Looking for ways to grow your short-term money without risking your capital? This guide breaks down instruments suited for durations from 1 month to 3 years, helping you make smarter decisions for your near-term financial goals.
Short-term financial planning often exposes a gap in our investing habits that we can sometimes overlook: our tendency to prioritize long-term wealth accumulation at the expense of near-term needs.
While most people focus their energy on major milestones and decade-spanning objectives, the smaller financial goals and immediate priorities can easily fall through the cracks, creating vulnerability.
The solution to this, however, is simple. Just plan for short-term investments along with long-term plans, and that’s exactly what this blog will help you do, with the top short-term investment plans that offer high returns. Let’s get started.
What are Short-term Investments?
Short-term investments are financial instruments designed to generate returns within a short period; typically ranging from months to three years. They can be both market-linked or fixed-income options that are easily converted into cash when required.
These investments fall under the category of marketable securities or temporary investments; assets that balance growth with liquidity. Here’s how different short-term instruments offering safety, liquidity and higher returns stack up.
Top Short-term Investment Plans with High Returns in India
Corporate Bonds
Corporate bonds are debt instruments issued by corporates like NBFCs, banks, and private sector companies to raise funds for expansion, refinancing, or operational requirements. Because these issuers don’t carry the sovereign guarantee that government bonds do, they typically offer higher coupon rates to compensate investors for the additional credit risk involved.
Corporate bonds are assigned credit ratings, from ‘AAA’ to ‘D’, with AAA to BBB- reflecting investment-grade category where the issuer’s creditworthiness is strong. Whereas corporate bonds rated below BBB- are considered speculative or junk bonds and the chances of default in these bonds are high.
For short durations, investment-grade bonds strike the right balance: they keep credit risk controlled while delivering some of the highest yields in the short-term debt space, typically ranging from 8% to 15% annually.
Small Finance Fixed Deposits
The classic fixed deposit remains a dependable choice for investors who value stability and predictable returns. You simply park a lump sum for a chosen tenure and earn assured interest, making it ideal for conservative or short-term goals.
Additionally, you can also explore FDs from NBFCs and small finance banks that offer higher interest rates than traditional bank FDs. Jiraaf’s high yield FDs offers you up to 8.5% interest p.a. and comes with DICGC insurance coverage of up to ₹5 lakh.
Treasury Bills
Treasury Bills (T-Bills) are short-term, zero-coupon securities issued by the government of India. Instead of paying periodic interest, they are sold at a discount and redeemed at face value; the spread between the buy and sell price becomes your return.
They are issued in three maturities with indicative yields of 5.4% (91-day), 5.5% (182-day), and 5.8% (364-day). Since they are backed by the government, repayment is almost certain, making it one of the most ideal instruments for keeping your capital at par with inflation and liquid.
Note: If you invest in a 182-day T-Bill yielding 5.5% and reinvest the proceeds into another 182-day T-Bill at a similar yield, your effective annualized return can be close to 11%. However, this is not guaranteed; T-Bills do not offer fixed compounding or assured reinvestment rates. Your actual annualized returns will always depend on the prevailing yields at the time of each reinvestment.
Sweep-in Fixed Deposits
If you want better returns than a savings account without giving up liquidity, a sweep-in fixed deposit can be an effective tool. Here’s how it works in practice:
Suppose your bank offers 3% p.a. on a savings account and 6% p.a. on FDs. You set a sweep-in threshold of ₹50,000. Whenever your balance goes above this limit; say it rises to ₹90,000, the surplus ₹40,000 is automatically moved into a linked FD earning the higher FD rate.
Later, if you need funds and your savings balance falls short, the bank simply “sweeps out” the required amount from the FD back into your savings account, usually by breaking only the required unit of the deposit.
Mutual Funds
Mutual funds offer a flexible way to invest for short durations, combining diversification with professional management. These funds pool money from multiple investors and allocate it across assets such as debt, equity, or money market instruments, depending on the fund’s objective.
For shorter horizons, you can consider liquid, ultra-short and low duration mutual fund categories such as debt mutual funds or liquid mutual funds. These funds are known for their liquidity and relatively stable performance. These funds have been able to generate 6% to 8% consistently in the last 3 years.
Now that all the options are out on the table, let us discuss which ones fit the best for specific time intervals.
Where to Invest Money for Short-term Goals
Your ideal investment depends largely on how you need the money. Here’s how you can plan your investments based on different time horizons:
For 1 to 3 Months
If you need quick access to funds, choose highly liquid options like:
- Sweep-in fixed deposits
- Liquid mutual funds
- Treasury Bills (91 days maturity)
For 3 to 6 Months
When your time frame is slightly longer, you can take a bit more risk for better returns. Consider:
- Fixed deposits (short tenure)
- Debt mutual funds (ultra-short duration)
- T-bills (182 days maturity)
For 1 to 3 Years
For slightly longer short-term goals; like a home renovation, vehicle purchase, or trave, you can explore:
- Corporate Bonds
- Small Finance Bank Fixed Deposits
- T-bills (364 days maturity)
- Short-duration debt mutual funds
This segmentation helps you align your goals with the right instruments, ensuring you don’t compromise on liquidity or returns. However, beyond choosing the right product, how you manage and optimize your investments matters just as much.
Tips to Maximize Returns from Short-term Investments
Investing smartly is about strategy as much as selection. Here are some practical ways to make the most of your short-term investments:
- Ladder your fixed deposits
Instead of investing a lump sum in a single FD, you can split it into multiple deposits with staggered maturities. This approach, known as FD laddering, ensures continuous liquidity and protection against interest rate fluctuations. You can execute a similar strategy using bonds as well.
- Prioritize capital safety and liquidity
For short-term goals, choose investments that are stable and easy to access. Stick to trusted issuers, high-rated bonds, or conservative debt funds to avoid unnecessary risk. High liquidity ensures you can withdraw or reinvest your money quickly without being tied to long lock-ins.
- Calculate your real return
Nominal returns aren’t always accurate, especially when inflation and taxes are factored in. Use this simple formula to calculate your Return on Investment (ROI):
ROI = (End value – Initial value) / Initial value × 100
Note: While this is the formula for calculating simple ROI, it’s not the correct formula for “real return”. The real return formula is
Real Return ≈ Nominal Return – Inflation Rate
This helps understand how efficiently your money is growing, not just how much interest you’re earning.
Conclusion
Your short-term money needs won’t disappear, and sudden requirements will continue to catch you off guard; but now your money doesn’t have to sit idle while you wait.
Whether you’re between investments, waiting for interest rates to turn favorable, or simply holding funds for a near-term goal, the right short-term avenues let your capital stay productive without tying your hands. These instruments ensure that even during transition periods, your money remains safe, accessible, and efficiently deployed.
Always remember, the more clarity you build around where your short-term cash belongs, the less space there is for uncertainty to influence your financial decisions in the future.
