Most Indians are firm believers in a safe investment, and when safety comes into the picture, the first investment option that comes to the mind of an investor is a Fixed Deposit (FD). However, with multiple bank failures worldwide, including the recent crises in Silicon Valley Bank, the question is – Is your money really safe even in the bank? This article will discuss the 5 safe and best short term investment plan and how to buy them.
Table of Contents
Features of the Safe & Best Short Term Investment Plan
Here are a few unique features of the best short term investment plan:
- 🔹High liquidity
- 🔹Principal safety
- 🔹No lock-in period
- 🔹No definite maturity period
- 🔹Very risk, low return
Benefits of the Safe & Best Short Term Investment Plan
- ✅You have peace of mind as your invested money is safe.
- ✅You are ready for an emergency.
Safe & Best Short Term Investment Plan Options
1. Fixed Deposit (FD): Each depositor in a bank is insured up to a maximum of 5,00,000 (Rupees Five Lakhs) by Deposit Insurance and Credit Guarantee (DICGC) for both principal and interest amount held by them. In the case of a bank default depositor, you will get Rs. 5 lakhs; however, if your deposit is more than Rs. 5 lakhs, it’s not safe. Hence, split your deposit within different banks and make sure it doesn’t exceed Rs. 5 lakhs. But before that, click here to check if your bank is covered under DICGC.
2. Post Office Term Deposit: Investing your money in post office instruments is a worry-free and safe investment option as they bear a sovereign guarantee from the Government of India. Post office term deposits provide different term options: 1 year, 2 years, 3 years, and 5 years. You can choose to buy them based on your goals.
Note: The investment under a 5-year Term Deposit (TD) qualifies for the Income tax benefit under section 80C of the IT Act, 1961, just like a fixed deposit in the bank.
3. Overnight Fund: Overnight fund is a type of mutual debt fund that invests in securities with a maturity of one day. It provides superior liquidity and safety of the principal amount due to underlying security one-day maturity. Almost all AMCs provide overnight funds. However, expecting a high return may not be fair. In the past 1 year, it has delivered a 5% return that may be close to savings bank interest post-taxation.
| Scheme Name | Benchmark | Riskometer Scheme | Return 1 Year (%) Direct Plan | Previous Month Average AUM (Cr.) |
| Aditya Birla Sun Life Overnight Fund | CRISIL Overnight Fund AI Index | Low | 5.46 | 13,701.11 |
| Axis Overnight Fund | NIFTY 1D Rate Index | Low | 5.49 | 11,128.47 |
| Bandhan Overnight Fund | NIFTY 1D Rate Index | Low | 5.45 | 2,733.65 |
| Bank of India Overnight Fund | CRISIL Overnight Fund AI Index | Low | 5.54 | 42.39 |
| Baroda BNP Paribas Overnight Fund | CRISIL Overnight Fund AI Index | Low | 5.46 | 565.62 |
| Canara Robeco Overnight Fund | CRISIL Overnight Fund AI Index | Low | 5.43 | 174.10 |
| DSP Overnight Fund | CRISIL Overnight Fund AI Index | Low | 5.47 | 3,704.21 |
| Edelweiss Overnight Fund | NIFTY 1D Rate Index | Low | 5.38 | 488.39 |
| Franklin India Overnight Fund | CRISIL Overnight Fund AI Index | Low | 5.39 | 167.54 |
| HDFC Overnight Fund | CRISIL Overnight Fund AI Index | Low | 5.42 | 18,858.68 |
| HSBC Overnight Fund | NIFTY 1D Rate Index | Low | 5.48 | 2,755.38 |
| ICICI Prudential Overnight Fund | CRISIL Overnight Fund AI Index | Low | 5.44 | 14,202.44 |
| Indiabulls Overnight Fund | CRISIL Overnight Fund AI Index | Low | 5.25 | 25.48 |
| Invesco India Overnight Fund | NIFTY 1D Rate Index | Low | 5.43 | 415.43 |
| ITI Overnight Fund | CRISIL Overnight Fund AI Index | Low | 5.34 | 35.14 |
| JM Overnight Fund | CRISIL Overnight Fund AI Index | Low | 5.43 | 171.47 |
| Kotak Overnight Fund | NIFTY 1D Rate Index | Low | 5.47 | 10,210.60 |
| LIC MF Overnight Fund | NIFTY 1D Rate Index | Low | 5.47 | 453.40 |
| Mahindra Manulife Overnight Fund | CRISIL Overnight Fund AI Index | Low | 5.47 | 410.45 |
| Mirae Asset Overnight Fund | NIFTY 1D Rate Index | Low | 5.49 | 855.64 |
| Nippon India Overnight Fund | CRISIL Overnight Fund AI Index | Low | 5.47 | 11,790.64 |
| NJ Overnight Fund | NIFTY 1D Rate Index | Low | 35.33 | |
| PGIM India Overnight Fund | NIFTY 1D Rate Index | Low | 5.44 | 78.53 |
| Quant Overnight Fund | CRISIL Overnight Fund AI Index | Low | 116.52 | |
| Samco Overnight Fund | CRISIL Overnight Fund AI Index | Low | 59.31 | |
| SBI Overnight Fund | CRISIL Overnight Fund AI Index | Low | 5.43 | 21,568.67 |
| Shriram Overnight Fund | CRISIL Overnight Fund AI Index | Low | 83.97 | |
| Sundaram Overnight Fund | NIFTY 1D Rate Index | Low to Moderate | 5.44 | 1,059.97 |
| Tata Overnight Fund | CRISIL Overnight Fund AI Index | Low | 5.45 | 3,336.79 |
| TRUSTMF Overnight Fund | CRISIL Overnight Fund AI Index | Low | 5.44 | 228.95 |
| Union Overnight Fund | CRISIL Overnight Fund AI Index | Low | 5.45 | 175.47 |
| UTI Overnight Fund | CRISIL Overnight Fund AI Index | Low | 5.45 | 7,184.45 |
4. Liquid Fund: Liquid Fund is a type of Debt Mutual Funds, which mainly invests in debt securities with less than 91 days of maturity like treasury bills (TB), commercial paper (CP), certificates of deposit (CD), government securities, etc. As the funds name indicates, liquid funds are liquid and could be suitable for any of your short-term goals with 6 month to 1-year tenure.
