Quick Summary
- Typically, short term investment plans are the ones where you invest for a duration of less than 24 months.
- Popular short term investment plans include Certificates of Deposit (CDs), treasury securities, money market accounts, high-yield savings accounts, etc
- Compared to longer-duration investments, short term investment plans may offer higher liquidity
- To choose the best short term investment plan for your financial goals, assess your risk appetite, future financial goals, and preferred investment tenure.
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Not every financial goal requires long-term planning. When you are planning short-term goals like a car, a foreign holiday, or simply building a financial safety net, short term investment plans can be a good idea.
The right plan for you depends on several factors, such as your risk appetite, financial goals, tenure, and other relevant considerations. Here are 5 short term investment plans that can fulfil your upcoming financial goals.
What are Short-Term Investment Plans?
Short term investment plans are made up of financial products that have a relatively shorter tenure of investment. These investments generally offer more liquidity, so you can easily convert them into cash if needed. The tenure can typically range from a few months to a few years.
People generally invest in short period investment plans to fulfil their future financial goals or to balance their investment portfolio. Short term investment plans may bridge the gap between long-term investment plans and a simple savings account.
How to Choose the Best Short-Term Investment Plan?
Short term investment plans include short-term bonds, certificates of deposit, and fixed deposits among others. Here are a few tips to help you pick the right short investment plan:
Identify your financial goals
Before you start investing, specify your future financial goals. Examples: Purchasing a car, planning a vacation, a wedding, or building a financial cushion. Identifying financial goals helps in making a practical investment plan.
Assess your risk tolerance
There are several options under short term investment plans. The risk exposure of each plan is different. So, you need to assess your risk appetite before choosing an investment plan.
For instance, if you do not want to take a higher risk, treasury securities, a high-yield savings account, or a short-term fixed deposit could work for you. If you want more returns and accept the corresponding higher risk, you can explore short-term bond funds.
Importance of liquidity
Liquidity refers to how quickly your asset can be converted into cash without losing its market value. Higher liquidity means easier access to money and vice versa. For instance, a high-yield savings account may give higher liquidity compared to certificates of deposit, as the latter may have certain withdrawal limitations.
Therefore, your investment timeline plays a crucial role in choosing the right short term investment plan.
Consideration of interest rates and returns
The return potential of a short term investment plan must also be taken into account. Depending on your financial goals and the preferred tenure, you need to choose a plan that offers the best returns. Simultaneously, you also need to assess the potential risk of the investments.
Top 5 Short-Term Investment Plans
Here is a list of the top 5 short term investment plans:
High-Yield Savings Accounts
A regular bank savings account typically offers an interest rate on the deposit. Thus, the money grows over time at a specific annual interest rate. In comparison to this regular savings account, a high-yield savings account can offer higher interest rates. So, the money you save in this account may provide higher returns over time. It also generally offers high liquidity.
Certificates of Deposit (CDs)
CDs or Certificate of Deposits are fixed-income financial instruments. RBI authorises scheduled commercial banks and All-India financial institutions to issue CDs. This electronic certificate states that an individual has deposited a specific amount for a specific tenure.
CDs typically offer higher interest rates than regular savings accounts, though they may have lower liquidity than savings accounts due to withdrawal restrictions. The tenure of CDs generally ranges between 7 days and 1 year when issued by commercial banks and up to 3 years when issued by financial institutions. The interest rate may also differ depending on the institution. As per Indian regulations, a minimum of â‚ą5 lakhs, or in multiples thereof, has to be deposited in a CD. Premature withdrawal is not permitted under CDs. If you do so, penalties are imposed.
Fixed Deposits
Fixed deposits by banks and NBFCs (non-banking financial companies) are a great option for short-term investment plans. NBFCs like Mahindra Finance offer fixed deposits from 12 to 60 months. The rate of interest you can earn on your deposit is generally higher than the rate on your regular savings account. As of September 2025, a 12-month FD can earn 7% interest with Mahindra Finance, and senior citizens also get an additional interest of 0.25% on their fixed deposit investments.
Treasury Securities
Treasury securities are short-term, government-issued, money market instruments. The tenure of treasury securities may range from a few days to a few months. These are typically purchased at a discount to their face value and mature at par value, providing returns through the difference. These are traded in both primary and secondary markets.
