Money Making Ideas: Where to Place Short-Term Money? 4 financial instruments for parking funds

To create wealth, you need to make a reasonable investment to make your money work for you. Fortunately, there are many ways to invest where you can invest according to your financial goals, risk tolerance and liquidity needs.

While long-term investments have always attracted attention, it is equally important to focus on them. short-term investmentswhich you can easily convert into money within 1 to 5 years.

Here are 4 financial instruments in which you can invest your short-term money.



1 Liquidity funds

Financial prudence requires emergency preparedness, and Covid-19 reinforces the importance of having a significant emergency corps. The hull must be equivalent to at least one year’s cost.

You can put your money in liquidity funds to build a contingency building.

These funds invest in money market securities with a maturity of 91 days and have the potential to offer a slightly higher return on a savings account.

You can easily convert them into money, and when you withdraw money, the money is credited to your account within 2-3 working days.

2. ELSS

ELSS, or Share Savings Scheme (ELSS), is a category of mutual funds that invests most of its assets in equities.

ELSS is the only mutual fund to offer tax savings under section 80C of the Income Tax Act 1961. In other words, investing in ELSS can help you reduce your tax debt.

ELSS has a 3-year block, which means you can’t withdraw money for 3 years from the date of investment. Locking time gives you money to grow, and if you stay invested for a long time, you can get a return that beats inflation.

Keep in mind, however, that ELSS can carry moderate to high risk; therefore, it is prudent to continue only if you have a high-risk tolerance.

3. Tax-saving fixed deposits

You can also park your short-term money in FD for tax savings that have a term of 5 years. As the name suggests, investing in FD to save taxes helps you reduce your taxes.

However, keep in mind that unlike regular FDs, which you can liquidate before their due date by paying a nominal penalty, you cannot do this in a tax-saving FD. If you think that your liquidity needs may arise 5 years ago, you can choose a regular FD bank.

4. Savings account offering high interest rate

You’ve probably seen ads from banks offering high-interest savings accounts. You can consider opening an account in any such bank and invest your money.

Some banks provide a monthly interest rate instead of a quarterly payment, which can help you increase your savings and withdraw money when needed.

The last word

The short-term investment options mentioned above can help you meet your short-term financial requirements and also reduce your tax liabilities. Happy investing!

(The author is president and leader, personal wealth, wealth management)

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