What To Do With Money Lying Idle In Your Account
A hike, a bonus or a good business deal, whatever be the reason for a sudden influx of money, it certainly makes us feel good. Being a responsible mature adult, you curb your impulses to splurge all that money and instead set it aside, untouched. But of what use is it if it just sits in your savings account earning a paltry interest? Here we take a look at some investment options that can give your high yields.
Certificate of Deposit
As the name indicates, a Certificate of Deposit or CD is a certificate issued by a bank to a person depositing money for a fixed time at a pre-decided rate of interest. A CD is a form of ultra short term debt fund. On an average, you can earn around 8% in returns in just a year and withdraw the funds along with the interest earned at maturity. The minimum tenure a bank can usually issue a CD is for 7 days and a maximum of 1 year.
Short Term Floating Rate Fund
A Short Term Floating Rate Fund is a type of short term investment with a floating interest rate where the principal amount invested is divided between fixed rate securities and floating securities. This is a great investment option for the risk averse as it gives you a source of stable income for a specified period.
Gold, the oldest form of investment is a great option to invest and grow money in a short tenure. Since it is not dependent on market performance, it is especially helpful during periods of economic crisis since the demand is almost always on the rise. The yellow metal offers protection and stability of your capital and is more of a investment against economic shocks. As a short term investment, you can earn anywhere between 7% and 8% or even as much as 20% returns if you decide to hold on to it for longer. Some experts are of the opinion that investing about 5% of your money in gold is a good option.
A bond is an agreement wherein an investor lends money to an entity as a loan. Bonds are generally risk-free, have high liquidity and give you the principal amount with a fixed rate of interest per annum upon maturity. This is a great option for investors who wish to diversify their investment profiles.
Invoice Discounting is an alternative investment instrument still in its nascent stages that has been gaining popularity over the last decade or so. It is a unique fixed income instrument that combines low risk with high yield in just 30-90 days. It usually takes place on an online platform or marketplace like KredX, India’s leading invoice discounting platform.
How it works:
- Businesses receive an invoice for delivered goods or services from a blue-chip company.
- The business then uploads the invoice on the KredX platform after a discount on the total amount.
- Investors check to see the available invoices on the platform and select the ones they wish to purchase.
- The funds are then transferred to the business in 24-72 hours. In essentiality, the business foregoes a small amount of their profit for a quicker payment that otherwise takes 90 days on an average. This ensures their cash flow isn’t affected.
- Investors get paid at the end of the invoice tenure, i.e. 30-90 days and earn an average of ~12-20% ARR*.
Investors get lucrative returns on funds that were sitting idle in a short time period of 30-90 days at a much higher rate than traditional investments offered by banks.
It’s always wise to save for a rainy day to ensure a worry-free tomorrow. And what better way to save than investing your hard earned money that is lying around idle. Happy investing!