Most of the time, indian people are not clear on proper investment tool for financial goals. They select wrong investment option such as Investing in stock or equity mutual fund for short term investments (or) FD for 10 years. Fixed deposit is not an investment tool for 10 years investment. Money would grow slowly in fixed deposit against inflation. So deciding better investment tool is more important than investment.
Let us discuss on short term investments or better saving instrument for short period. Short term investment are less than 2 years. For example,
- Saving money for next year kid’s school fees.
- Saving money to buy mobile phone or gold ring.
- Saving money for emergency fund.
- Saving money for insurance yearly premium.
- Saving money for tax planning.
- Saving money for short vacation.
Better Option for Short Term Investment in Mutual Fund World – Debt Mutual Funds.
All these short financial goal money should be considered as “Short Term Investment”. Short term investment, the aim to keep the money without any major risk and not to create the huge profit. Most of the people keep the money in fixed deposit, Post Office schemes, money back insurance policy. But there is better option for short term investment in mutual fund world – Debt mutual funds.
Debt Mutual funds:
Debt Mutual Funds mainly invest in a mix of debt or fixed income securities such as Treasury Bills, Government Securities, Corporate Bonds, Money Market instruments and other debt securities of different time horizons. Generally, debt securities have a fixed maturity date & pay a fixed rate of interest. The option available in Debt instruments are huge based on our investment horizon. Debt instruments are FDs, Bonds, debt based Mutual Fund Scheme such as Short Term Funds, Gilt Funds, Liquid Funds.
Low Duration Debt Funds:
Low duration funds selects bonds/debt for investment such that average maturity (remaining) period for portfolio is between 6 to 12 months. For example, SBI Magnum Low Duration , Axis Treasury Advantage ,DSP Low Duration Funds.
Gilt Debt mutual Funds:
Gilt mutual funds invest mostly in government bonds for 12 to 24 months investments. Government bonds are considered the safest investment in the country. Top gilt mutual funds are Edelweiss G-Sec. Fund, DSP Government Securities and Reliance Gilt Sec.
Ultra Short Debt Funds :
Ultra short Debt mutual funds select bonds/debt for investment such that average maturity (remaining) period for portfolio is between 3 to 6 months. Top ultra short debt funds are L&T Ultra Short Term, SBI Magnum Ultra Short Duration and Kotak Savings Fund.
Liquid DEBT Funds:
Liquid debt mutual funds invest in bonds and money market instruments with maturity 0 to 90 days. Top liquid mutual funds are L&T Liquid Fund, HDFC Liquid Fund (G) and LIC Liquid Fund.
In short,
- Investment is more than 3 years, don’t invests in debt fund. Equity may yield better than debt in longer time.
- Debt funds returns are better than FD and post office investment.
- More than 200 debt mutual funds option are available to select based on investment horizon and requirement.
Start exploring mutual funds for better saving option for shorter financial goals.