Financial planning is essential for anyone who wishes to learn to manage and invest their money in a wiser way. Some individuals believe that saving alone is enough for long term and that investing isn’t a necessity. But the fact remains that if you aren’t happy with your existing income and seek wealth creation then you need to be good at financial planning. The first step of financial planning is determining your short term and long term financial goals. As our life keeps taking unexpected turns, it is quite evident that our financial goals might differ from time to time. Thus, every investor must understand that they need to algin their investment objective with that of the investment scheme before going ahead. Your current age, existing income and liabilities help you understand how much risk you can take with your finances with the hope of earning decent capital appreciation in future.

There was a time when the Indian investor only have conservative investment avenues to choose from. There is nothing wrong with investing in traditional investment schemes. They offer guaranteed capital appreciation, but the fixed interest rates on offer are generally on the lower side. One might be able to achieve their life’s financial goals by only depending on conservative investments. If you are someone with little to moderate risk appetite and do not mind investing in market linked schemes, you can consider investing in mutual funds. These are a pool of professionally managed funds that seek capital appreciation by investing in a diversified portfolio of securities. Mutual funds are owned by reputed Asset Management Companies who hire experienced fund managers that play a pivotal role in help a mutual fund scheme outperform or beat its underlying benchmark.

What are short term funds?

Investors carrying a moderately low risk appetite or those shifting from conservative investment avenues to mutual funds for and seeking capital appreciation over a short term, you can consider investing in short term funds. A short term fund is a debt mutual fund that invests in commercial papers, bonds, certificates of deposits and other such fixed income securities that have a short maturity period.

Achieve short term financial goals with short term funds

If you are new to mutual fund investing you should know that there are two modes in which you can invest in short term funds. The traditional way to invest in short term bond funds is to make a lump sum investment. A lump sum is a one time investment that an investor has to pay at the beginning of the investment cycle. An investor benefits by receiving fund units in large quantities in quantum with the investment amount. A Systematic Investment Plan on the other hand is a new and convenient way to invest in short term funds. Investors can now invest a small amount at periodic intervals instead of paying the entire investment amount at one go. Investors are allotted units depending on the fund’s NAV which may fluctuate from time to time, thus allowing the scheme to benefit from rupee cost averaging. With SIP all one has to do is complete a one time mandate with their bank following which every month on a fixed date, a predetermined amount is debited from their savings account and electronically transferred to the short term fund. Investors decide how much to invest provided the figure fulfils the minimum investment amount.

Now that you are aware about some of the features and benefits of short term funds, plan on investing? Before investing in mutual funds do remember that these are market linked schemes that do not guarantee capital appreciation.