Short-Term Investment Fund (STIF) - Definition, What is Short-Term Investment Fund (STIF), Advantages of Short-Term Investment Fund (STIF), and Latest News - ClearTax (2024)

Introduction

A short-term investment fund or STIF is a low risk and high-quality short-term money market instrument. A STIF is renowned as one of the most secured investment options and is suitable for risk-averse investors.

The fundamental purpose of these funds is to protect the capital being invested. Short-term investment funds are usually anticipated to be on terms with the rate of inflation and generate comparatively higher returns than a regular savings bank account and the benchmark.

Liquidity

As these STIFs come with a tenor of short-term, they are perceived as to be liquid in nature. Furthermore, there are some short-term investment funds available that provide investors with cheques through which they can withdraw from their STIF investments in a much easier manner.

Majority of the STIF funds also provide investors with an option to access their investment online, through which they can make deposits and withdrawals. They can also view their statements on a weekly, monthly, quarterly, and annual basis.

As these funds offer an extremely higher degree of freedom, one can invest and withdraw any time, like a regular savings bank account. In fact, most STIF funds put up ads saying the funds are 100% liquid.

Breaking Down Short-Term Investment Funds

Short-term investment funds or STIF provide investors with an opportunity to preserve their capital while accumulating much higher returns than a regular savings bank account. Most short-term investment funds try to match the returns that are generated by instruments, such as indices tracking treasury bills.

The portfolio of STIFs typically consists of banknotes, government bills, cash, and conservative bonds that are of short tenors. These funds are apt for those investors who are not ready to bear a higher risk. Furthermore, these funds come with a low transaction cost.