These short-term investments can fetch you better returns

Almost everyone wants to become rich. However, cynics claim that it takes years of prolonged savings and shrewd investment strategies to create wealth. The need for an adequate amount of cash in the near future may necessitate you to invest in financial instruments that help to earn quick returns. These earnings can help pay for your marriage or make down payments for your new car or home. Unlikely as it may seem, there are short-term investment strategies that can ensure good returns if done judiciously. Some of them include:

Fixed deposits with banks: One of the most common investments made by people who tend to be risk-averse or do not have too much money in hand to invest. Deemed as the simplest form of investments after bank savings, the returns on fixed deposits (FDs) are better than the interest income from a savings bank account. Explaining how investments in FDs help, Vineet Patawari, co-founder, stock analytic app StockEdge and financial market learning portal Elearnmarkets.com, says, "Good returns are subjective. Bank FDs give better returns than savings accounts. They're safe and there are FDs which can help in saving taxes too. But over a long period, the returns from FDs just manage to beat inflation. With a similar risk-return profile, debt mutual funds give similar returns and better fund withdrawal flexibility."

Fixed deposits can be somewhere between 30 days and 10 years. Explaining how one may decide the investment horizon of the bank fixed deposits, CS Sudheer, founder and CEO, IndianMoney.com, says, "Fix the investment horizon based on risk appetite and liquidity needs. The investment horizon must match critical goals that cannot be delayed. The investment horizon is fixed such that there's little fluctuation in returns and almost no loss of capital".

Money market instruments: Also called liquid funds, one may invest in these financial instruments to earn interest income better than fixed deposits. Sold as term deposits, commercial papers, etc., the maturity period of the assets comprising these liquid funds is not more than 91 days, thus, enabling greater opportunities of liquidity within a short period. Raj Khosla, founder and managing director, MyMoneyMantra.com, says, "Money market instruments provide liquidity and safety by investing in relatively low-risk, short-duration bonds. Such instruments offer the potential for higher yields as compared to FD and other saving schemes, thereby extending maximum value to an investor who seeks stable returns in a short period of time."

Investing in gold: Saving money to invest in gold or silver jewellery is common in India. However, those aiming for high liquidity must opt for gold bonds. Suresh Sadagopan, founder, Ladder7 Financial Advisories, says, "Gold Bonds issued by the government is an excellent option as it tracks the price of gold and would offer the return gold offers without ever having to hold gold physically and be subject to attendant problems. Also, gold bonds currently offer 2.5% per annum returns (taxable), which is clearly positive. Capital gains arising out of redemption of bonds are exempted if held to maturity, which again is a positive."

Short-term debt funds: The underlying benefit of investing in them is that they shield against the volatility of market movements. Conservative investors inclined towards capital creation find them a viable option. Manoj Agrawal, director legal & compliance, Risers Accelerator, says, "For investors who seek good returns on their investments, debt funds are always better than fixed deposits, which are bound to a fix duration and interest rate. Though fixed deposits are always considered safest, the returns they give are limited. On the other hand, investors who opt for debts funds comparatively enjoy a lesser tax burden on the same amount." Debt funds invested for more than a year yield good returns and help save on taxes as compared to bank fixed deposits.

Mutual funds: Most investments in mutual funds (MFs) are made for prolonged periods to beat inflation while earning good returns. However, the choice of MFs varies for those looking to earn in a short duration. Explaining which category of MFs help to earn good returns within a short period, Rajeev Srivastava, head-retail broking, Reliance Securities, says, "In the current scenario, investors with 1-2 years of investment horizon can consider short-term MFs with a past return track record of 8-10% based on the assets in the fund portfolio. Investors with low risk can look at short-term debt while for investors with an investment horizon of 30 days or lesser, liquid funds will be a better option and ultra-short-term funds can be an option for a maturity period of 2-4 months. For investors with moderate risk appetite and investment horizon of above two years, one could consider large-cap or blue-chip MFs that has delivered a CAGR of 9-12 %."

Making the right choice of MFs for quick returns may not be easy owing to a lack of understanding of how they work. However, Archit Gupta, founder & CEO, ClearTax, says, "Before investing in a mutual fund, you need to analyse your goals and requirements. Asset allocation varies across mutual funds to meet different obligations. Check if the objective of the fund is in line with your necessities. The risk involved in any mutual fund is significantly dependent on equity exposure. If your main intention of investing in mutual funds is to earn quick returns with minimal risk, then go with liquid funds. These funds invest in high-rated debt papers, and they mature within ninety days. Liquid funds offer moderate returns. If you want high returns, then invest in high-risk equity funds."

Relying on tax-efficient mutual funds: Other than earning returns, many people are concerned about savings on their taxes too. This propels them to look for tax-efficient financial instruments that can ensure good returns too. Gupta says, "Equity-linked savings scheme (ELSS) is the only kind of mutual fund that offers tax deductions under Section 80C of the Income Tax Act, 1961. The ELSS investors can avail a maximum deduction of Rs 1,50,000 and save up to Rs 46,800 in taxes a year. Investing in ELSS offers the twin benefit of high returns and tax deductions. Above all, ELSS offers the highest return among Section 80C avenues, thus, making it the most lucrative tax-saving investment option. All ELSS instruments come with a lock-in period of three years and are offered by most fund