Most investors strive to increase their wealth over time, but cash loses its value fast due to inflation. Therefore, it’s critical to invest your money in a way that will allow it to increase in value and contribute to your future financial prosperity.
Investing is a method of allowing your hard-earned money to do some of the heavy liftings for you. On paper, this sounds fantastic, but in fact, investing entails some risk, and investors must determine whether the risk vs possible return trade-off is worthwhile.
If the prospect of losing the money you put into your investment makes you nervous (and you’re not alone), don’t rule out all your options just yet. The good news is that there are several strategies you can use to reduce the amount of risk you take on while investing – here are investment plans in India.
Investment Options in India 2022 are as follows:
1. RD
This is the most frequent short-term investment choice, and it is available by all banks, so many people use it to store their money for short-term purposes. It lets you receive a fixed rate of interest on your investment until it matures. Simply log into your net banking account to start a recurring deposit (RD) account. Please select the amount to save each month, the duration, and you’re done!
- Return on investment: 4% to 6% every year
- Time frame: 6 months to 10 years
- After being added to your income, the interest received from your RD account is taxed according to your tax bracket.
2. FD
Another common option to build a corpus for short-term investments is to use a fixed deposit given by a bank. The money is invested for a set length of time, usually 7 to 10 years, at a preset rate of return, after which it matures and may be withdrawn. Microlending can be a more flexible and rewarding alternative to fixed deposits for investors seeking higher returns. Although the interest rates are greater than savings accounts and RDs, early withdrawal is not possible. You can also opt for a fixed deposit for 6 months or more as per your requirement.
- The annual rate of return: 2.5 percent to 5.5 percent
- Timeframe: 7 days to 10 years
- The interest on your FD is applied to your income and taxed according to your income tax bracket.
3. CD
Corporate fixed deposits are like bank fixed deposits, with the exception that they are collected by corporations for expansion and operations. Because the danger of default is higher, the interest rates are somewhat higher than bank FDs. Housing loans can be partially pre-paid with corporate fixed deposits to reduce interest payments and expedite loan repayment. Those who are willing to take a risk can invest in these corporate FDs and receive higher returns than bank FDs.
- Return on investment: 6% to 8% every year
- Time frame: 1 to 3 years
- Interest is added to your income and taxed according to the current income tax bracket.
4. Debt Mutual Funds
These mutual funds invest their money largely in debt securities such as government bonds, treasury bills, commercial papers, corporate bonds, and other money market instruments. For risk-averse investors seeking higher short-term returns, this is one of the greatest short-term investing possibilities.
- Return on investment: 8% to 11% every year
- Time frame: 6 months to 3 years
- Short-term mutual funds are taxed if you redeem the units within three years, but long-term capital gains are taxed if you hold the units for longer than three years.
5. Savings Account
In India, a savings account is one of the most popular short-term investing options. It’s a savings or checking account with a bank or financial organization where you may save money and earn interest. Having a good savings account history can increase your chances of getting approved for an instant personal loan. It offers maximum liquidity since consumers may withdraw their deposited funds at any time. Furthermore, there are no deposit limits, and numerous banks provide zero balance accounts.
- Return on investment: 3.5 percent to 7%, depending on the bank.
- Time limit: indefinite
- Interest on a savings account is taxable income since it is considered an extra source of income.
6. The Stock Exchange
Stock markets are the ideal short-term investments for high-risk takers who want to maximize their earnings. If you can pick the correct stocks, you can double your money by investing in them for a few months. If you gamble on the incorrect stocks, you run the risk of losing your whole investment.
- Rate of return: ten percent to one hundred percent every year
- Timeframe: 1 month to 5 years
- Returns are added to your income, and tax is determined according to your income tax gains.
Short-term investments are the most effective way to achieve your short-term financial objectives. You can assure financial freedom with short-term investments, which can help you manage unforeseen costs furthermore, it allows you to withdraw money whenever you need it without having to wait a long period. Furthermore, short-term investment plans in India give stability, liquidity, and minimal transaction costs, allowing you to generate huge returns in a short period, demonstrating ways to greatly prevent undesired difficulties. .
Fixed deposit is the most used investment plan, and we can have many options like a fixed deposit for 6 months. There are several long-term investment plans in India, and you may select one based on your future objectives. The above list should have provided you with an insight into the numerous short-term investment choices available in India in 2022.
Good luck with your investments!