21 thoughts on “Where to Park Money for Very Short Term [less than 6 Months]?”

    1. This slab has now been changed to 5.15% from this financial year. The post is old, will update it. Thanks for pointing this out

  1. I just came across this mutual fund portfolio to park money for very short term. Looks pretty decent.

  2. Thanks Amit. It was very confusing that where to save our money for short Period. Thanks for sharing this useful information to us.

  3. Amit, aren’t FDs between 7 days to 6 months calculated per annum?
    So for investment of 5 lacs for a year at 6.5 percent, I will be returned 5,34 lacs. But if I invest 5 lacs for 3-6 months slab, then I will get only 17k as interest, right?

    1. I am sorry Ii did not get the question fully. But if you are asking if the interest is compounded quarterly for 7 days to 6 months, then yes some banks do it quarterly while others do it on annual basis. However it would not make much difference in final interest.

      1. Sorry for the confusion. I am just trying to understand how the interest is calculated in less than 6 month FDs and if they are worth it. To give another example, if I deposit 5 lacs for 1 month FD on a 5.0% interest, then will I end up with 25000 as interest or 25000/12 months = INR 2083 as interest?

        1. Generally Banks give a quarterly compound interest for having a deposit with them for more than 1 quarter which basically mean for more than 2 quarters (compounding will happen only when it crosses the second quarter). Though some Banks may not give compounding effect. But generally all Banks compound at least on yearly basis.
          All Banks’ website or Branches give this information.

    1. Short term is for goals which are close while long term are for goals far away in future. So investment should be according to your goals – Short term investment for short term goals and vice versa!

  4. Interesting article, thanks for sharing the information. Can you suggest if it is advisable to park the money from FD’s to Liquid funds for a horizon of one year. As I keep the FD’s for any contingencies but now since the rates of FD’s have gone down so don’t want to stay invested and looking for some good options. Money will be invested on my wife’s name who’s income is not taxable as on date.

    1. Thanks for appreciation! Bank FDs and Liquid funds follow similar pattern. As the returns of Bank FDs are coming down so would for Liquid Funds. You can move some money in Liquid or Arbitrage Funds.

      Even if you invest in your wife’s name the income is going to be clubbed with yours! Had done a Post on Emergency Fund which might be of help – Where should you Invest your Emergency Fund?

  5. Hi Amit, I have 20 lakhs available for investment for a short term – exactly 6 months. I also have my KYC registered on CAMS and KARVY and have SIP’s in MF’s such as Birla, Tata, HDFC and SBI. Can you please guide me where to park this sum so that I can get good interest rate and the money available for withdrawal by Nov 2016.?
    Also i have tried with my banks for an FD but as I understand its not allowing me to open FD for a period of 180 days although they post on the website the interest rate is 6.5 % but not allowing to open online.
    Many thanks to assist.

    1. There are multiple banks which are offering 7.5% to 8% for 6 months fixed deposit. I do not see a problem in banks accepting this. You can check the highest FD rates here.

      Other than FD, you can invest in Liquid/Short Term debt or Arbitrage funds. In case you are in highest tax bracket dividend reinvestment option would be more beneficial. As for risk of negative return is concerned – Bank FDs are safest (guaranteed returns) followed by liquid funds and then arbitrage funds.

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