8 Best Short Term Investment Options

Updated on May 28, 2024 , 9789 views

A short term investment is something that you would want to invest for a short duration. Well, here short term doesn’t have any fix duration, but it’s ideally a financial goal, which is less than three years. So, if you are planning to invest for a short term, here are some of the best short term investment options.

One can park this fund in short term investment options, so that it can be liquidated anytime one chooses while earning a return reward too. While Investing money for a vacation, start early to create a large corpus and focus on low risk, assured Return on Investment and high liquidity instruments.

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1. Liquid Funds

Liquid Funds invest in short-term money Market products such as treasury bills, commercial papers, term deposits, etc. Liquid funds invest in securities that have a low maturity period, usually less than 91 days. Liquid funds provide easy liquidity and are less volatile than the other types of debt instruments. Also, these are a better option than traditional Bank Savings Account. In comparison to bank account, liquid funds provide 7-8 percent of annual interest.

Investors wanting to invest in liquid funds, can choose amongst the below-mentioned Best Liquid Funds:

Fund	NAV	Net Assets (Cr)	1 MO (%)	3 MO (%)	6 MO (%)	1 YR (%)	2023 (%)	Debt Yield (YTM)	Mod. Duration	Eff. Maturity
Indiabulls Liquid Fund Growth	₹2,341.82 ↑ 0.43	₹213	0.6	1.9	3.7	7.2	6.8	7.47%	2M 2D	2M 8D
Principal Cash Management Fund Growth	₹2,137.98 ↑ 0.39	₹5,149	0.6	1.8	3.7	7.2	7	7.21%	1M 6D	1M 6D
PGIM India Insta Cash Fund Growth	₹315.309 ↑ 0.05	₹438	0.6	1.8	3.7	7.2	7	7.64%	2M 9D	2M 14D
JM Liquid Fund Growth	₹66.1591 ↑ 0.01	₹2,233	0.6	1.8	3.6	7.2	7	7.14%	22D	24D
Axis Liquid Fund Growth	₹2,696.2 ↑ 0.50	₹32,648	0.6	1.9	3.7	7.3	7.1	7.22%	1M 8D	1M 8D
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 30 May 24

2. Ultra Short Term Funds

Ultra short duration funds invest in fixed Income instruments which have a Macaulay duration between three to six months. Ultra short-term funds help investors avoid interest rate risks and also offer better returns compared to liquid Debt fund. Macaulay duration measures how long it will take the scheme to recoup the investment

Here are some of the best performing ultra short term funds to invest:

Fund	NAV	Net Assets (Cr)	1 MO (%)	3 MO (%)	6 MO (%)	1 YR (%)	2023 (%)	Debt Yield (YTM)	Mod. Duration	Eff. Maturity
Aditya Birla Sun Life Savings Fund Growth	₹504.821 ↑ 0.11	₹12,633	0.6	2	3.8	7.4	7.2	8.08%	5M 16D	6M 29D
UTI Ultra Short Term Fund Growth	₹3,929.69 ↑ 0.81	₹2,349	0.6	1.8	3.5	6.9	6.7	7.69%	5M 15D	5M 25D
BOI AXA Ultra Short Duration Fund Growth	₹2,940.9 ↑ 0.64	₹146	0.5	1.7	3.2	6.3	6.2	7.41%	4M 28D	5M 5D
Indiabulls Ultra Short Term Fund Growth	₹2,021.64 ↑ 0.84	₹18	0.2	0.8	1.5	4.2		3.23%	1D	1D
ICICI Prudential Ultra Short Term Fund Growth	₹25.61 ↑ 0.00	₹12,586	0.6	1.9	3.7	7.2	6.9	7.7%	5M 8D	5M 26D
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 30 May 24

3. Low Duration Funds

The scheme will invest in debt and money market securities with a Macaulay duration between six to 12 months. Low duration funds have a higher maturity duration than liquid and Ultra Short Term fund. Risk-averse investors can invest in this scheme for a short period and earn better returns than that bank savings account. These funds generally offer steady and stable returns.

Here are some of the best low duration funds to invest:

Fund	NAV	Net Assets (Cr)	3 MO (%)	6 MO (%)	1 YR (%)	3 YR (%)	2023 (%)	Debt Yield (YTM)	Mod. Duration	Eff. Maturity
PGIM India Low Duration Fund Growth	₹26.0337 ↑ 0.01	₹104	1.5	3.3	6.3	4.5		7.34%	6M 11D	7M 17D
Baroda Pioneer Treasury Advantage Fund Growth	₹1,600.39 ↑ 0.30	₹28	0.7	1.2	3.7	-9.5		4.07%	7M 17D	8M 1D
ICICI Prudential Savings Fund Growth	₹499.546 ↑ 0.05	₹18,176	2	3.9	7.7	6	7.6	7.88%	11M 1D	2Y 3M 4D
UTI Treasury Advantage Fund Growth	₹3,262.79 ↑ 0.83	₹2,630	1.9	3.7	7.1	7.4	7.1	7.76%	10M 20D	11M 23D
Tata Treasury Advantage Fund Growth	₹3,626.78 ↑ 0.69	₹2,350	1.8	3.7	6.9	5.4	6.9	7.66%	10M 25D	1Y 2D
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 29 Sep 23

4. Money Market Fund

The money market fund invests in many markets such as commercial/treasury bills, commercial papers, Certificate of Deposit and other instruments specified by the Reserve Bank of India (RBI). These investments are a good option for risk-averse investors who want to earn good returns in short duration. This debt scheme will invest in money market instruments having a maturity up to one year.

