At home, work or even while commuting, the topic that is dominating every conversation today is Coronavirus and its impact on one’s health, the stock markets and wealth. The coronavirus outbreak has impacted all strata of the financial ecosystem. With a complete halt on the global supply chain and markets undergoing a downward spiral, the world is currently experiencing one of the worst recessions. Amidst such situations, it can become challenging to invest in long-term. The economic repercussion of the pandemic outbreak compelled many investors to realign their portfolio and think short-term investments.
According to a report published by S&P Global Ratings, the Indian economy is expected to shrink by 5% in 2021, due to the ongoing coronavirus lockdown impacting the economic activity of the nation. The impact of the pandemic outbreak was felt in the money market, as indices across the globe experienced a sharp plunge as the rapid spread of the pandemic hurt investor sentiment as well. Considering the current economic conditions, it is absolutely natural for investors to look for short-term investment options. In light of this, here are the top 3 short-term investments to look out for.
Choose Fixed Deposits
Considering the current situation, it is reasonable to limit the risk factor in an investment portfolio. Typically, a market cycle lasts more than 3 years, so there regularly isn’t sufficient opportunity to recuperate from a downturn that may happen if choosing higher-risk assets, for instance, equities. Hence, one of the easiest and safest ways to invest in the short-term is by opting for fixed deposits. The general notion about the fixed deposit is that its long-term. However, investors can invest in fixed deposits for much shorter periods as well. Along these lines, you can guarantee that you get fair returns and your venture is secured against market inflation. Moreover, a short-term fixed deposit also acts as a contingency fund. Instead of borrowing, withdraw your FD.
Liquid funds are a type of mutual funds that invest in short-term government certificates and securities of deposits. Investors can enter and exit at any point of time these liquid funds investments are secure and provide around 4-7% post-tax return. Consider parking your contingency funds in these, as the recovery takes around 2 days.
Considering the current market condition, many investors are looking for alternative investments to diversify their portfolio. Since these assets react differently to market conditions, investors often find alternative funds a great way to minimise market risk. AIFs like invoice discounting is increasingly gaining traction among investors as it offers above-market returns within a short period of time at a reduced risk
With a reduced interest rate and vulnerability pervasive in the market, investors will need to be aware of the market corrections to be on top of their game. Hence, investing in short-term investments are considered prudent amidst the current circumstances. It is suggested to keep up satisfactory liquidity of at least 25%, and to put resources into the market in a methodical way with enough diversification across assets.