People often recommend investing in low cost passive funds to achieve financial freedom and build wealth. However, this process can take at least 15-20 years. In the meantime, where should one invest for short-term goals? What kind portfolio is suitable for this to achieve this?
Depends on what is the definition of short term, and how much volatility (risk) one is willing to take.
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Here we can consider short term = less than 5-7 yrs. Investor is young and can take moderate to aggresive risk for5-7 yrs
For less than 5 yrs, I would recommend keeping money in safe investments like fixed deposits, debt mutual funds (ultra-short, floating, corporate).
Because we don’t know for how long the market will stay low. Generally it rebounds within 5yrs. Therefore 5yr is the limit.
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When people say that young people can take more risk, they mean that they have a lot of time to wait for the markets to rebound. So don’t get confused.
A person retiring in 2yrs and an young person saving to get college admission in 2yrs are almost same from risk taking capacity. Both of them need the money after 2yrs. Age doesn’t matter in this case.
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do manual sip through lumpsum in microcap 250 index fund. post initial investment if your portfolio turns red someday, buy more units at cheaper price, else buy only if it goes > +4% everytime. for a 5 year time, the risk is close to none statistically.
but do your research first.
For short-term goals in India, consider investing in high-interest savings accounts, short-term fixed deposits, liquid mutual funds, or ultra-short-term debt funds.
These options offer stability, liquidity, and moderate returns suitable for short investment horizons.
One approach is debt funds or ultra-short-term funds, which can provide better returns than savings accounts without the volatility of stocks.
With less than 7 years it’s best to stick with fixed deposits. Reaching the goal is important unless the goal is flexible.
The minimum rolling return for nifty 50 for 7 years is 4.9%. bring it down to 5 years it’s -1.03% If you are happy to get 4.9% then nifty 50 is good for 7 years, although past returns are not guaranteed.
Anything less than 7 years equity is not the place to be.
Target dated maturity debt funds or fixed deposits are good for less than 7 years.