Short Term Investment

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Short term Investment

Short term investments are designed to provide considerable returns in


a fairly short span of time which can be a year or even a few months.
These plans are more focused to meet the expected near future
expenses. Usually, investors who are more inclined towards short-term
investments option aren’t really interested in waiting for years in order
to get their money multiplied many times over. Instead, they look for
quick and effective results. This is where short term investment plans
come to their rescue. With short term investment plans, one can expect
optimum returns to meet their financial objectives.

• Best Short term Investments Options

• Recurring Deposits

• Recurring deposit
The Recurring deposit account is an account in the bank or in a Post
office where a depositor deposits a preset amount of money every
month for a fixed time period (generally ranging from one year to five
years). This format is meant for persons who would like to deposit a
fixed amount every month, with the purpose of getting a lump sum
after a few years. The little monthly savings in the Recurring Deposit
plan allow the saver to build up an attractive sum on maturity. Interest
rate in this kind of deposit scheme is calculable on quarterly
compounded based.
• Objective
• The main objective of recurring deposit account is to develop
regular savings habit among the public.
• In India, minimum amount that can be deposited is Rs.10 at
regular intervals.
• The period of deposit is minimum six months and maximum ten
• years.
• The rate of interest is higher.
• No withdrawals are allowed. However, the bank may allow to
close the account before the maturity period.
• The bank provides the loan facility. The loan can be given up to
75% of the amount standing to the credit of the account holder.

• Benefits
1. High-interest rate
One of the main benefits of recurring deposit account is the attractive
interest Rate. For instance, IDFC FIRST Bank offers 6.75% to 7.25% for a
recurring deposit. This is higher than savings account interest rates. Do
remember that the interest rates are per annum. The payout will only
be made at the maturity of the recurring deposit with quarterly
compounding. Recurring deposits are currently available only for
domestic and senior citizens in most banks.
2. No penalty if you miss a month
Previously, when savers for some unavoidable reason missed a
recurring deposit, they were forced to pay a monetary fine. But, those
days are gone. Customer-friendly financial institutions like IDFC FIRST
Bank have no penalty if you miss a month. Do, however, remember in
case of premature withdrawal before 30 days, no interest is payable. In
case of premature withdrawal of a recurring deposit after 30 days and
before 6 months, the interest rate you will get will be the fixed deposit
card rate applicable for 30- 45 days.

3. Start with minimum Rs 2000/month


There is no need to think that you have to save a lot of money every
month to get a recurring deposit. One of the key advantages of a
recurring deposit is that you can start with minimum Rs 2,000 per
month. On the higher side, the maximum monthly installment for
recurring deposits will be Rs 75,000.

4. Save for as low as 6 months


In the case of many investment products, you have to commit to a fixed
time period. This is usually 12-24 months. One of the benefits of
recurring deposit account is that the commitment period is much
lower. For example, IDFC FIRST Bank allows you to save for as low as six
months.
5. Best for short-term goals
Recurring deposits
are best suited for all types of short-term goals. A short-term goal is
one which you have 1-3 years to achieve. So, a recurring deposit should
be used to save for yearly education expenses for your kids, furnishing
and renovation costs for your existing home, saving for a dream
overseas vacation and marriage expenses.

• Risk
1.Recurring Deposits are not subject to market risks: When you invest
in recurring deposits, you will receive the full monthly amount
deposited along with interest at maturity. The value of recurring
deposits is not affected by market conditions like other investment
options such as mutual funds and equity shares.
2)Risk of investing in the recurring deposit scheme of an institution that
is not credible: You should invest in a recurring deposit scheme of only
a reputed financial institution. Compare the schemes of institutions in
the segment and select a trustworthy company that offers you the best
interest rate on your investment. It’s not advisable to select a company
without conducting thorough research.
3)Risk related to premature withdrawal: There could be a case where
the investor requires funds and wishes to withdraw the deposited
amount before maturity. In such a scenario, the financial institution
may levy a penalty for premature withdrawal or give the depositor the
sum without the interest component.
• Return % by Indian bank
Recurring Deposit Interest Rates Bank wise
Bank Tenures (p.a.)
SEBI plays an important role in regulating all the players operating in
the Indian capital market. It attempts to protect the interest of
investors and aims at developing the capital markets by enforcing
various rules and regulations. Best Recurring Deposit Scheme in India
with Highest Interest Rates
Here are some banks that offer the best interest rates for RD schemes:
Bank Tenures (p.a.)

