Best Investing Plans for 3-year horizon? Best 9 short-term investments Plans

Every individual wants to save for their future and provide financial security to the family. To achieve financial stability and security, one needs to invest wisely. Many people need to be educated about different investment plans. With the availability of resources and guidance, an individual can make sound investment choices. These investments will help an individual to maximise returns.Some of the best ways to invest hard-earned money are by diversifying the portfolio. Many short-term plans are investments of less than 3 years tenure. These investments help an individual reach their financial goals soon.

A short-term investment plan is when a considerable amount is invested for a short period, and they give a fair amount of returns. These plans are focused on meeting the near-future goals of the investor. Many people want to multiply their money quickly and accumulate it over several years. Instead, such people want to invest in a place that will secure their funds and give effective results. These plans are prevalent owing to the lower risks and moderate returns.

The 3-year investment plan is a scheme or a way to grow savings or assets in 3 years. It involves strategising funds to be invested equally amongst stocks, fixed deposits, mutual funds , or other assets to maximise returns with little or no risk. The investment plans are decided according to the person's risk appetite, financial goal and other factors. These plans ensure the investor has money whenever required, as cash can be withdrawn anytime.

Several types of 3-year investment plans can be considered for getting good returns. Some of them are as follows:

• The depositor decides the term of investment of the Recurring Deposits according to their needs. Many prefer investing for a duration of either 1 year or 3 years. They can be opened for a short period of 6 months also. It can go up to 5 to 10 years. This accumulated amount can be reinvested upon maturity in some other short-term plan.
• The interest rate on Recurring Deposits is almost the same as that of fixed deposits, which currently is between 4.5% to 7%. It is a better option for some since the money is deposited monthly and not as a lump sum. It benefits those with a small amount at their disposal but can deposit a small amount monthly.
• It develops a habit of savings in individuals. This is because the amount, as well as the tenure, can be small. Investors starting their investment journey can opt for this short-term investment for 3 years.
• The bank with the investor's saving account can be instructed to auto-debit the amount on a fixed date. The individual with a recurring deposit doesn’t have to keep track of the date of the deposit. It also saves them the time and effort of depositing the monthly amount.

1. The fixed deposits can also be opened for a brief period of 7 days. This can benefit those individuals who require funds after 7 days and want to park them in a secure place and get a higher interest rate than a savings account. The ideal tenure for a Fixed Deposit would be a 365-day or 3-year deposit. It is because the interest rates keep changing every year. The chances of getting better interest rates in the following year are there.
2. The interest rates offered are better than those of savings accounts. It is better to invest in Fixed Deposits to get better returns for the funds that are kept ideally in a savings account. Senior citizens are offered an additional 2% to 2.5% on their Fixed Deposits.
3. The depositor can avail of loans on their Fixed Deposits in an emergency or any unforeseen financial crisis. Besides this, early withdrawal is also possible. The depositor should keep in mind that early withdrawals will fetch a penalty. Another feature of Fixed Deposits is that an overdraft facility can also be taken. The banks offer an overdraft of 90% of the Fixed Deposits value. But the interest rate charged is 2 % higher than that of fixed deposit.

1. Low-duration funds are invested in the money market and debt instruments. The tenure of these investments is 6 months to 1 year.
2. Ultra-short-duration funds are invested in the money market and debt instruments. The tenure of these investments is 3 months to 6 months.
3. Liquid funds are invested in the money market and debt securities. The tenure of these investments is up to 91 days.

1. Around 80% of the accumulated corpus is invested in equities and equity-related instruments.
2. The investor gets Rs.1.5 lakhs tax exemptions under Section 80C of the Income Tax Act. This is on the invested amount.
3. It has a Lock-in period of 3 years, so a person willing to block the funds for 3 years may think of investing in these mutual funds. However, there is no maximum period of tenure for these schemes.
4. The accumulated funds are invested in equities. Across different sectors, market capitalisation and themes.

