Best Short-Term Investment Options for 5 Years or Less

In India, there’s simply no dearth of short-term investment options. They can help you meet your short-term and mid-term goals easily. While some offer stable and guaranteed returns, others provide market-linked returns. That said, the abundance of choice can sometimes cause a bit of confusion in the minds of investors as to which investment option to opt for.

If you’re an investor who is looking to invest in short-term options for a period of 5 years or less, then here are a few choices that you can consider.

1. Fixed Deposits

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Fixed deposits are one of the safest ways to invest. Even your parents may suggest that you invest in FD to start off with a safer investment option over the short term. This may be a good suggestion too, since there’s very little default risk.

Also, with the DICGC insurance of up to Rs. 5 lakhs on deposits with scheduled commercial banks, you can put your worries about investment risks to rest. Banks and NBFCs also offer competitive interest rates on fixed deposits, so you can earn guaranteed interest on your investments over the investment tenure, which can last from 7 days to 10 years.

2. Debt Mutual Funds

Another very good short-term investment option for a tenure of 5 years or less is a debt mutual fund. Although this is slightly riskier than a fixed deposit, it also has the potential to deliver competitive returns.

Debt mutual funds essentially invest your money in a basket of debt instruments such as debentures, bonds, certificate of deposits, and treasury bills, among others. And even among debt mutual funds, you have different categories such as liquid funds, ultra-short term funds, and short-term funds, giving you full freedom to choose the kind of fund that you wish to invest in.

3. National Savings Certificate

The National Savings Certificate (NSC) is a savings scheme backed by the government of India. It has a tenure of 5 years and offers guaranteed returns. The interest rate is lower than many fixed deposits.

However, one of the primary advantages of this option is that the investment that you make in a 5-year NSC can be claimed as a deduction from your total taxable income under section 80C of the Income Tax Act, 1961, up to Rs. 1.5 lakhs.

4. Equity Mutual Funds

If you don’t wish to invest in an FD, debt mutual fund, or NSC due to the lower rate of return on offer, then equity mutual funds may just be the right choice for you as long as you’re willing to take on a bit of risk. Equity mutual funds invest your money in a basket of stocks of different companies.

Although the returns are completely market-linked and are not guaranteed, these mutual funds have the potential to offer higher returns on your investment when compared with the other options listed here. The only thing that you would have to account for is the high level of risk that it comes with.

5. Corporate Deposits

Finally, you have corporate deposits. These are essentially fixed deposits offered by corporations. The funds that companies raise through these deposits are used by them to further their business. Although corporate deposits are riskier than fixed deposits with banks or NBFCs, the rate of interest on offer is generally on the higher side.

That said, before investing in corporate deposits, it is always advisable to take a look at the company’s credit ratings. The higher the credit rating, the safer your deposits are.


These are some of the many short-term investment options that you can consider investing in for a tenure of 5 years or less. However, if you’re looking for a good mix of low-risk and a moderate return on your investment, then you may want to invest in an FD.

On the other hand, if you’re willing to take on high levels of risk, then equity mutual funds and corporate deposits are a few of the options you can consider investing in.

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