| Scheme Name | Benchmark | Riskometer Scheme | Return 1 Year (%) Direct | Previous Month Average AUM (Cr.) |
| Aditya Birla Sun Life Liquid Fund | CRISIL Liquid Fund BI Index | Moderate | – | 33,507.75 |
| Aditya Birla Sun Life Liquid Fund | CRISIL Liquid Fund BI Index | Moderate | – | 33,507.75 |
| Aditya Birla Sun Life Liquid Fund | CRISIL Liquid Fund BI Index | Moderate | 5.82 | 33,507.75 |
| Axis Liquid Fund | NIFTY Liquid Index B-I | Low to Moderate | – | 30,232.88 |
| Axis Liquid Fund | NIFTY Liquid Index B-I | Low to Moderate | 5.79 | 30,232.88 |
| Bandhan Liquid Fund | NIFTY Liquid Index A-I | Low to Moderate | 5.74 | 13,171.48 |
| Bank of India Liquid Fund | CRISIL Liquid Fund BI Index | Low to Moderate | 5.78 | 441.69 |
| Baroda BNP Paribas Liquid Fund | CRISIL Liquid Fund BI Index | Low to Moderate | – | 7,548.85 |
| Baroda BNP Paribas Liquid Fund | CRISIL Liquid Fund BI Index | Low to Moderate | 5.81 | 7,548.85 |
| Canara Robeco Liquid Fund | CRISIL Liquid Fund AI Index | Low to Moderate | 5.76 | 3,230.56 |
| DSP Liquidity Fund | CRISIL Liquid Fund BI Index | Low to Moderate | 5.72 | 14,688.68 |
| Edelweiss Liquid Fund | NIFTY Liquid Index B-I | Low to Moderate | – | 1,562.25 |
| Edelweiss Liquid Fund | NIFTY Liquid Index B-I | Low to Moderate | 5.74 | 1,562.25 |
| Franklin India Liquid Fund | CRISIL Liquid Fund BI Index | Low to Moderate | – | 1,608.81 |
| Franklin India Liquid Fund | CRISIL Liquid Fund BI Index | Low to Moderate | – | 1,608.81 |
| Franklin India Liquid Fund | CRISIL Liquid Fund BI Index | Low to Moderate | 5.71 | 1,608.81 |
| HDFC Liquid Fund | CRISIL Liquid Fund BI Index | Moderate | 5.70 | 54,248.46 |
| HSBC Liquid Fund | NIFTY Liquid Index B-I | Low to Moderate | 5.77 | 12,641.25 |
| HSBC Liquid Fund | NIFTY Liquid Index B-I | Low to Moderate | – | 12,641.25 |
| HSBC Liquid Fund | NIFTY Liquid Index B-I | Low to Moderate | – | 12,641.25 |
| ICICI Prudential Liquid Fund | CRISIL Liquid Fund BI Index | Low to Moderate | 5.69 | 50,429.67 |
| IDBI Liquid | CRISIL Liquid Fund BI Index | Low to Moderate | 5.72 | 739.43 |
| IIFL Liquid Fund | CRISIL Liquid Fund BI Index | Moderate | 5.60 | 581.58 |
| Indiabulls Liquid | CRISIL Liquid Fund BI Index | Low to Moderate | 5.47 | 226.90 |
| Invesco India Liquid Fund | NIFTY Liquid Index A-I | Low to Moderate | 5.71 | 7,312.74 |
| Invesco India Liquid Fund | NIFTY Liquid Index A-I | Low to Moderate | – | 7,312.74 |
| ITI Liquid Fund | CRISIL Liquid Fund AI Index | Low to Moderate | 5.57 | 34.35 |
| JM Liquid Fund | CRISIL Liquid Fund BI Index | Low to Moderate | 5.73 | 1,752.93 |
| JM Liquid Fund | CRISIL Liquid Fund BI Index | Low to Moderate | – | 1,752.93 |
| Kotak Liquid Fund | NIFTY Liquid Index B-I | Moderate | 5.70 | 35,817.12 |
| LIC MF Liquid Fund | CRISIL Liquid Fund BI Index | Moderate | 5.71 | 5,866.49 |
| Mahindra Manulife Liquid Fund | CRISIL Liquid Fund BI Index | Low to Moderate | 5.81 | 556.12 |
| Mirae Asset Cash Management Fund | NIFTY Liquid Index B-I | Low to Moderate | 5.76 | 5,707.19 |
| Motilal Oswal Liquid Fund | CRISIL Liquid Fund AI Index | Low to Moderate | 5.33 | 484.18 |
| Navi Liquid | CRISIL Liquid Fund BI Index | Low to Moderate | 5.72 | 97.40 |
| Nippon India Liquid Fund | NIFTY Liquid Index B-I | Moderate | – | 28,470.58 |