1 year 2 years 3 years 4 years 5 years

Andhra Bank RD Interest Rates 5.00% 5.40% 5.50% 5.50% 5.60%

Allahabad Bank RD Interest Rates 5.00% 5.10% 5.15% 5.15% 5.15%

Axis Bank RD Interest Rates 4.40% 5.25% 5.50% 5.50% 5.75%

Bandhan Bank RD Interest Rates 5.50% 5.50% 5.25% 5.25% 5.00%

BOM RD Interest Rates 4.90% 4.90% 4.90% 4.90% 4.90%

BOB RD Interest Rates 4.90% 5.10% 5.25% 5.25% 5.25%

BOI RD Interest Rates 5.00% 5.05% 5.05% 5.05% 5.05%

Canara Bank RD Interest Rates 5.10% 5.10% 5.25% 5.25% 5.25%

Central Bank of India RD Interest Rates 4.90% 5.00% 5.00% 5.00% 5.00%

City Union Bank RD Interest Rates 5.00% 5.25% 5.00% 5.00% 5.00%

Corporation Bank RD Interest Rates 5.00% 5.40% 5.50% 5.50% 5.50%

Citi Bank RD Interest Rates 2.75% 3.00% NA NA NA


DBS Bank RD Interest Rates 4.25% 4.55% 5.50% 5.50% 5.50%

Deutsche Bank RD Interest Rates 4.25% 4.50% 5.00% 5.25% 6.25%

Dhanlaxmi Bank Rd Interest Rates 5.15% 5.30% 5.30% 5.40% 5.40%

Federal Bank RD Interest Rates 5.10% 5.35% 5.35% 5.35% 5.60%

HDFC Bank RD Interest Rates 4.90% 5.15% 5.30% 5.30% 5.30%

Indian Overseas Bank RD Interest Rates 5.20% 5.25% 5.25% 5.25% 5.25%

ICICI Bank RD Interest Rates 3.75% 4.40% 4.40% 4.40% 4.40%

IDBI Bank RD Interest Rates 5.05% 5.20% 5.40% 5.40% 5.25%

Indian Bank RD Interest Rates 5.10% 5.15% 5.15% 5.15% 5.15%

IndusInd Bank RD Interest Rates 6.00% 6.00% 6.00% 6.00% 5.50%

J&K Bank RD Interest Rates 5.10% 5.20% 5.30% 5.30% 5.30%

Karnataka Bank RD Interest Rates 5.20% 5.50% 5.50% 5.50% 5.60%

Karur Vysya Bank RD Interest Rates 5.25% 5.50% 5.50% 5.50% 5.75%

Kotak Mahindra RD Interest Rates 4.50% 5.00% 5.10% 5.20% 5.25%

Laxmi Vilas Bank RD Interest Rates 5.00% 4.75% 5.50% 5.50% 5.50%

Oriental Bank of Commerce RD Interest Rates 5.00% 5.10% 5.25% 5.25% 5.25%

PNB RD Interest Rates 5.00% 5.10% 5.25% 5.25% 5.25%

Punjab & Sind Bank RD Interest Rates 5.15% 5.15% 5.30% 5.30% 5.30%

Saraswat Bank RD Interest Rates 5.25% 5.25% 5.45% 5.45% 5.85%

South Indian Bank RD Interest Rates 5.40% 5.40% 5.50% 5.50% 5.65%

SBI RD Interest Rates 4.90% 5.10% 5.30% 5.30% 5.40%

Syndicate Bank RD Interest Rates 5.10% 5.10% 5.25% 5.25% 5.25%

TMB RD Interest Rates 5.50% 5.50% 5.25% 5.25% 5.25%


UCO Bank RD Interest Rates 4.90% 5.00% 5.00% 5.00% 5.00%

Union Bank RD Interest Rates 5.00% 5.40% 5.50% 5.50% 5.60%

United Bank RD Interest Rates 5.15% 5.15% 5.30% 5.30% 5.30%

Yes Bank RD Interest Rate 5.75% 6.00% 6.25% 6.25% 6.50%

Post office (5 years) 5.5% 5.5% 5.5 % NA 6.7 %

For 2-year tenure, one of the best highest interest rates are offered by
Lakshmi Vilas Bank at 7.50% p.a. and then by Yes Bank at 7.50%.
For 3-year and 4-year tenures, you earn the best RD interest rates with
Lakshmi Vilas Bank at 7.50% p.a.