1. Recurring Deposits: It is one of the safest ways of investing for a short period. Many people invest in recurring deposits to meet their financial requirements for the immediate future. Some invest on behalf of their children, who are minors. Upon maturity, this lump sum amount is reinvested in another investment plan. Once the child grows, a corpus gets accumulated. These funds help in providing financial stability in the future.Mainly all banks offer this facility, and nowadays, many other financial institutions like NBFC (Non-Banking Financial Companies) have also started offering the opening of recurring deposit accounts to their customers. The interest rate offered in these types of short-term investment plans is higher than that of savings accounts.Post offices also have this facility. The Post Office Recurring Deposit (PORD) offer a slightly better interest rate than banks. A minimum of Rs. 500 is sufficient to invest in a recurring deposit.Some of the features and benefits of investing in Recurring Deposits are:
2. Fixed Deposits Fixed deposits are when an investor puts a lump sum for a fixed period. They are the most popular and safest types of short-term investments. Banks provide interest on the amount and guaranteed returns on fixed deposits . Many NBFCs (Non-Banking Financial Companies) offer a competitive interest rate on Fixed Deposits. Some even offer better interest rates than most banks to attract customers.Investing in Fixed Deposits in a Post Office is better for best interest rates and non-deduction on TDS (Tax Deducted at Source). Premature withdrawals on 3-year fixed deposits are also possible here, but they can only be done after 6 months of the deposit.Some of the benefits and features of investing in Fixed Deposits are:
3. Also Read: What are the Types of Deposit Accounts?
4. Debt Instrument (Short-term Debt Mutual Funds) They are good short-term investment plans for individuals who do not want to take risks and want good returns. The funds invested in short-term debt mutual funds plan are invested in financial market instruments, Government Bonds and Corporate Bonds.They offer a return of 10.5% on investments of short tenure. There are 3 term plans offered in debt mutual funds depending upon the tenure of investment.These are -
5. The debt funds are invested for 91 days and give high returns. They provide high liquidity and low risk. These debt mutual funds offer interest rates of 7 to 9%.Capital gains tax is charged on debt mutual funds. Short-Term Capital Gains Tax (STCG) is applicable on any investment for 3 years. The stock market volatility does not impact these investments directly. That is why they are less risky than investing directly in equities and debentures. Any investments in Debt Mutual Funds are not subject to TDS (Tax Deducted at Source) deductions. The transaction fee for this type of investment is relatively low.
6. Money Market Account They are popularly known as liquid funds. They provide security to the capital and also give good returns. They are considered one of the best short-term investments under 3 years of tenure. These mutual funds offer high liquidity and can be redeemed quickly. They are the least risky among mutual funds.The money market account can be opened for less than a year and 1 month. They do not have any lock-in period, which means the money can be withdrawn whenever needed. With guaranteed returns, the money market funds offer an interest of 7% annually. The profits earned on these funds by the investor are added to the income and taxed as per the income tax slab rate . If the investment is for 3 years, it is taxed at 20% post-indexation.
7. Large Cap Mutual Funds Large-cap mutual funds are short-term plans where mutual fund companies invest in equities of large business organisations. These equities may give good returns in a short span. Investing in large-cap mutual funds can give quick returns within 1 to 3 years.The investment is mainly for a short time but can also be invested for 3 to 5 years.
8. Treasury Bills The Central Government of India issues short-term Government securities called T- Bills or Treasury Bills. Every Wednesday, through the weekly auctions, The Reserve Bank of India (RBI) issues these bills in the open market. They do not pay any interest. For this reason, these investments are also called zero-coupon securities. The Investments in Treasury Bills are made through primary dealers or depository participants. They can also be done through commercial banks.The maturity of these investments is 91 days to 365 days. Since the investment period is less than a year, the T- Bills are less risky with satisfying results. They have greater liquidity than the other short-term investment plans. The minimum amount that can be invested is Rs. 25,000. If the investor wishes to make further investments, it can be done in denominations of Rs. 25,000. Since the Central Government issues them, they are considered a safe investment and are reliable.
9. ELSS Mutual Fund Equity Linked Savings Scheme (ELSS) mutual funds are equity funds that invest a large part in equities. They are prominently known as tax saving schemes. An investor can get up to Rs. 1.5 lakhs of tax benefits under Section 80 of the Income Tax Act.Equity Linked Savings Scheme has a lock-in period of 3 years, and this tenure will be considered a Long Term Capital Gain (LTCG). If the income from this scheme is above Rs. 1 lakh, then it will be taxed at 10%.An investor looking to diversify the portfolio can look at investing in these mutual funds. A small amount of Rs. 500 is needed to invest in this scheme. A lump sum amount can be invested. Some investors invest in these tax saving schemes through SIP (Systematic Investment Plan). There is no maximum limit for investing in ELSS; the investor can invest in it beyond 3 years.Some of the features of Equity Linked Savings Scheme (ELSS) mutual funds are as follows:
10. Also Read: How to Invest In ELSS Mutual Funds To Save Tax?
11. Stock Markets, Commodities and Derivatives Investing in stocks, derivatives, and commodities is a good option for those who know the financial markets and are willing to take risks. Investments in stocks, derivatives and commodities can be short-term investments as well as long-term investments depending upon the investor's financial goals.Investors investing in stocks can earn higher capital gains by investing in the company's stocks whose valuation increases. Investing in stocks can be through the stock exchange, mutual funds, direct stock plans and dividend reinvestment funds.Investing in commodities mitigates volatility and helps in hedging against losses in other asset investments. A wide range of commodities can be traded in the stock market . They can be traded in cash markets as well as futures and options.Derivatives can be used as leverage instruments with an expiry or maturity date. After this date, they automatically get terminated. There are 3 types of derivatives: swaps, forward, future and options.Stocks, derivatives, as well as commodities can be traded daily. Depending on the investor's financial requirements, they can also be held for a specific period.
12. Savings Account Every person opens a savings account, which is the best short-term investment form. It provides security and liquidity. Interest is given on the savings account balance.Nowadays, every savings account holder is issued a debit card with a simplified life. The savings account can park extra funds and withdraw them whenever required. The savings account can park extra funds and withdraw them whenever required. Money can be withdrawn from the account anytime through ATM (Automated Teller Machine).

Also Read: Know The Features Of A Savings Account

When a person chooses a 3-year investment period, a few things must be considered before investing in a 3-year investment plan. A person should know their financial goals, risk appetite, past performances of the plan chosen, investment fees etc. It has to be done to make the right choice of the 3-year investment.Short-term investment plans are prevalent due to the low risk involved. The returns are not that massive, yet people who want to avoid risking their hard-earned income invest in such plans. The 3-year investment plan boosts a person's income by making additional profits through interest on the investments. Some 3-year investments also offer tax benefits when invested in them.