0
0
Usually an investor invests in mutual funds to achieve their long-term financial goals. However, that may not always be the case. You may invest to achieve your short-term goals as well. Short-term investments help you achieve the same. Are you looking for investment options to park your lumpsum for the short-term? Well, look no more. This article covers 4 different types of investment that an investor can invest in their lumpsum amount for a short period of time. But, before we dive into that, let’s quickly what is lumpsum.
What is lumpsum?
When an investor makes a substantial investment in one go, it is known as lumpsum investment. Thus, this mode of investment is ideal for investors who have a sudden influx of cash or have surplus funds. Lumpsum investments are highly dependent on the market.
Short-term investment options to park your lumpsum amount
Here are a few short-term investments that can be used to make a lumpsum investment:
1. Bank fixed deposits (FDs)
These are one of the safest and the most popular choice for short-term lumpsum investments. They are accompanied by various investment horizons ranging from 7 days, 14 days, 1 month, or even up to ten years. However, note that these investments have an all-time low interest rates.
2. Liquid funds
Liquid funds are a type of mutual funds that invest their capital in money market instruments that have a maturity period of up to 91 days. Examples include commercial papers, treasury bills, certificate of deposit (CD), term deposits, etc. As these funds do not have any entry charge or exit load, they are highly liquid in nature. What’s more, liquid funds redemptions just take about one working day to process in your bank account.
3. Arbitrage funds
The term arbitrage refers to simultaneous buying and selling of securities, commodities or currencies in diverging markets at the same time. These funds produce returns by this capitalizing on the price modifications of a particular security in diverse markets.
4. Short-term debt funds
These are a type of mutual funds that have an investment horizon of up to three years. These mutual funds are ideal for risk-averse investors who wish to invest for a short duration, say 1 year or so. Debt mutual funds have the likely to produce substantial returns than traditional saving investments – bank fixed bank deposits (FD). What’s more, they are also more tax efficient than a these savings scheme. Although debt funds have a low degree of risk, one must note that these mutual funds are not immune to credit risk.
Now that you are aware of the various investment options available at your disposal to make a lumpsum investment, you can choose any that suits your needs. An ideal investment must align with financial objectives, risk profile, and investment tenure. You can also use a mutual fund lumpsum calculator to understand the future value of your investments. A lumpsum calculator thus helps you plan your finances in a better way. Happy investing!
Average Rating