Top 5 Short-Term Investments to Consider in 2024

In 2024, the five short-term investments that investors can consider include mutual funds, fixed deposits, bonds, equity funds, and Gratuity formula-based schemes. These options help investors achieve their financial goals in a short period, ranging from a few months to a few years. Each of these investments is unique and suitable for individual investors based on their risk tolerance, return expectations, and investment tenure.

Mutual funds are one of the most preferred options for short-term investments. They are professionally managed investment vehicles that pool money from multiple investors and invest them in a diversified portfolio of stocks, bonds, and other asset classes.

Mutual funds in India offer various types of schemes such as equity funds, debt funds, hybrid funds, and liquid funds, among others. Liquid funds invest in highly liquid and low-risk money-market instruments, making them an ideal choice for short-term investments. In 2024, investors can expect returns of around 4-5% per annum from liquid mutual funds, with a minimum investment tenure of 7 days.

Fixed deposits are another popular investment option for short-term investments. In this investment, the investor deposits a lump sum amount with a financial institution, and the institution pays the investor a fixed rate of interest over the investment tenure. In India, fixed deposits offer interest rates ranging from 4%-6% depending on the duration of the deposit, with a minimum investment tenure of 7 days. However, fixed deposits are not suitable for investors looking for high returns or those who seek flexibility in terms of withdrawal.

Bonds are debt instruments issued by companies and governments to raise funds. They offer fixed returns at regular intervals and have a fixed maturity date when the principal amount is returned to the investor. In 2024, bonds are expected to offer an annual return of around 7-8%, making them an attractive short-term investment option. However, bonds are subject to interest rate risks and credit risks, and investors must perform thorough due diligence before investing.

Equity funds are mutual fund schemes that primarily invest in stocks of companies listed on stock exchanges. Equity funds are suitable for investors with a higher risk appetite and those who seek higher returns. In 2024, equity funds are expected to offer returns of around 10-12% per annum on investment horizons of 1-3 years. However, equity funds are volatile and subject to market risks, and investors must understand their portfolio composition and investment strategy before investing in them.

Gratuity formula-based schemes are investment options offered by insurance companies and pension funds in India. These schemes provide guaranteed returns, and the rate of return is based on the gratuity formula, which is a statutory formula under Indian law used to calculate the gratuity payable to employees under the Payment of Gratuity Act, 1972. In 2024, gratuity formula-based schemes are expected to offer annual returns of around 6-8% on short-term investments. However, investors must note that gratuity formula-based schemes can be subject to liquidity risks, and it may be challenging to withdraw the funds before maturity.

Conclusion

Short-term investments provide an excellent opportunity for investors to achieve their financial goals by parking their funds for a short duration. However, it is essential to note that short-term investments are subject to risk, and investors must perform their due diligence before investing in any financial instrument. In 2024, mutual funds, fixed deposits, bonds, equity funds, and gratuity formula-based schemes are the five short-term investments that Indian investors can consider.

Summary

In 2024, short-term investment vehicles that Indian investors can look at include mutual funds, fixed deposits, bonds, equity funds, and gratuity formula-based schemes. These options provide a unique set of features suitable for individual investors based on their risk appetite, investment horizon, and return expectations. Mutual funds offer professional management and diversification, while fixed deposits provide guaranteed returns. Likewise, bonds offer fixed returns at regular intervals, equity funds promise high returns, and gratuity formula-based schemes provide guaranteed returns based on the gratuity formula. Despite their benefits, investors must evaluate all pros and cons and perform due diligence before investing in the Indian financial markets.

Top 5 Short-Term Investments to Consider in 2024