• Suitability
RD Features Applicability
Rate of interestBetween 5% to 8% (variable from one bank to
another)
Amount of minimum deposit
Long term investment
A long-term investment is an account on the asset side of a company's
balance sheet that represents the company's investments, including
stocks, bonds, real estate, and cash. Long-term investments are assets
that a company intends to hold for more than a year.
The long-term investment account differs largely from the short-term
investment account in that short-term investments will most likely be
sold, whereas the long-term investments will not be sold for years and,
in some cases, may never be sold.
Being a long-term investor means that you are willing to accept a certain
amount of risk in pursuit of potentially higher rewards and that you can
afford to be patient for a longer period of time. It also suggests that you
have enough capital available to afford to tie up a set amount for a long
period of time.
From Rs. 10 Tenure of investment Between 6 months and 10 years.
Frequency of interest calculation Usually every quarter.

• Best Long term investment


PPF (Public Provident Fund)
Public provident fund is a popular investment scheme among investors
courtesy its multiple investor-friendly features and associated benefits.
It is a long-term investment scheme popular among individuals who
want to earn high but are also looking for stable returns. Safety of the
principal amount is the prime target of individuals opening a PPF
account.
• Objective of PPF
Public Provident Fund (PPF) was introduced in India in 1968 with the
objective to mobilize small saving in the form of investment, coupled
with a return on it. It can also be called a savings-cum-tax savings
investment vehicle that enables one to build a retirement corpus while
saving on annual taxes. Anyone looking for a safe investment option to
save taxes and earn guaranteed returns should open a PPF account.

• Benefits
PPF is one investment vehicle that falls under the Exempt-Exempt-
Exempt (EEE) category. This, in other words, means that all deposits
made in the PPF are deductible under Section 80C of the Income Tax Act.
Furthermore, the accumulated amount and interest is also exempt from
tax at the time of withdrawal. It is important to note that a PPF account
cannot be closed before maturity. A PPF account, however, can be
transferred from one point of designation to another. But, do remember
that a PPF account cannot be closed prematurely. Only in the case of the
account holder’s demise can the nominee’s file for the closure of the
account.

• Risk
Risk free investment: PPF investment is 100 per cent risk-free as it is a
Goal-backed small saving scheme, which is not linked to the stock market
movement. In case of bank default, one's PPF balance amount will
remain 100 per cent secured. Most importantly, the PPF balance won't
be added in ₹5 lakh insurance guaranteed by the GoI to bank account
holders.

• Return
Savings as a practice is an essential exercise to secure yourself
financially. However, keeping the rising costs of living and inflation in
mind, it does not suffice to merely apportion a part of one’s income as
savings while letting it sit idly. It is also crucial to opt for a suitable
avenue for channeling such funds to appreciate its value. Here’s where
a Public Provident Fund with guaranteed PPF returns and sovereign
backing as well as tax benefits, comes to the aid of such investors.

• Example of return in PPF


As an example, let’s assume Ramesh has started a PPF account from April 2019. At the
end of FY 2018 – 19, he had Rs.1.5 lakh as balance, including that year’s interest. He makes
a monthly deposit of Rs.5000 on the 10th of every month. The table below illustrates the
interest calculation for his PPF account.

Savings as a practice is an essential exercise to secure yourself financially. However,


keeping the rising costs of living and inflation in mind, it does not suffice to merely
apportion a part of one’s income as savings while letting it sit idly. It is also crucial to opt
for a suitable avenue for channeling such funds to appreciate its value. Here’s where a
Public Provident Fund with guaranteed PPF returns and sovereign backing as well as tax
benefits, comes to the aid of such investors.
Public Provident Fund
It is a savings scheme that the Government of India offers to resident Indians, including
employees, students, self-employed individuals, and retired persons. A Public Provident
Fund account carries a lock-in period of 15 years, and an account-holder must make
deposits every year, as per PPF rules.
The Government of India revises the PPF return rate every quarter, which is set based on
the rate of returns on government bonds. For the first quarter of the Financial Year 2020
– 21 (April – June), the Indian government has revised the return rate for PPF at 7.1%,
which was 7.9% in the previous quarter. The Indian government is responsible for paying
the returns to account-holders.
The Public Provident Fund is one of the safest investment options since it receives the
backing of the central government, and chances of capital loss are negligible. Another
winning point of PPF is the effect of compounding. Due to compounding and a
considerably long tenure (15 years), PPF subscribers stand to gain substantially from
Public Provident Fund returns.
How is Interest on PPF Calculated?
The interest calculation for PPF takes place on a monthly basis. However, such interest is
added to the balance in a PPF account at the end of every financial year. Furthermore,
such monthly calculation takes place in the following manner –
The lowest balance in a PPF account on a specific month’s 5th date and that month’s end
date is considered for interest calculation for that month.
For instance, if a PPF account shows a balance of Rs.500 on 5th January and Rs.1500 on
31st January, then interest for January will be calculated on Rs.500 and not Rs.1500.
Therefore, if a person deposits on any date after 5th, they will not be able to enjoy any
interest on that contribution for that specific month. Therefore, a PPF account holder
should make any additional deposit for a specific month before the 5th of that month to
maximize their PPF returns.