Here are some of the best Money market funds to invest:

Fund	NAV	Net Assets (Cr)	3 MO (%)	6 MO (%)	1 YR (%)	3 YR (%)	2023 (%)	Debt Yield (YTM)	Mod. Duration	Eff. Maturity
Aditya Birla Sun Life Money Manager Fund Growth	₹341.007 ↑ 0.09	₹23,852	2	3.9	7.5	5.9	7.4	7.81%	9M 29D	9M 29D
UTI Money Market Fund Growth	₹2,840.29 ↑ 0.69	₹14,041	2	3.8	7.5	5.9	7.4	7.62%	8M 8D	8M 8D
ICICI Prudential Money Market Fund Growth	₹349.651 ↑ 0.09	₹21,861	2	3.8	7.5	5.8	7.4	7.66%	8M 8D	8M 28D
Kotak Money Market Scheme Growth	₹4,139.75 ↑ 1.08	₹18,875	2	3.8	7.5	5.9	7.3	7.73%	8M 8D	8M 16D
L&T Money Market Fund Growth	₹24.3616 ↑ 0.01	₹1,158	1.9	3.7	7.1	5.3	6.9	7.61%	8M 12D	9M 1D
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 30 May 24

5. Short Term Funds/Short Duration Funds

Short duration funds mainly invest in Commercial Papers, Certificate of Deposits, Money Market Instruments, etc, with a Macaulay duration of one to three years. They may provide a higher level of return than ultra-short-term and liquid funds but will be exposed to higher risks.

Here are some of the best money market funds to invest:

Fund	NAV	Net Assets (Cr)	3 MO (%)	6 MO (%)	1 YR (%)	3 YR (%)	2023 (%)	Debt Yield (YTM)	Mod. Duration	Eff. Maturity
PGIM India Short Maturity Fund Growth	₹39.3202 ↓ 0.00	₹28	1.2	3.1	6.1	4.2		7.18%	1Y 7M 28D	1Y 11M 1D
ICICI Prudential Short Term Fund Growth	₹55.0345 ↑ 0.01	₹18,092	1.9	3.8	7.2	5.9	7.4	7.98%	2Y 9M 22D	5Y 18D
UTI Short Term Income Fund Growth	₹29.0772 ↑ 0.01	₹2,680	1.7	4.1	7	7	6.9	7.52%	2Y 6M 22D	3Y 1M 28D
Aditya Birla Sun Life Short Term Opportunities Fund Growth	₹43.4897 ↑ 0.01	₹7,339	1.8	3.9	6.7	5.5	6.9	7.87%	2Y 10M 10D	4Y 2M 16D
Nippon India Short Term Fund Growth	₹48.1399 ↑ 0.01	₹5,497	1.7	3.9	6.7	5.2	6.8	7.84%	2Y 8M 8D	3Y 4M 2D
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 29 Sep 23

6. Bank Fixed Deposits

Bank fixed deposits can be one of the best short term investment options, as these are secure investments. Also, many banks provide better interest rates on FDs, which typically Range from 3% to 9.25% per annum. Investors can park their money for a minimum period of 7 days to a maximum of 10 years.

A similar option to Bank FD is Recurring deposit, which is equally effective for short term investment. If you have a habit of saving monthly, then Bank Recurring Deposits are a good option to go. They have a minimum of six months to a maximum of a decade’s tenure. Their interest rates are around 8% per annum.

7. Savings Account

A savings account is the most popular short term investment option in India. Also, it’s the safest and easiest way to access your money. If you invest your money in savings account, you can get around 4% to 7% of the return. However, interest rates may vary bank to bank. One can deposit and withdraw their money as per their convenience and requirements.

8. Fixed Maturity Plans

Fixed Maturity Plan (FMP) is offered by Mutual Funds, which invest in money market and debt instruments. These funds come up with lock-in period varying from a month up to three years. Unlike FDs, you cannot withdraw your money in FMPs before the maturity period. However, FMPs are more tax efficient than FDs, and you can also expect better returns.

Conclusion

Every investor has their own choice of instruments with regards to their goals. In order to invest in the short term Investment plan, one should calculate the amount, risks, tenure, interest rates and liquidity that comes along with each instrument. Since you are planning a short term investment, you should make a smart choice with instruments that have a low risk. Invest Now and make your short term goals successful!

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Disclaimer:
All efforts have been made to ensure the information provided here is accurate. However, no guarantees are made regarding correctness of data. Please verify with scheme information document before making any investment.