The government issues treasury securities when it needs money for short-term requirements. Treasury securities can be of different types based on investment timeline, like T-bills, T-notes, and T-bonds. Since these are government-backed, the returns are stable but comparatively lower. Treasury securities also offer high liquidity.
Short-Term Bond Funds
Short-term bond funds invest in securities that have a maturity timeline of less than 3 years. Investments can be made in CDs, commercial papers, government securities, and long and medium-term instruments. Government, companies, and corporations can issue short-term bond funds. Compared to a long-term bond, the interest rate risks of short-term bond funds may be lower.
Suggested Read: Gold Vs FD : What Are The Differences
Pros and Cons of Short-Term Investment Plans
Returns and risks on investments are not always predictable. However, some of the common advantages and limitations of short term investment plans are discussed below:
Pros of Short-Term Investment Plans
Comparatively Lower Risk
Compared to various other investment plans, certain short term investments may have lower risk exposure. Though no investment is risk-free, some short term investment plans may have a higher potential for stable returns.
Scope of Higher Liquidity
Some short term investment plans may also offer higher liquidity. You can access and withdraw money without many restrictions. While some plans offer uninterrupted liquidity access, others may impose limits on withdrawals and charges for premature withdrawal.
A Shorter Investment Duration
Another prominent benefit of short term investment plans is that you don’t have to enter into a long-term commitment.
Cons of Short-Term Investment Plans
There are certain limitations of short term investments as well. The potential for returns may be lower in some plans compared to long-term investments. On the other hand, some plans may not always be able to beat inflation, thus offering lower returns. The premature withdrawal trade-offs in some plans, like CDs, can be costly as they charge penalties.
When to Consider a Short-Term Investment Plan?
Short-term investment plans can be considered under different situations. Some of these are discussed below:
1. When you are planning to build an emergency fund
If you are planning to build an emergency fund, short term investments can be a good option. It grows your money while also providing comparatively higher liquidity. In times of need, you can easily access your money!
2. When you have an upcoming expense
It is crucial to save money if you have an upcoming expense, such as a wedding, buying a car, or taking a vacation. Under short-term investment plans, you can choose a short tenure as per your preference!
3. Conservative investors who wish to take less risk
Conservative investors may be those who prioritise stability of returns over higher returns. In this case, short-term investment plans that offer comparatively stable returns can be an ideal choice.
Conclusion
Short term investments are quite strategic as the funds have growth potential even during a shorter tenure. Since these are of short duration, investors may get higher liquidity benefits. You can access funds easily, but it is best to let your investment grow to maximise benefits. You must identify your financial goals, risk tolerance level, and investment timeline before choosing a short-term investment. While no investment is free from risk, planning your short period investment plans smartly is key to steady growth and fulfilling your financial goals.
For investors looking for an ideal balance of high safety and attractive returns, the Mahindra Finance Fixed Deposit (FD) stands out as an excellent choice. It is a reliable instrument specifically designed to help you achieve your short-term financial goals with confidence and peace of mind.
Suggested Read: FD vs RD: Which One Should You Choose?
FAQs on Short-Term Investment Plans
What is the best short-term investment for high returns?
There are several options under short term investment plans. Some of these are discussed above. To choose the most suitable one for your investment goals, you must take into account your preferred investment tenure, personal financial goals, and risk tolerance levels.
How safe are short-term investment plans?
The risk exposure of different short term investment plans differs. Since there is no guarantee in investments, the safety of money invested depends on the current market situation.
Can short-term investments be part of a diversified portfolio?
Yes, to expand your investment portfolio, you may include short-term investments for higher liquidity and shorter investment tenure.
Are short-term bond funds better than individual bonds for short-term investing?
Short-term bond funds give you diversification, liquidity, and professional management but returns can fluctuate.
Individual bonds offer fixed payouts if held to maturity but lack diversification and are harder to exit early.
How do economic conditions affect short-term investment choices?
Economic conditions significantly impact short-term investments. Rising interest rates generally increase returns on new CDs and bonds but may decrease existing bond values. High inflation can erode real returns, making it important to choose investments that can outpace inflation. During economic uncertainty, government-backed securities become more attractive despite lower returns.
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