As an example, let’s assume Ramesh has started a PPF account from April 2019. At the
end of FY 2018 – 19, he had Rs.1.5 lakh as balance, including that year’s interest. He makes
a monthly deposit of Rs.5000 on the 10th of every month. The table below illustrates the
interest calculation for his PPF account.

Balance considered for PPF rate of Interest


Month (Rs.)
interest calculation (Rs.) return (%)

April 150,000 7.9 988

May 155,000 7.9 1020

June 160,000 7.9 1053

July 165,000 7.9 1086

August 170,000 7.9 1119


September 175,000 7.9 1152

October 180,000 7.9 1185

November 185,000 7.9 1218

December 190,000 7.9 1251

January 195,000 7.9 1284

February 200,000 7.9 1317

March 205,000 7.9 1350

Total Nil Nil 14,023

Now, let’s consider an alternative example. In this instance, Ramesh makes his monthly
deposits on the 4th of every month. The table below represents the interest calculation
for his PPF account.

Balance considered for PPF rate of Interest


Month (Rs.)
interest calculation (Rs.) return (%)

April 155,000 7.9 1020

May 160,000 7.9 1053

June 165,000 7.9 1086

July 170,000 7.9 1119

August 175,000 7.9 1152


September 180,000 7.9 1185

October 185,000 7.9 1218

November 190,000 7.9 1251

December 195,000 7.9 1284

January 200,000 7.9 1317

February 205,000 7.9 1350

March 210,000 7.9 1383

Total Nil Nil 14,418

As can be seen, in the latter case, the PPF account return was higher by Rs.359. As this
effect is compounded over 15 years, the potential increase in yields while making deposits
before the 5th of every month is substantially higher than when making deposits after
the 5th.

• Suitability
PPF is a Government of India backed debt asset, suitable for long
terms financial goals such as children's education and retirement
planning. By investing in PPF, you can claim tax deductions under
section 80C up to Rs 1.5 lakh.
SEBI
SEBI is a statutory regulatory body established on the 12th of April,
1992. It monitors and regulates the Indian capital and securities
market while ensuring to protect the interests of the investors,
formulating regulations and guidelines. The head office of SEBI is at
Bandra Kurla Complex, Mumbai.

• Role of SEBI in financial market


• This regulatory authority acts as a watchdog for all the capital
market participants and its main purpose is to provide such an
environment for the financial market enthusiasts that facilitate the
efficient and smooth working of the securities markets to make this
happen, it ensures that the three main participants of the financial
market are taken care of, i.e. issuers of securities, investor, and
financial intermediaries.
• 1. Issuers of securities
These are entities in the corporate field that raise funds from
various sources in the market. This ORGANISATION makes sure that
they get a healthy and transparent environment for their needs.
• 2. Investor
Investors are the ones who keep the markets active. This regulatory
authority is responsible for maintaining an environment that is free
from malpractices to restore the confidence of general public who
invest their hard-earned money in the markets.
• 3. Financial Intermediaries
These are the people who act as middlemen between the issuers and
• Function of SEBI in financial market
The main primary three functions are-

Protective Function
Regulatory Function
Development Function
1. Protective Functions
As the name suggests, these functions are performed by SEBI to protect
the interest of investors and other financial participants.
It includes-
Checking price rigging
Prevent insider trading
Promote fair practices
Create awareness among investors
Prohibit fraudulent and unfair trade practices
2. Regulatory Functions
These functions are basically performed to keep a check on the
functioning of the business in the financial markets.
These functions include-
Designing guidelines and code of conduct for the proper functioning of
financial intermediaries and corporate.
Regulation of takeover of companies
Conducting inquiries and audit of exchanges
Registration of brokers, sub-brokers, merchant bankers etc.
Levying of fees
Performing and exercising powers
Register and regulate credit rating agency
Learn about stock market with Basics of Financial Markets Course by
Market Experts
3. Development Functions
This regulatory authority performs certain development functions also
that include but they are not limited to-
Imparting training to intermediaries
Promotion of fair trading and reduction of malpractices
Carry out research work
Encouraging self-regulating organizations
Buy-sell mutual funds directly from AMC through a broker Investors.
They make the financial transactions smooth and safe.

Importance of SEBI in financial market


SEBI plays an important role in regulating all the players operating in
the Indian capital market. It attempts to protect the interest of
investors and aims at developing the capital markets by enforcing
various rules and regulations.

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