How To Save For a Holiday On a Budget
Holidays — both within India and overseas / abroad — are an expensive affair. The flights are expensive, and so are the hotels. The budget balloons further if you are travelling with your family. And with the value of the rupee weakening every month, a foreign destination could cost you an arm and a leg.
Therefore, investing with a short-term goal has become increasingly important. Good short-term investment can equip you with extra cash, which could be used in upgrading your hotel or during your shopping spree.
So, what are the investment options that can help you achieve your short-term goals? Fixed deposit (FD) is a popular choice. But, there are other investment avenues that can offer your higher returns in the short-term. You could invest in the stock market.
You could invest in a money market or in government treasuries. Do these terms seem unfamiliar or do you not have the time to research and then invest? Then, mutual funds are your way forward. In fact, you could choose a mutual fund that aligns with your investment goals. They are best-suited for people who are not well-versed with the financial market.
Mutual fund investment for specific goals
Let’s say your goal is to take your family for a vacation six months down the line.With a good short-term investment, you may even have the chance to bump up your holiday destination. Instead of travelling within India, you can take them out to an exotic foreign location. This is how mutual fund benefits can help you in the short-term.
Let’s look at different mutual funds that can help you save for a holiday.
They could help you with your short-term goals. The average returns for large-cap equity funds over a six-month investment stand at 9.3%, as on September 27, 2017. However, there is usually an exit load associated with equity funds. An exit load is an amount charged if you decide to leave the scheme before 12 months.You need to evaluate this option before you invest.
The six-month category average returns stand at 7.8%. Balanced funds invest in both fixed income (debt) instruments and stocks. These funds also have an exit load.
Short-term debt funds
They invest in short-term corporate bonds with a focus on higher interest income. You could get up to 10.4% returns for a year’s investment, a higher rate when compared to short-term fixed deposits (FDs).
Ultra short-term funds
These mutual funds invest in short-term debt and money market instruments. Ultra short-term funds do not have an exit load, and are highly liquid. These funds benefit those who seek to earn money in a shortduration.
These funds invest in highly liquid money market instruments such as treasury bills. Investing in them would be better than stashing your money in a savings account. Though these funds are recommended for emergency funds, they could be a good investment option for your vacation. They do not have an exit load either. As the name suggests, they can be liquidated (redeemed) very easily.
Fixed deposits and savings account are considered safe.With mutual funds, there is a certain element of risk involved. But, they can grow your money at a faster rate and help you relax during your holiday.
You can easily start your investments with companies like Franklin Templeton , FundsIndia etc and start accumulating money for that dream vacation you’ve been planning.