Whenever we reach close to goals, it’s always recommended to shift the investment from risky avenues to safer options. In this post we discuss which is the best option to park your money if you investment horizon is less than 6 months. 1 Where to Park Money for Very SHORT-TERM? Where to Park Money for Very SHORT-TERM? 1.Saving Bank Account – You can keep the amount of money in the savings bank-account. The interest offered is 4% to 7% depending on the bank or investment company to a bank or investment company and the account balance. Taxation – Interest up to Rs 10,000 is exempted from tax. Any additional amount is put into the income and taxed at marginal tax rate.
Most banks offer fixed deposits from 7 days on wards. The eye offered is 4% to 6% for 3 months deposit and 5% to 7% for deposit up to 180 times. Please, note many many banking institutions do not offer increased rates for senior citizens for deposits of less than 1 year.
Taxation – the interest received is put into the income and taxed at marginal tax rates. 3.Personal debt Mutual Money – either Water can be chosen by you Funds or brief term FMPs. Year bank or investment company Fixed deposits – albeit with higher risk The results of both are marginally higher than prevailing 1. Taxation – the gains made on redemption within three years of investment is termed as short-term capital gains.
The gains are put into the income and taxed at marginal taxes rates. 4.Arbitrage Mutual Funds – These funds leverage arbitrage opportunities in the stock market to generate results. As they are mainly invested in equities, these are treated as equity funds. The results are similar to Debt Mutual Funds. Taxation – increases in size made on redemption within 1 years of investment is referred to as short-term capital increases. Also Read: How are your Investments Taxed? If you compare the taxation part, the conserving bank account gets the most favorable taxes treatment accompanied by Arbitrage Mutual Funds. Debt Mutual Funds and Fixed Deposits have the same taxation.
The table below shows the profits at different tax slabs when you make investments Rs. 1 lakh and Rs. 5 Lakh for 3 months and six months. The cells with best results are shaded in green. As you can see for Arbitrage Funds are good for parking higher amounts for individuals in the 20% taxes brackets.
Also Read: Thinking about Choose Dividend Reinvestment for Arbitrage Fund if Investing for less than a Year? 1. The arbitrage finance provides the best returns for individuals in higher tax bracket of 20% or more. 2. The debt funds have the potential to give the best earnings for investors in lower tax slab or whose income is below the taxable limit but this comes with some risk! 3. Savings bank-account offering higher rates of interest can be a better option than buying Fixed deposits especially for people in higher taxes bracket. However, as the total amount invested rises the benefit of saving account in conditions of taxes treatment is reduced.
- Annuities as well as your Spouse as Beneficiary of the IRA
- Silver Bullion Coins
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- Creating Your Own Products
- Pretty close to earth – which means you can prospect the asteroid
4. For a while (for 90/180 times) liquid funds and arbitrage funds have the potential to provide superior absolute results when compared with fixed debris. On a longer length of time (to get more than 1 year) the comes back for debt shared funds and set deposits are comparable. 5. You can find FMPs of 90 and 180 times periods also.
You can invest in them if you’re sure that you do not need money before maturity though I do not see any major advantages over Liquid Funds. 6. As stated, go for a set deposit or saving bank account if you would like 100% guaranteed earnings. Though uncommon but there have been instances when Debt Mutual Funds (on July 16, 2013) have given negative returns for few days.
Also in case of Arbitrage Mutual Funds, there were cases of marginal negative earnings in a quarter even. For e.g. – JM Arbitrage Advantage Fund gave negative 0.for July 07 88 results, 2008 to Oct 06, 2008 quarters. 7. If you withdraw before maturity from Fixed Deposits, there would be charges for the. So be cautious to match investment period with Fixed Deposit tenure.