Short-term investments are financial assets you hold for a brief period—anywhere from a few days to a few years. These options focus on safety, liquidity, and moderate returns, making them ideal for people who want to protect their capital while keeping access to money when needed.
Short-term plans include savings accounts, fixed deposits, recurring deposits, liquid funds, treasury bills, money market accounts, debt funds, gold, and more. They are perfect for emergency funds, travel, upcoming expenses, or any goal where money should stay safe and accessible.
What Are Short-Term Investments?
Short-term investments are financial instruments purchased with the intention of holding them for a limited period. These assets offer:
- High liquidity
- Low to moderate risk
- Faster access to capital
- Predictable returns
Examples include:
- Savings accounts
- Bank fixed deposits
- Recurring deposits
- Liquid mutual funds
- Treasury securities
- Money market instruments
These plans suit investors who want to preserve capital, earn moderate returns, and keep the flexibility to withdraw money quickly.
Best Short Term Investment Options 2025
Here is a complete breakdown of the most trusted short-term plans.
Short Term Investment for 1 Month
- Easy deposits and withdrawals
- Very low risk
- Suitable for emergency money
- Ideal for short upcoming expenses
- Low interest compared to other products
2. Liquid Funds
- Highly liquid; money can be redeemed within one business day
- Invested in safe short-term debt instruments
- Higher returns than savings accounts
- Good for parking surplus cash
- Flexible for SIP or lump sum
3. Equity Mutual Funds
- High return potential in strong markets
- Higher risk due to market volatility
- Useful for longer time horizons
- Expert fund managers handle stock selection
- Enables diversification
- Long-term tax benefits
Short Term Investment for 3 Months
1. Recurring Deposits (RD)
- Tenure from 6 months to 10 years
- Minimum 1-month lock-in
- Interest similar to fixed deposits
- Taxable returns
- TDS applies if interest exceeds ₹10,000
2. Bank Fixed Deposits (FD)
- One-time lump sum deposit
- Very safe investment
- Guaranteed fixed returns
- Tenure: 7 days to 10 years
- Early withdrawal allowed with penalty
- Renewable on maturity
- No tax benefits on interest income
3. Treasury Securities
- Government-backed
- Very safe, high liquidity
- Maturity of 91 to 365 days
- Good for predictable and stable returns
4. Money Market Account
- Short-term low-risk investment
- No lock-in period
- Quick withdrawal
- Returns around 3.35 percent per year
- Taxed as per income slab
5. Stock Market / Derivatives
- Suitable for experienced investors
- High risk, high reward
- Can be held for short or long periods
- Not recommended for risk-averse users
Debt Mutual Funds
- Invest in bonds and corporate securities
- Lower volatility than equity
- Good for 3 to 12 months
- High liquidity
- Stable and predictable returns
- No guaranteed performance
Short Term Investments for 6 Months
1. Large-Cap Mutual Funds
- Invest in top stable companies
- Suitable for 1–3 year horizon
- Good liquidity
- Returns range: 8 to 13 percent
- Short-term and long-term taxes apply
2. Post-Office Time Deposits
A very safe short-term deposit option backed by India Post.
