please do consult a professional advisor. Greynium Information Technologies Pvt Ltd, its subsidiaries, associates and authors do not accept culpability for losses and/or damages arising based on information in GoodReturns.in

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