Short term investments have quite a few investment options. Marketable securities on the other hand are type of investment choices a person can make for his own company. But there are certain basic differences between short term investments and marketable securities. Short term FD is also a safe investment into the bank and this also gives a sort of security.
Why should you choose short-term investment options?
A fixed deposit is an investment option provided by banks or non-banking financial companies to deposit money and earn a certain rate of interest and in case this is invested for a short period of time, the money can be extracted any time. Short term investments actually vary from one business to the other. Businesses are not always the same kind, hence, the investment policies also differs most of the time. These short-term investments are quite different from that of marketable securities.
These are basically liquid financial instruments which can be converted to liquid cash at a very reasonable rate. The liquidity in this case comes into being because maturities tend to be less than a single year and that the rates in which they are bought and sold have very shallow effect on prices. Marketable securities can also be said to be any unrestricted financial instrument that can be bought or sold on a public stock exchange or a public bond exchange. Thus, it is very clear that they can be classified into two categories – marketable equity security and marketable debt security.
What makes short-term FDs profitable?
As far as short-term investments are concerned, an investment must have a degree of marketability that allows it to be turned into cash quickly. Short term FD is considered to be one of the most profitable investments which help in the boosting up the business in a very effective way. When we are talking about short-term investments, it is better to be clarified that they mainly are classified as current assets and they generally fall into one of three categories namely marketable debt securities, short-term paper or marketable equity securities. On the other hands as said before, marketable securities can be classified into two important categories. The marketable equity securities have two types – common stock or preferred stock. In case of all marketable equity securities which include both current and non-current are enlisted at lower value of market. When we are talking about marketing debt securities, which happen to be the second category, it can be said that they are considered to be any short-term bond issued by a public company held by another company.
It is lieu of cash that holds the marketable securities in companies; hence, it is even more important that there is an established secondary market. Investments in equity and debt securities help in boosting up the business by ensuring its security as well as cash flow. 7-12 months are the actual time period for fixed income investments. A few of the common fixed-income products that have great usage in short-term investing include fixed deposits, company deposits and post office term deposits as well. Hence, this is being very well clarified that where exactly lies the difference between these two.
A bank FD is a safe choice for short-term investment. FDs come with various tenures ranging from different numbers of time periods. Different banks have different duration of deposits. These can be easily renewed on maturity and thus funds can be reinvested, if there is no such need. Hence, short term investment as FD is perhaps the wisest choice. While on the hand, marketable securities basically have no restriction as such, they may also come in the form of stock exchange or bond exchange.
Also Read: How you Can Earn higher returns with the Bajaj Finance Fixed Deposit.