Available Tenures:
1 year, 2 years, 3 years, 5 years
Interest Rates:
- 1 year – 6.9 percent
- 2 years – 7.0 percent
- 3 years – 7.1 percent
- 5 years – 7.5 percent
Important Points:
- Premature withdrawal not allowed before 6 months
- Interest taxed as per income slab
3. Debt Instruments
- Ideal for risk-averse investors
- Returns up to 10.5 percent
- Types based on maturity:
- Liquid funds: up to 91 days
- Ultra-short funds: 3 to 6 months
- Low-duration funds: 6 to 12 months
- High liquidity
- Short-term and long-term taxes apply
4. Gold or Silver
- Works for both short and long term
- Hedge against inflation
- Available as ETF or digital gold
- Prices fluctuate but protect long-term value
5. NCDs / Corporate Deposits
- Attractive interest: 9 to 12 percent
- Moderate to high risk
- Better suited for 6 months to 3 years
- Credit rating must be checked
Other Short Term Investment Options
Arbitrage Funds
- Low-risk mutual fund strategy
- Earns from price difference in markets
- Stable returns
- Tax-efficient compared to FDs
Fixed Maturity Plans (FMPs)
- Closed-ended mutual fund
- Predetermined maturity
- Locked till end of term
- Provides stable returns
Short Term Funds
- Invest in short duration debt instruments
- Lower risk
- Stable returns
- Good liquidity
Average Returns of Short-Term Investments
| Investment Type | Average Return |
|---|---|
| Savings Account | 0.25% – 3.5% |
| Liquid Funds | 4% – 6.5% |
| Recurring Deposits | 4.5% – 7% |
| Fixed Deposits | 4.5% – 7.5% |
| Treasury Securities | 4% – 7% |
| Money Market Account | 3.5% – 5.5% |
| Stock Market | Highly variable |
| Large Cap Mutual Funds | 8% – 12% |
| Post Office Time Deposits | 6.9% – 7.5% |
| Debt Instruments | 5% – 8% |
| Gold or Silver | Volatile |
| NCDs | 6% – 9% |
| Arbitrage Funds | 6% – 10% |
| Equity Mutual Funds | 7% – 15% |
| Debt Mutual Funds | 6% – 9% |
| Fixed Maturity Plans | 2.5% – 10% |
| Short Term Funds | 4% – 7% |
Features and Benefits of Short-Term Investments
Features
- Low risk
- High liquidity
- Flexible duration
- Easy access to funds
Benefits
- Grow savings faster than a savings account
- Ideal for emergency fund
- Suitable for short goals like vacations, EMIs, new purchases
How Do Short-Term Investments Work?
Short-term investments park your surplus money in liquid assets that:
- Offer better returns than savings accounts
- Have minimal risk
- Keep funds accessible at any time
Common instruments include Treasury bills, commercial paper, and certificates of deposit. These support efficient cash management for both individuals and institutions.
Drawbacks of Short-Term Plans
- Lower returns than long-term investments
- Limited growth potential
- Less compounding
- Fewer diversification opportunities
- Early withdrawal penalties in some products
Things to Consider Before Investing
- Set a clear goal
- Check your risk level
- Match investment period
- Ensure easy liquidity
- Compare returns
- Consider tax impact
- Diversify money
- Track and review investments
Tenure of Short Term Investments
Short-term investments generally range from:
- Few days
- Few months
- Up to 3 years
- Some extend to 5 years
The ideal pick depends on your withdrawal needs and financial goals.
Related Terms
- Cash Investments – short-term bonds
- Cash Equivalents – highly liquid low-risk securities
- Money Market – short-term debt market
- Financial Assets – stocks bonds deposits
- Short Term Fund – low-risk fund for liquid goals
How to Calculate Returns?
Use an FD calculator or SIP calculator to estimate returns, interest, maturity amount, and tax impact.
Wrapping Up
Short-term investment options are perfect for anyone who wants stability, liquidity, and predictable returns. Whether you need money in one month or six months, these plans help you stay financially prepared while keeping your capital safe.
Q&A
Q1 What is the best long term investment plan in 2025
The best long term plan depends on your goal but based on returns Axis Max Life Online Savings Plan shows the highest long term growth with a return of 22.3 percent and a long term value above 2 Cr on a 10 year SIP of 10000 per month.
Q2 Are short term investments safe
Yes short term investments like savings account liquid funds treasury bills and bank FD are very safe. They focus on liquidity and capital protection rather than high returns.
Q3 How much return can I expect from a 3 month investment
You can expect 3 to 7 percent yearly return depending on the option. Bank FD and treasury bills offer steady returns while debt mutual funds may give slightly better performance.
Q4 Which is better long term or short term investment
Long term investments give higher returns through compounding and growth. Short term investments give safety and liquidity. The best choice depends on your goal timeline and risk level.
Q5 Can I invest in both long term and short term plans
Yes you can invest in both. Many people create a mixed portfolio. Short term plans handle emergency and near future needs while long term plans build wealth for goals like home purchase retirement and children planning.
