Short term investment

They are good for short term goals, you can look at liquid funds,
floating rate funds and short term bank deposits as options for this
category of investments. Liquid funds have returned around 5% post-
tax returns as compared to 5.6% post-tax that your one year 8% bank
fixed deposit gives you. So, if you have funds for investments for over
a period of one year, it is better, if your time horizon is less than one
year, say around six months. This is because the bank deposit rates
decrease proportionately with lower periods, while liquid funds will
yield the same annualized returns for any period of time. Short-term
floating rate funds can be considered at par to liquid funds for short
term investments.

Fixed Maturity Plan (FMP)

If you know exactly for hoe much time you need to invest your
surplus, a smarter option is to invest in FMPs. They are shorter
tenured debt schemes that buy and hold securities till maturity,
thereby eliminating the interest rate risk. Try and opt for FMPs that
offer a double indexation benefit. Fund houses usually launch double
indexation benefit. Fund houses usually launch double indexation
FMPs during the end of the financial year so that they cover two
financial year closings.