| Nippon India Liquid Fund | NIFTY Liquid Index B-I | Moderate | 5.74 | 28,470.58 |
| Parag Parikh Liquid Fund | CRISIL Liquid Fund AI Index | Low to Moderate | 5.33 | 1,479.15 |
| PGIM India Liquid Fund | CRISIL Liquid Fund BI Index | Low to Moderate | 5.75 | 757.06 |
| Quant Liquid Fund | CRISIL Liquid Fund BI Index | Moderate | 5.68 | 1,611.35 |
| Quantum Liquid Fund | CRISIL Liquid Fund AI Index | Low | 5.47 | 582.15 |
| SBI Liquid Fund | NIFTY Liquid Index B-I | Low to Moderate | – | 62,275.80 |
| SBI Liquid Fund | NIFTY Liquid Index B-I | Low to Moderate | 5.71 | 62,275.80 |
| Sundaram Liquid Fund | NIFTY Liquid Index B-I | Low to Moderate | 5.79 | 3,769.95 |
| Tata Liquid Fund | CRISIL Liquid Fund AI Index | Low to Moderate | 5.68 | 18,519.62 |
| TRUSTMF Liquid Fund | CRISIL Liquid Fund AI Index | Low to Moderate | 5.74 | 199.45 |
| Union Liquid | CRISIL Liquid Fund BI Index | Low to Moderate | 5.78 | 1,722.63 |
| UTI Liquid Cash Fund | CRISIL Liquid Fund AI Index | Low to Moderate | – | 32,874.65 |
| UTI Liquid Cash Fund | CRISIL Liquid Fund AI Index | Low to Moderate | 5.77 | 32,874.65 |
| WhiteOak Capital Liquid Fund | CRISIL Liquid Fund BI Index | Low to Moderate | 5.47 | 204.52 |
💡Pro Tip: All liquid funds are not 100% safe. There are incidences where the liquid fund has also given a negative return. That’s why you need to check the underlying asset (where the fund manager is investing) before initiating investment in a liquid fund. You may choose the liquid fund with a high sovereign and AAA securities allocation.
Remember, when you decide to invest in a debt fund, the safety and liquidity of your principal should be your priority, and if you can get a better return than a savings bank, then nothing like it.
5. Treasury Bill: Treasury bills are India’s safest fixed-income investment option because the central government issues them. The yield in these instruments is predetermined, which means you are sure how much return you will make if you hold T-bills until maturity. Thus, you can use T-bills as an investment option to park the short-term amount you need within a year.
There are various treasury bills like 14 days, 91 days, 182 days, and 364 days. You can buy T-bill directly through the RBI Retail platform or a broker like Zerodha through bidding.
The minimum investment required to buy a t-bill is Rs. 25,000; furthermore, multiples of Rs. 25,000. Remember T-Bills do not carry interest like FDs, TDs, etc., but you buy them at a discount and upon maturity to get the face value.
For example, A 91 days treasury bill face value is Rs.1,000 may be available now at Rs.950. You have to invest Rs.95 now; at maturity, you will get a face value of Rs.1000. The Rs. 50 is earned by investing in a treasury bill.
📖Must Read: Debt Mutual Funds Taxation New Rule From 1st April 2023
Conclusion
Apart from the above-listed investment options, others carry some other risks. While investing in short-term instruments, remember the purpose is the safety and liquidity of your principal and not the high return.
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Important Calculators
2 Responses
Excellent post and a lot of learning
Hi Vivek,
I am glad that you had a fantastic learning experience.
Thank you for your feedback.