Unveiling the 6 Best Short-term Investment Plans for 3 Years in India

Whether you are saving up for an upcoming expense or want to grow your surplus funds in a relatively short period, short-term investments come as a viable choice. In the realm of investment planning, the time frame is a pivotal aspect. If your investment horizon is around three years, you will be interested in the best investment plan for 3 years that can maximize your returns while aligning with your risk profile. This article unravels the 3 years investment plans that can aid in achieving your short-term financial objectives.

Understanding short-term Investment

Before diving into the short-term investment plan for 3 years, let's understand what short-term investments entail. These are investments made for a period of 1 to 3 years, intending to get higher returns within this period compared to traditional saving methods. The best investment plan for 3 years in India would offer a balance of risk and return suitable to individual investor preferences.

Six Best Short-term Investment Plans for Three Years

1. Bank Fixed Deposits

One of the safest and most traditional forms of investment, Bank Fixed Deposits (FDs), tops the list of short-term investment plans. With a tenure ranging from seven days to ten years, choosing a 3-year term for your FD can be an excellent short-term investment plan. While the returns might not be as high as some other risk-associated investments, they are reliable and secure, making FDs a suitable option for risk-averse investors.

2. Debt Mutual Funds

For those willing to accept a slight risk for better returns, Debt Mutual Funds can serve as an effective investment plan. Debt funds primarily invest in fixed-income securities like treasury bills, government securities, corporate bonds, and other money market instruments, aiming to provide steady returns. They are less volatile than equity funds and are suitable for an investment horizon of 3 years.

3. Liquid Funds

Liquid funds are mutual funds that invest in debt and money market securities with a maturity period of up to 91 days. They aim to provide liquidity, safety, and moderate returns to the investor. Although they aren't risk-free, they are among the least risky mutual funds, offering higher returns than regular savings accounts. They also allow you to withdraw your funds anytime, making them an attractive short-term investment plan for 3 years.

4. Recurring Deposits

If you prefer to invest a certain amount periodically instead of a lump sum, Recurring Deposits (RDs) can be an excellent choice. RDs operate much like FDs but allow you to deposit a fixed sum every month for a chosen period. At the end of the term, you get your invested amount along with the accumulated interest. This systematic investment approach can work as a disciplined 3 years investment plan.

5. Arbitrage Mutual Funds

Arbitrage mutual funds capitalise on the price difference of securities in different markets. They purchase security from a market at a lower price and sell it in another market at a higher price. The difference is the investor's profit. These funds generally have a low risk and provide better returns than traditional saving instruments. Given their risk-return profile, they can serve as one of the best investment plans for 3 years.

6. Short-Term Bonds

Short-term bonds, or bond funds, are debt instruments that can be an excellent investment choice for 3 years. They offer higher returns than bank FDs, although with slightly higher risk. However, this risk is still significantly lower than that of equity investments. Corporate bonds and government bonds are two types of bonds that investors can consider for short-term investment.

Choosing the Right Investment Plan

While the aforementioned options stand as some of the best investment plans for 3 years in India, the choice of the right plan depends on several factors:

1. Risk Appetite: Your ability and willingness to bear risk largely influence the choice of investment. While FDs and RDs are safer options, mutual funds and bonds involve some amount of risk.

2. Financial Goals: The investment choice also depends on what you aim to achieve in three years. It could be saving for a vacation, buying a car, or simply earning higher returns on surplus funds.

3. Investment Amount: The amount you plan to invest also plays a role in determining the best investment plan. Some options are better suited for lump sum investments, while others are ideal for regular, smaller investments.

4. Liquidity Needs: If you might need to withdraw the funds before the three-year term, options like liquid funds, which offer high liquidity, could be more suitable.

The investment arena provides numerous opportunities, and the best investment plan for 3 years might differ for each individual. Thus, investors should evaluate each plan considering their unique financial circumstances and objectives. Regardless of the investment vehicle you choose, remember that all investments carry some level of risk, and it's crucial to stay informed and keep an eye on your investments. Finally, consult with a financial advisor if you're uncertain about choosing the right investment plan.