Short - Term Products

  Short- term Products- Low Returns with Capital Appreciation

Short term goals are those less than three five years in the future. To reduce the risk of loss, holding the investment in cash or cash like vehicles is likely the most appropriate strategy. Money market funds and cash equivalent investments are conservative popular investments, as are savings accounts.

                                                     Investors with short-term money/ goals have two primary objectives.

1. Safety of capital

2. Return on capital

Money Market Funds / Liquid Schemes

Money Market or Liquid Funds are very short-term maturity. They invest in debt securities with less than 91 days to maturity. The primary source of return is interest income. Liquid fund is a very short-term fund and seeks to provide safety of principal and superior liquidity. An investor seeking the lowest risk ought to go for a liquid scheme. However, the returns in such investment are lower. Cash-equivalent instruments and money market funds are the least volatile of the investment types and are therefore ideal for people with extremely low risk tolerance.

Short Term Debt Funds

Short term funds may provide a higher level of return than liquid funds and ultra short term funds, but will be exposed to higher mark to market risks. Debt instruments are FDs, Bonds, debt based Mutual Fund Scheme such as Short Term Funds, Gilt Funds, Liquid Funds, floater etc. Depending upon the liquidity needs and taxation, the product should be taken debt category.

Fixed Maturity Plans (FMPs)

FMP's are closed end schemes that invest in a portfolio of debt securities which mature on or before the maturity of the scheme. FMP's come with tenors ranging from 90 days to 3 years. The investment horizon of the investor must watch the tenor of the scheme.

Bank Deposits

The simplest of all investment by opening a bank account and depositing money in it one can make a bank deposit. There are various kinds of bank accounts: current account, savings account and fixed deposit account. Bank offer deposits of varying time frames beginning with a minimum of 7 days.

Post Office Time Deposits (POTDs)

The Post Office Term deposits is similar to a fixed bank deposit, where you save money for a definite time period earning a guaranteed return through the tenure of deposit.

Recurring Deposits (RDs)

This is one more type of secured investment. This product is ideally suitable to those who not able to invest a lump sum and looking for monthly investment. Ideally bank offers RD of minimum tenure with 6 months to a maximum of 10 yrs. Interest received on your RD is taxable as per your tax slab.

5- Yrs National Savings Certificate (NSC)

You can invest in Postal NSC of 5 years, only if you are sure that goal is exactly at 5 years from today. You can claim deduction under section 80 C. However, the interest on NSC will be taxable.