Crypto Investing
25 Nov 2020

Where To Invest For Less Than One Year?

Nisha Ramesh

When we talk about investments, we usually think of those investments that can be bought and held for a while before giving us good returns. Those investments are known as long term investments.

While it makes sense to go for a long-term investment strategy, there is another type of investment that slips our attention – Short term investments. 

But where to invest and grow the money that you are going to need within the next year? 

Here are a few assets that will help you invest and grow your money for less than one year.

Where To Invest For Less Than One Year?

1. Cryptocurrencies [New Asset Class]

Cryptocurrencies such as Bitcoins are digital currencies – meaning, they are available only digitally. Their limited supply and high demand make it a highly volatile instrument.

Bitcoin-like currencies are known to yield high returns for both short and long-term investors. However, high returns are always tied with high risk, and so, it is a good option for risk-friendly investors.

Investing in cryptocurrencies for a short period can be segmented into three.

  • Profiting within hours: This is similar to day trading in other assets. You can buy the currency and sell it within the same day if the price rises to your expectation. It requires a lot of your time and is quite risky for beginners. 
  • Profiting within days: If you do not have the time to continually track the markets, this could be a better strategy. Here, you can look for a currency that has been jumping up and down within two prices. The idea is to buy low and sell high. 
  • Profiting within Months: This strategy requires you to buy the currencies and hold them for a significant period and sell when there is a surge in price. This is much less risker than the above strategies but can yield similar returns if done right.

If you are skeptical about the risk involved, you can always start small and add further to understand the market better. 

Buy Crypto With Just Rs.100

2. Direct Equities

This type of financial instrument is generally considered to be long term investments. However, when picked rightly, there are good chances one can earn returns within a short period.

For instance, suppose a significantly undervalued mid-cap or small-cap stock shows potential. There are chances that it may yield significant returns in a short time when the market recognizes it and values it accordingly.

Also, IPO (Initial Public Offering) is another way to invest in stocks for the short term. When stocks are first listed in the market, they are generally available at the lowest price possible.

And there has been a general pattern of high price fluctuations for the first three to six months after the IPO before it settles. You can take advantage of its volatility and sell the stocks at a much higher price to gain profits within a short span of time.

3. Ultrashort Mutual Funds

Mutual Funds are another popular instrument that pools many investors’ money and buys securities such as stocks and bonds with that fund.  Such funds generally come with a lock-in period.

Ultra short term mutual funds offered by Asset management companies can be ideal for less than one year. They have a maturity period ranging from 3 to 6 months. 

They invest in debt instruments and hence carry lower risk. However, the returns generated from UST Mutual funds are considerably lower.

4. Fixed Deposits

This is one of the most popular options among risk-averse investors. Money invested in fixed deposits is locked in for a specified period. The bank, in turn, pays interest on such deposits.

Usually, the interest rate is much lower than the returns from other instruments, but there is some level of assurance on the return of capital.

This investment is suitable for investors who seek stability and safety over high returns for short periods like less than 1- year.

5. Recurring Deposits

This instrument is very similar to fixed deposits.

The difference is that instead of investing a lump sum amount, you can pay a fixed sum periodically over which interest will be paid. The RD tenure may range somewhere between 6 months to 10 years.

If you have regular income and seek to park your savings in a safe space, this deposit may suit you.

Like Fixed Deposits, the flip side is that the interest rate after tax rarely overcomes the inflation rate but still a good option if your horizon is less than 1 year.

6. Arbitrage Mutual Funds

Arbitrage funds are a kind of mutual funds that gain advantage from the difference in the stock prices in the cash (Spot) market and the futures (derivatives) market.

These funds work by buying stocks from the cash market and selling it in the futures market. Generally, the stock price in the cash markets tends to be lower than in the future market. The difference in price between both markets will be the return on investment. 

This investment can be suitable for investors with a low-risk appetite but require an initial surplus investment. So if you have a surplus that you want to deploy for less than a year, you can look into it.

7. Treasury Bills

These instruments are money market securities offered by the central government of India.

T-Bills can be availed at three maturity periods – 91 days, 182 days, and 365 days. Such bills are issued at a discount rate and bought back at face value. 

For example,  if a T-bill of face value ₹100 is offered at the rate of ₹95 and bought back at 100. The difference of ₹5 is the returns generated by the investment.

You should know that these securities do not pay interest. These are low-risk instruments and are easily traded hence making them ideal for low-time horizon investments.

Bottom Line

If you have surplus money that you might need in one year, consider investing in the instruments mentioned above. You can decide where to invest based on your goals and risk appetite. 

Suppose you are looking to grow your investments tremendously within one year; cryptocurrencies may be a good option for you. If this is the option you choose, sign up with CoinSwitch Kuber to invest in cryptos seamlessly and securely within minutes. 

[su_note] KuberVerse is an educational initiative. Anything expressed here directly or indirectly is not investment advice. And we ask you to do your own research before investing. [/su_note]

Disclaimer : Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. The information provided in this post is not to be considered as investment/financial advice from CoinSwitch. Any action taken upon the information shall be at user's own risk.

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Nisha Ramesh

Content Writer

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