Hyderabad: Considering rising interest rates these days, utmost caution is required on the part of investors in making their choices. Especially, when they are going for 'short term investments' of one to five years, they should carefully select the right kind of plans. Only then, there will be a scope for getting guaranteed returns without incurring any loss to their hard earnings.
Before selecting investment plans, every prospective investor must fix financial goals by considering their overall needs. Long-term plans yield good returns. Whereas, short-term investments provide the facility to withdraw funds whenever we feel the need. As such, it is very important to select only those short term investments that are safe and secure.
'Liquid funds' may be selected as short term investment as they effectively serve as a sort of contingency fund. They give slightly better income when compared to savings deposits in bank accounts. Liquid funds are considered safe investments that can be taken back anytime from the date of investment. They yield four to seven percent interest after tax.
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The term of liquid funds ranges from one to 90 days. Most notable point is that the net asset value (NAV) of liquid funds remains stable and it decreases only in rarest of rare circumstances. Another investor-friendly feature is that cash will be deposited in our accounts within two to three days of selling these investment units.
Then, there are 'ultra short duration funds' in which investments can be made for terms ranging from just three to six months. These ultra short funds provide loans to companies. For such reasons, there is a little risk factor in these ultra short funds when compared to liquid funds. However, the ultra short investments will give equal to or slightly higher returns compared to fixed deposits in banks.
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Those aiming at slightly higher returns by investing in equities and futures can prefer 'arbitrage funds'. They may yield nearly eight to nine percent annual income. The same rules governing equity funds will apply to the profits made through these funds. Investors can park their funds in these arbitrage funds for three to five years.
Investors can also go for 'money market funds' which are among those mutual funds that carry lowest risk factor. These funds invest in Government securities. They are accessible for making investments for a period of three months to one year. Those in high tax slabs can choose these money market funds as an alternative to fixed deposits.
