Explore the key differences between LIC and Mutual Funds. Understand the benefits, risks, and returns of both investment options to determine which is better for your financial goals and risk tolerance.
Investing can seem like a big task, especially if you’re new to it. Short-term investments, however, provide a simple yet effective way to grow your money while keeping risks in check.
With its dynamic economy and favorable financial environment, UAE offers a variety of short-term investment plans that can help you achieve your financial goals without locking up your funds for too long. In this guide, we’ll help you find a safe place to park your money in the best short-term investments in the UAE for quick returns.
Short-term investments refer to financial instruments that you can invest in for a period of up to 3 years, but most often, these investments mature in less than a year. These are highly liquid, meaning they can be easily converted to cash if needed, making them an attractive choice for those who need easy access to their funds.
Unlike long-term, short-term investments in UAE are particularly appealing for individuals and businesses looking to achieve quick financial returns, protect their capital, or create temporary cash reserves. They are also a good option for those who have an immediate need for liquidity without the long wait that comes with long-term investments.
Did You Know? |
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If you have short-term goals like buying a phone or want some cash in the case of an emergency, or just starting out, investing for short-term can always be better. |
If you're looking for options of the best short-term investment in UAE, here are some of the best options —
Recurring deposits (RD) are a great option for those who want to save regularly. You make fixed monthly deposits, and in return, you earn interest on your savings. RDs are offered by most UAE banks, and they generally offer higher interest rates than savings accounts.
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Gold has always been a highly valued asset in the UAE, and it remains a popular short-term investment option. You can invest in physical gold (jewelry, bars, or coins), gold stocks, gold mutual funds, or gold ETFs. Gold is particularly valued as a hedge against inflation and economic uncertainty.
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Looking to make quick returns?
Check out the best short-term SIP Plans that offer high liquidity and growth.
Money market funds are an attractive choice for low-risk investment that offers liquidity and stability. These funds invest in high-quality short-term debt instruments, such as government securities and certificates of deposit. They are ideal for conservative investors who want to preserve their capital while providing modest returns.
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If you're looking to earn interest on your savings without taking risks, a high-yield savings account is a great short term investment in the UAE. Compared to regular savings accounts, these accounts offer higher annual percentage yields (APY). This makes them a good place to store your money for short-term financial goals.
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Equity derivatives, such as options and futures, allow you to speculate on the future price movements of stocks. This high-risk short term investment plan can offer substantial returns if your predictions are accurate. However, it requires expertise and is best suited for seasoned investors who have the experience and extensive knowledge to understand the complexities of the market.
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National Bonds are a popular and safe investment option in the UAE. These bonds are compliant with Shariah law and offer a low-risk investment opportunity. They are highly flexible and suitable for individuals of all income levels. You can start investing with as little as AED 100.
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Certificates of Deposit are a safe and traditional investment option. Banks in the UAE offer these fixed-term instruments, which come with higher interest rates than regular savings accounts. They generally have a lock-in period ranging from 6 to 18 months, and the rate of return is fixed, meaning you know exactly what you're going to earn.
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Short-term fixed deposits offer a great way to earn higher returns on your savings over a shorter period. These deposits usually have a tenure ranging from 7 days to 12 months, and they provide a higher rate of return than regular savings accounts.
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An endowment plan combines insurance and savings. It offers a lump sum payout on maturity, making it a more stable investment option. Though the returns may be lower than other options, endowment plans also provide life insurance coverage, ensuring financial protection for your family.
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Cryptocurrencies like Bitcoin and Ethereum have gained traction as short-term investment plans in UAE due to their high volatility. While they carry higher risks, they also offer the potential for significant returns. The UAE has robust regulatory frameworks for cryptocurrencies providing a secure and an attractive option for investors.
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Need help choosing the right investment?
We know how overwhelming it can be to find the right investment plan. Let’s shortlist a few top investment plans available and compare to find the right one for you.
With so many options available, selecting the right short-term investment plan in the UAE can be challenging.
Here are some key factors you should consider when making your decision —
Quick Returns | One of the major advantages is the quick maturity period. You can see returns in under a year and reinvest the profits in other opportunities. |
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Low Risk | Many short-term investments, like government bonds or fixed deposits, are backed by government guarantees or stable financial institutions, offering low-risk opportunities. |
Flexibility | You can tailor your investment amounts, duration, and type of investment to their personal needs and goals. |
Easy Access | Many platforms in the UAE allow online management of short-term investments, making them highly accessible. |
Low Returns | Since the investment duration is short, returns are generally lower than long-term investments. |
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Limited Growth | These investments provide limited time for compounding, so they may not offer as much growth as long-term investments. |
Limited Diversification | Some short-term investments in the UAE may have fewer diversification opportunities, leading to concentrated risk. |
Penalties for Early Withdrawal | Fixed deposits impose penalties for withdrawing funds before maturity, which can discourage early cash-outs. |
The best way to invest money for the short term is high-yield savings accounts, money market funds, certificates of deposit, and short-term fixed deposits are great choices for low-risk investments.
Short-term investment plans work by allocating your funds into low-risk, liquid instruments like government bonds or fixed deposits. They aim to generate interest or returns over a short period while keeping your capital safe.
In the UAE, tax-free investments are common, especially in government-backed options. There are no taxes on most short-term investments, including savings accounts, bonds, and fixed deposits.
Short-term investments are used for achieving immediate financial goals, providing liquidity, and preserving capital while earning quick returns. They help meet needs like emergency funds, vacations, or purchasing a car.
Tax-free short-term investment plans in UAE, include Public Provident Fund (PPF), Employees' Provident Fund (EPF), and five-year post office term deposits (in India). In some countries, there are also tax-free returns on certain pension schemes and tax-saver fixed deposits.