Safest Short Term Investment Plans 2023

Which are the few safest short term investment plans with high returns in India in 2023? After the series of banking failures in different countries, we Indians are obviously scared and searching for the safest short term investment plans where we can earn decent returns also.

Safest Short Term Investment Plans 2023

I already wrote about the SVB related post recently “Silicon Valley Bank crisis and personal finance learning“, where I have explained what are the learnings from such banking failures. Just because there is a risk in mindless parking of our money in any instrument, does not mean we have to hold in cash mode or stay away from all the investments. Instead, we have to learn the art of managing the risk. Hence, in this post, I am going to share with you the safest short term investment plans available in 2023.

Before jumping into looking at the options, first, you have to be clear about why you are investing or the better usage of the word is PARKING your money for the short term.

It must be for your short term requirements which may pop up within few days, months to years. For such requirements, the primary purpose of the investor is to look for the safety of the principal rather than trying to earn the BEST returns. Once you try to look for the HIGHEST or BEST returns, then accordingly the risk will increase. Hence, you must have a plan for what purpose you need money and also you must understand this basic principle that the purpose is for safekeeping rather than looking for high returns.

Safest Short Term Investment Plans 2023

Considering all these in mind, I am suggesting few options for your requirement.

# Bank Fixed Deposits

Above I have mentioned the risk of investing in FDs. However, I am starting my list with a fixed deposit itself. The reason is that in the case of Bank FDs, up to Rs.5 lakh is insured under the DICGC. You can refer to the details in my earliest post “Bank FDs-Is your Bank have Deposit Insurance and Credit Guarantee (DICGC)?“.

If you look back the Indian Banking history, the failure of big banks (PSUs) is the rarest of rare events. However, if you are still looking for the safety feature, then follow the instructions given in the above-shared post to park safely.

# Post Office Savings Account and Term Deposits

Post Office Term Deposits have sovereign guarantee. Hence, whatever money you keep with Post Office is completely safe. Post Offers various type of term deposits like 1 Yr, 2 Yrs, 3 Yrs and 5 Yrs. You can also opt for NSC (5 Yrs) and KVP (currently money will double in 120 months).

I wrote a detailed post with features of these products and latest rates. You can refer the same at “Latest Post Office Interest Rates January – March 2023“.

# Overnight Mutual Funds

It is a debt mutual fund which invests in bonds of the shortest maturity of one day. This implies that its portfolio is simply cash and is always changing! Investors should be aware of additional risks even if this type of mutual funds has the lowest chance of capital loss. Interest rate risk is lowest here. However, due to volatility, you may sometimes end up with lower returns like savings account rate.

Don’t expect more than your savings account interest rates. All the AMCs offer these funds. You can choose any AMC of your choice. As the maturity is of just one day and your expectation is just equal to savings account, this product may be a better choice for you.

However, since few months the bond prices are falling, even overnight funds also generated decent returns of around 5% (1 Yr return). The list of available overnight funds are as below.

