Most investors plan to invest for their long term goals and keep money with them for their emergency or short term needs. It is equally important to invest money for the short term because you will get a handful of returns back even for the shorter duration. Multiple goals can be set for these short term investment plans.

Even though there is no such pre-defined tenure for the short term investment, the duration won’t last more than five years which means the investment will be converted to cash before five years. But many short investments are converted to cash in 3-12 months. 

There are multiple benefits and conveniences one will get by investing in the short term investment plan. Let us start from the basics of short term investment and proceed to know about the best short term investment plans available in 2021.


Short Term Investment plans are planned to get a decent return of money for the investment made in a shorter duration. These plans are liquid in nature, where investors park their lump sum for a minimum of 3 months. 

The short-term investment plans’ sole goal is capital protection (protecting the invested cash without any loss) and generating returns on the invested capital (good percentage return for the invested amount). Short term investment plans are securities or bonds that can be easily converted to cash.

There are lock-in periods for some of these plans starting from 7 days to 12 months. These short term investment plans are effective for those who don’t want to take any high risk but need some fair returns for their invested money. 

Due to the low-risk factor, the returns for these plans are less compared to long-term plans. However, If you are planning for any short term or near-future goal, short term investment plans will serve your purpose. 

Benefits of Short Term Investment Plans

If opted for good plans, Short Term Investment options can do wonders to the invested amount. The benefits of short term investment plans are listed below.

  1. High liquidity
  2. Shorter maturity period
  3. Optimal returns
  4. Low to minimal risk on investment
  5. Lesser lock-in period or nil for specific plans

Best Short Term Investment Plans in 2021

Here is a list of India’s best short-term investment plans that give favorable returns to their investors.


Bank Savings Account

The easiest, convenient and popular way of saving your money is just depositing the extra cash into a bank account. The interest rate for the savings account varies from one bank to another, which lies in the range of 2.5-6.75%. 

There are no limits on depositing money in a savings account. The advantage is the liquidity that it provides, and, of course, the disadvantage is the returns are significantly less compared to other short term investment plans.

Fixed Deposit

One of India’s safest short-term investment plans is Fixed Deposits, where a lump sum is invested in getting a guaranteed return with a fixed interest rate. Banks, post offices, and other financial institutions offer fixed deposits to investors. 

The investment period varies from 7 days to 10 years. Fixed Deposits offer high liquidity and an interest rate of 3-7% per annum based on the financial institutions you opted for. One of the disadvantages of a fixed deposit is that the interest earned will be taxable deducted as Tax Deduction at source by the bank. 

Recurring Deposit

The recurring deposit allows investors to invest fixed money as monthly deposits like a SIP in Mutual funds, whereas fixed deposits allow only lump-sum investment. RD is a low-risk yet profitable mode of short term investment plan in India.

The recurring deposit period varies from 6 months to 10 years, and the interest rate is slightly higher than the fixed deposit, which is 4-8% based on the banks. Liquidity, guaranteed return, and flexibility are the advantages of investing in recurring deposits. The disadvantage of a recurring deposit is TDS, one year lock-in period, and will give only the invested amount in case withdrawn by the investor within one year.

Post Office Time Deposit

Offered by India Post, Post Office Time Deposit is one of the most sorted short term investment plans in rural and remote places of India. The tenure of the deposit is one year, two years, three years, and five years. This investment plan is quite similar to a bank’s fixed deposit. 

The interest rate varies from 5.5-7.5%, depending on the tenure of the investment. Anyone above the age of 10 can open their account and invest in this plan. The post office scheme doesn’t allow any premature withdrawal. You can avail of tax benefits under 80c if you have opted for the five years tenure plan.

Debt Mutual Funds

Debt Mutual Fund is an excellent short-term investment plan if you are a low-risk appetite and need some handsome return on investment. It invests money in fixed-income securities like government securities, corporate bonds, and other fixed-income assets. 

Debt Mutual fund is the safest when compared with other mutual funds. The returns will be in the range of 8-12% based on the fund you choose. Based on the investment period, three categories come under debt mutual funds. Tax will be charged for the returns as per the individual’s salary slab.

Liquid Funds – With a maximum maturity period of 91 days, liquid funds offer higher returns compared to saving account and provide high liquidity 

for the invested amount.

Ultra-Short Duration Funds – Maturity of 3 to 6 months, ultra-short duration debt funds are invested in debt and money market accounts.

This fund is ideal for those who wanted to park their money for few weeks.

Low Duration Funds – Invested in short term debt securities, low duration funds are for the duration of 6 to 12 months. These funds have moderate risk and offer reasonable returns compared to liquid and ultra-short duration funds.


Large Cap Mutual Funds

As the name suggests, large-cap mutual funds invest money on larger capitalization companies equal to or more than twenty thousand crores. The investment is made on stocks of larger companies that are likely to perform well in a shorter duration. 

The tenure of investment for this large-cap mutual fund is 3-5 years. Investing in equities, large-cap funds can deliver 8-13% of returns which is high compared to other short term investment plans. Since investing in large-cap companies, the risk is less as it is not primarily affected by the market movements and offers good returns. There are many other mutual funds types available that provide you good returns.

National Savings Certificate

National Savings Certificate is a tax-saving short term investment plan offered by India post with a maturity date of 5 years. It is a low-risk investment plan backed by the government scheme, offers fixed returns. The Indian Government quarterly revises the return that is 6.8% for Q1 FY (2020-2021). 

The highest return among other fixed-rate investment options and no upper limit for the investment amount are the advantages of NCS. No reinvestment option (buy new NSC every time) and fixed returns are some of the disadvantages of NSC. With low risk, NSC isn’t affected by market fluctuations and a good tax-saving investment plan.

Wrapping up,

The best short term investment plan for every individual will vary depending on their financial goals. If planned well, short term investment plans will give you good returns on the invested capital. Stop thinking and start investing based on your own goal. Remember, these short term investment plans provide only nominal returns when you have invested some lump sum money. If the capital is low, you can consider it to be on the savings account itself.

If you have any doubt or need clarification, please feel free to comment below; we will reply to that soon.


What is the best investment plan for the short term?

It depends on the money that you are planning to invest. Based on the risk profile you like to choose and the duration, the plan may vary. For low-risk, a liquid mutual fund will fetch you a decent return and large-cap in case high-risk averse.

Where can I invest for 3 months?

If the lump sum money is high and you are willing to take risks, you can invest in debt funds. The returns will be high if you invest lump sum money of say 1 lakh; if anything below that, you can keep it in a savings account where you will get nominal returns.

Where can I invest for 6 months?

You can invest your money in liquid or debt funds with your lump sum. You will get decent returns if you have invested some lump sum money in it.

Which short term investment plan gives the highest return?

Large Cap Mutual funds will give you the highest return, If you have picked an excellent mutual fund.

Which is the riskiest type of investment in the short term?

Large-cap mutual funds have high risk because the money is invested in the equities of the company.

What makes a good short term investment plan?

Stability (not affected by market fluctuations), liquidity, low transaction cost, and high returns make a good short term investment plan.

What is the best investment plan for beginners?

If you are a beginner, you can start to invest your money in Fixed deposits or recurring deposits. Once you understand about mutual funds, you can explore that plans as well.

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