Investors mainly invest in mutual funds with a long-term objective and relate their investment with earning growth, while they also choose to invest in short-term funds for their short-term goals. Also, their short-term investments, keep their capital safe while at the same time giving them the most efficient return possible for the short period.

In short, if we say investors seek stability and the flexibility to sell anytime, they require, from their short-term investments.

Well, let us know where you should invest for your short-term investment and what you should not pick for short term parking of money.

Equity Mutual Funds

Equity funds or equity MF’s offers good flexibility but at the same, they are much volatile than it is required for their short-term investments.

If you invest in equity mutual funds, you must have noticed the short-term volatilities that affect your investments, however, over a longer period of time, the price of a mutual fund scheme depends on the quality of the underlying asset and the ability to grow earnings by that one company or the portfolio of companies.

Simply the value return for equity mutual funds can take a few years. If you invest in Equity mutual funds for your short-term objectives, you might get disappointed, seeing the volatilities and the returns, especially if you are looking to keep the money safe.

Bonds

In the case of investment in a bond, sometimes issuers fail to pay interest and/or return appreciated on your capital invested. Also, it does not offer good flexibility that is you cannot sell your investment as per your requirement. Thus, this category too is not suitable for your short-term parking of money.

In case if you take, a bond issued by a highly rated company as a good short-term investment as it offers good liquidity to sell when you want and help you get relatively safe returns, then you need to reconsider all the other risk involves in such bonds.

Bonds offered by high rated companies, are associated with kind of interest rate risk if they are listed on exchanges to give you the flexibility to exit when you want. In case if the interest rate starts declining, investors gain by selling their bonds. But if the interest rate rises, they can lose money as the price of a listed bond will fall.

For your short term investment needs, pick bonds whose maturity period matches the period for which you wish to be invested. Debt funds are a better fit for this though from a convenience and effectiveness point of view.

So basically, for your short-term investment, park your money in funds that offer good flexibility and stable investment, like debt funds or categories of debt funds, like liquid funds, ultra-short-term funds, short-term funds, and others.

For any kind of query, you can contact us at Shri Ashutosh Securities Pvt Ltd., we are here to help you in any way possible.

Happy Investing!

(Mutual Fund investments are subject to market risk Illustrations are for example only, there is no guarantee of returns. Past performance is not an indicator/guarantee of future returns).