Money Mazics

When you have met all the expanses and still left with surplus money raises the desire to savings. Instead of just saving it, you can opt to invest in various short term investments options which can earn you good returns. Investing in short term investment options increase the value of your money and lowers your risk of running out of finances when you really have a pressing situation. Listed below are the prominent short term investment options where you can park your extra money and earn good returns. 

Bank Fixed Deposits

Many Indian banks provide good interest rates on fixed deposits ranging from 8 percent to 9.25 percent per annum. You can park your money for 2 to 3 years as they are considered to be very safe investments. Currently, 1-2 year FD offers a rate in the range of 9.10-9.50 percent and 3-4 year FD 8.75-9.25 percent. Tax-free FDs with tenure of more than five years fetch you 8.25-9.25 percent. Though bank FDs are the safest bet, your post-tax returns may not be too impressive, especially if you fall in the highest tax bracket. You get around 6.9 percent post-tax for those in the highest tax bracket if FD rate is 9.50 percent. Bear in mind that you will have to pay a penalty usually for pre-mature withdrawal.

Stocks

When you purchase stocks, or equities, as your adviser might put it, you become a part owner of the business. This entitles you to vote at the shareholders' meeting and allows you to receive any profits that the company allocates to its owners. These profits are referred to as dividends. However share market is volatile and you may gain or lose your money.

Mutual fund

An investment vehicle that allows you to invest your money in a professionally-managed portfolio of assets that, depending on the specific fund, could contain a variety of stocks, bonds, market-related indexes, and other investment opportunities.

Corporate/Company Deposits

Corporate companies also provide fixed deposit schemes which can earn you good returns. These deposits are also accepted by financial institutions and Non-Banking Finance Companies (NBFCs). Benefits of investing in Company Fixed Deposits are high interest, short-term deposits; lock-in period is only 6 months. No Income Tax is deducted at source if the interest income is up to 5, 000 in one financial year. Investment can be spread in more than one company, so that interest from one company does not exceed 5, 000.

Non-convertible debentures (NCD)

Apart from fixed deposits, the companies also provide Non-convertible debentures (NCD) with attractive interest rates. NCDs are debt instruments issued by companies as part of their fund raising. They have a fixed tenure and pay out interest monthly, quarterly, annually or even at the end of the tenure. There are two types of NCDs – secured and unsecured. Secured NCDs come with slightly lower risk, since they come with some sort of assurance that if the issuing company defaults on payment, you can claim it from the company as per law. Unsecured NCDs don’t have any such assurance. Invest in NCDs with a high AAA rating. Most NCDs are listed on the stock exchanges and available in the Demat form. This makes NCDs liquid, but only to an extent, as volumes are low and it may be difficult to find a buyer

Tax Free Bonds

Tax Free Bonds are tax free because interest earned from them does not form part of the total income. When you sell the bond on the exchange, you will have to pay capital gains tax, though. The post-tax return you earn on this bond is better than what you would have earned for a fixed deposit. The coupon on these bonds are linked to the government securities market, where the prevailing economic uncertainties have pushed up yields.

Investment in Gold

Investment in gold is a good option for both long term and short term time period. It is observed that investment in gold has provided almost 24 percent yearly returns in the last 5 years. There are various options to invest in gold.

Exchange-Traded Fund (ETF)

ETFs are funds – sometimes referred to as baskets or portfolios of securities – that trade like stocks on an exchange. When you purchase an ETF, you are purchasing shares of the overall fund rather than actual shares of the individual underlying investments.

ULIP

Unit-linked insurance policies (UILPs) have both life insurance and investment components. Your premiums are used to pay for units in investment–linked fund(s) of your choice. Some of the units you buy are then sold to pay for insurance and other charges, while the rest remain invested.

Real Estate

This investment could be buying a house, an apartment, or just plain land. Buying real estate is a bit expensive. Though it is not really available in India right now but in other countries if you are interested in real estate investments, you might consider real estate investment trusts (REIT), a public company that owns and manages a lot of real estate such as apartments, shopping malls, and office buildings. You can buy shares of REIT stock and not worry about managing these buildings.

Invest prudently and reap the benefits in the year ahead..