Are Short-term Investments on Your Mind? Read this!

Do you like a 2-hour crisp movie or a 10-hour full-fledged season? Regardless, aren’t you happy that you have the option to choose how much time you will invest for leisure? With mutual funds too, you have the option to choose the time you will stay invested for. As such, there are short term, medium term and long term investments.

In this fast-moving world, if you are looking for quick options for your near-term goals such as buying a phone or funding a trip, then short term investments are suitable for you. There are several short term investment plans in mutual funds that you can consider for the same. 

Let’s find out more about this.

Are short term investmentsactually what you are thinking?

Yes, the name is self-explanatory. Short term investments have a short investment tenure. This means they mature soon, typically within three years. They invest primarily in debt securities and help you cater to your short-term financial needs.

Several short term debt fund types let you invest your money for as little as a day or a few months.

Here are some options that you can consider if you are on the search for top mutual funds to invest in for the short-term:

• Overnight funds:These are open-ended debt funds that invest in debt securities. They have a term of one day. So, if you invest in a fund today, it will mature the next day. The risk involved is very low. 
• Liquid funds:These low-risk open-ended debt funds invest in securities with a 3 to 91 days maturity. Liquid funds meaning can be well-reflected in their name as they allow you to park your money for a short term with easy accessibility and relatively good returns.
• Arbitrage funds: These are hybrid or balanced mutual funds that earn returns through arbitrage. Arbitrage refers to earning risk-free returns because of price mismatch in the cash and derivatives market. These funds also carry low risk. 

Just like any other thing, do short term investment plans have advantages as well as disadvantages? 

Yes! But first, let’s talk about its pros:

• One of the greatest benefits is the low risk they carry. Short term investments can be ideal for investors with a low risk profile.
  
• If you have a high concentration in equity, you can consider short term debt mutual funds to maintain a well-diversified portfolio. 
  
  Short term debt investments can help you maintain stability in your overall portfolio since they invest in fixed-income securities.
  
• Short-term mutual fund returns are generally stable with minimal/no fluctuations. 

It’s time to know the cons:

• Short term investments in debt do not offer high returns compared to long-term equity
• Even though the risk is low, short-term funds are exposed to inflation, credit, and interest risks.

Conclusion

Short term investment plans can be ideal if you want to prepare for your immediate goals.

Short term investments are a suitable option to park your surplus money as they can be easily accessed in the case of an emergency. However, they may not offer similar returns as long term investments in equity. Nevertheless, they can diversify your portfolio and lower its overall risk. 

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