Funds1 Yr Ret (%)Expense Ratio (%)LaunchNet Assets (Cr)
Aditya Birla Sun Life Overnight Fund – Direct Plan5.350.0701-11-201813,400
Axis Overnight Fund – Direct Plan5.390.0515-03-201912,566
Bandhan Overnight Fund – Direct Plan5.350.0618-01-20192,424
Bank of India Overnight Fund – Direct Plan5.450.1728-01-202083
Baroda BNP Paribas Overnight Fund – Direct Plan5.350.0825-04-2019424
Canara Robeco Overnight Fund – Direct Plan5.330.124-07-2019217
DSP Overnight Fund – Direct Plan5.360.0609-01-20192,754
Edelweiss Overnight Fund – Direct Plan5.280.123-07-2019481
Franklin India Overnight Fund – Direct Plan5.290.108-05-2019152
HDFC Overnight Fund – Direct Plan5.310.101-01-201320,146
HSBC Overnight Fund – Direct Plan5.370.122-05-20192,759
ICICI Prudential Overnight Fund – Direct Plan5.340.115-11-201812,838
Indiabulls Overnight Fund – Direct Plan5.160.1808-07-201942
Invesco India Overnight Fund – Direct Plan5.330.0908-01-2020337
ITI Overnight Fund – Direct Plan5.230.0825-10-201926
JM Overnight Fund – Direct Plan5.330.0704-12-2019116
Kotak Overnight Fund – Direct Plan5.360.0715-01-20199,000
LIC MF Overnight Fund – Direct Plan5.370.0718-07-2019952
Mahindra Manulife Overnight Fund – Direct Plan5.360.1223-07-2019346
Mirae Asset Overnight Fund – Direct Plan5.380.1115-10-2019632
Nippon India Overnight Fund – Direct Plan5.380.0818-12-20188,861
NJ Overnight Fund – Direct Plan0.0501-08-202236
PGIM India Overnight Fund – Direct Plan5.340.2527-08-201976
Quant Overnight Fund – Direct Plan0.1105-12-2022118
Samco Overnight Fund – Direct Plan0.112-10-202253
SBI Overnight Fund – Direct Plan5.320.101-01-201319,888
Shriram Overnight Fund – Direct Plan0.0526-08-202283
Sundaram Overnight Fund – Direct Plan5.330.0720-03-20191,006
Tata Overnight Fund – Direct Plan5.350.0927-03-20193,236
TRUSTMF Overnight Fund – Direct Plan5.330.0719-01-2022191
Union Overnight Fund – Direct Plan5.350.0827-03-2019159
UTI Overnight Fund – Direct Plan5.350.0701-01-20135,600

# Liquid Mutual Funds

The next level of safe debt mutual funds are Liquid Funds. Typically Liquid Funds, as the name suggests, invest predominantly in highly liquid money market instruments and debt securities of very short tenure and hence provide high liquidity. They invest in very short-term instruments such as Treasury Bills (T-bills), Commercial Paper (CP), Certificates Of Deposit (CD) and Collateralized Lending & Borrowing Obligations (CBLO) that have residual maturities of up to 91 days to generate optimal returns while maintaining safety and high liquidity.

Many preach liquid funds are alternative to your savings account or an alternative to your short term deposit. However, there are few instances which force us to cautious while choosing such liquid Funds. Take for example, during 2017, one Liquid Fund gave NEGATIVE 7% returns in a single day (refer my post “Is Liquid Fund Safe and alternative to Savings Account?“. Hence, you have to be cautious to check where your fund manager is investing your money. Blindly assuming all liquid funds are safe may sometimes backfire you.

I am suggesting two mutual funds and you can cross check the portfolio before investing.

  1. Quantum Liquid Fund (NOT Quant)
  2. Parag Parikh Liquid Fund

You may expect slightly higher returns than savings account and overnight funds. Use this category when you need the money in short term but unsure of the exact date.

# Treasury Bills

Treasury bills are money market instruments issued by the government of India to finance its short term financial requirements. There are various types of treasury bills like 14 days, 91 days, 182 days and 364 days.

The minimum of Rs. 25,000 has to be invested by individuals willing to procure a short term treasury bill. Furthermore, any higher investment has to be made in multiples of Rs. 25,000.

They not carry any interest. Instead, while investing, you have to buy them at the discounted price. At maturity, you will get the face value. Take for example Rs.100 face value treasury bill may available now at Rs.95. You have to invest Rs.95 now and at maturity, you will get the face value of Rs.100. The Rs.5 is earning for you by investing in treasury bill.

You can buy them directly from RBI Retail Direct or through some brokers like Zerodha. You can view the current bidding at RBI Retail Direct platform or your broker will also provide this information.

Sharing with you the current treasury bills with the indicative YTM.

DateTenor_BucketSecurityYTM
20-Mar-202391D91 DTB (15-Jun-2023)6.8573
20-Mar-2023182D182 DTB (14-Sep-2023)7.2695
20-Mar-2023364D364 DTB (14-Mar-2024)7.3067

Beyond these products, rest everything carries certain amount of risk. Hence, if you are capable of digesting the risk and understanding those risks, then go ahead. Otherwise, it is always better to explore the above shared products. Because at the end of the day, the primary purpose of SHORT TERM INVESTMENT is to protect the principal but not to look for high returns.

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