In many of our videos, we have helped you put together an investment plan for achieving one’s longterm goals. But it’s also true that most of us have several shortterm goals .. like buying a phone, planning a vacation, tuition, paying back a shortterm loan, purchasing a bike, etc.

In this video, we shall try to put together an investment plan for managing money over short periods.

Topics Covered:
00:00 Introduction
01:03 Short Term Goals
02:49 Selection criteria for short term investments
08:10 setting up your short term investments

SHORT TERM GOALS
All shortterm goals can be categorized into two parameters the tenure of the goal and also the importance of the goal.
When planning, this segmentation between time and importance can be really useful. As a thumb rule, the closer you are to your goals and the more important those goals are the higher should be your allocation to those instruments which are not going to give you a nasty surprise. This would mean that the money you have allocated for goals like your emergency fund, school fees, etc. should be invested or kept in only those instruments which have very little risk

SELECTION CRITERIA FOR SHORT TERM INVESTMENTS
When choosing an investment for your shortterm goals, there are three areas to focus on

The safety of capital i.e. the money one puts in should not carry any speculative or unknown risks
Liquidity or more importantly accessibility so one should be able to pull out the money as and when required
Returns which comes with the ability to earn more than other comparable options

Three points that one should always keep an eye for

When looking at debt fund returns never forget that safety and liquidity have a higher role to play
Never make the mistake of chasing the bestperforming fund as more often than not the funds that deliver the highest returns also take in the highest risk
When evaluating returns, always do that on a posttax basis. Taxes are particularly important when comparing fixed deposits with debt mutual funds .. because both these instruments have a different taxation structure

SETTING UP YOUR SHORT TERM INVESTMENTS
Step 1 Align every single rupee to a goal. This is done by creating specific, measurable, actionable, realistic, and timebound goals.

Step 2 Allocate the right financial product to each of your shortterm goals. For instance, the money allotted to important and immediate goals should be invested only in super safe instruments like a savings account, a fixed deposit, overnight funds, or liquid funds. However, for the other goals which are not that important or are a little into the future then one can explore the slightly longer duration options like an ultra short term fund, a money market fund, a low duration fund.


The framework for shortterm investing is the actual selection of funds. Manually incorporate some checks and rules in your selection process

Check 1 looking at the modified duration and the lower that number, the better it is because it means that the scheme is less sensitive to interest rate movements which is what we want in a short term fund

Check 2 ensure that the fund’s average maturity is equal to or lower than the category’s average maturity

Check 3 Look at having a YTM that is close to the category’s average YTM

Resources:
How to Read a Debt Fund Factsheet    • Debt Mutual Funds for Beginners Part ...  
Debt Mutual Fund Taxation blog https://www.etmoney.com/blog/debtmut...
Debt Specific videos:
   • Best Debt Mutual Fund Guide for Begin...  
   • How to pick a Debt Mutual Fund for In...  
   • Debt Mutual Funds for Beginners Part ...  
   • Debt Mutual Funds: How to invest in 2...  

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