Where India’s Wealthy Really Park Their Short-Term Money — And It’s Not In FDs
When it comes to handling short-term cash, India’s high-net-worth individuals (HNIs) follow a completely different strategy from regular savers. While most people trust savings accounts and fixed deposits (FDs), the wealthy prefer tax-efficient, market-linked instruments that keep their idle money working without locking it away.
Financial planner Vijay Maheshwari, CWM®, who manages more than ₹500 crore for over 1,000 families, recently explained on LinkedIn how HNIs and ultra-HNIs truly manage their short-term funds. His insights reveal a sharp contrast between what retail investors believe is safe and what the affluent actually use to optimise returns, liquidity, and tax efficiency.
Here’s where India’s wealthy park their money and why this smart, layered approach works so well.
0–3 Months: Liquid Funds & Arbitrage Funds
The HNI pick for: High liquidity, safety, and better post-tax returns than FDs
Instead of parking money in low-yield savings accounts, wealthy investors prefer:
Liquid mutual funds invest in ultra-short-term debt instruments maturing within 91 days. Because these funds lend to highly rated institutions for short durations, they offer minimal risk, low volatility, and same-day liquidity. This makes them far more efficient than savings accounts, especially for those in higher tax brackets.
Arbitrage funds, on the other hand, benefit from price differences between the cash and futures markets. The fund buys in the cash market and sells in the futures market simultaneously, locking in a predictable gain. Although classified as equity for taxation, the risk is closer to debt because the positions are hedged.
Why HNIs prefer them:
HNIs want liquidity and returns and these funds deliver both.
6–12 Months: Equity Savings Funds
The HNI pick for: Low volatility + tax efficiency + stable growth
Equity savings funds combine:
This combination keeps volatility low while still offering equity-style taxation and better potential returns than short-term debt. For HNIs in the highest tax brackets, this category is significantly more efficient than traditional FDs or savings schemes.
12–24 Months: Balanced Advantage / Hybrid Funds
The HNI pick for: Dynamic allocation with controlled risk
These funds automatically adjust their allocation between equity and debt depending on:
Wealthy investors use these funds as a bridge product, ideal for parking money for 1–2 years while maintaining the right balance between growth and safety.
Why HNIs love them:
They combine downside protection with the ability to capture upside when markets recover.
3+ Years: Large-Cap or Flexi-Cap Funds
The HNI pick for: Long-term compounding and wealth creation
For goals beyond three years, HNIs shift to growth assets such as:
Both categories offer:
At this stage, liquidity matters less disciplined growth becomes the priority.
Why India’s Rich Avoid FDs and Savings Accounts
For high-income investors, fixed deposits offer poor post-tax returns. An FD yielding 7% may shrink to just 4.5% post tax for someone in the 30% tax bracket.
Meanwhile, debt and hybrid funds offer:
HNIs understand that idle cash slows down wealth creation — so they ensure every rupee is optimised.
What Retail Investors Can Learn from HNIs
Most retail investors leave surplus money in:
But Maheshwari’s breakdown shows how the wealthy ensure no money sits idle.
Key lessons for regular investors:
Financial planner Vijay Maheshwari, CWM®, who manages more than ₹500 crore for over 1,000 families, recently explained on LinkedIn how HNIs and ultra-HNIs truly manage their short-term funds. His insights reveal a sharp contrast between what retail investors believe is safe and what the affluent actually use to optimise returns, liquidity, and tax efficiency.
Here’s where India’s wealthy park their money and why this smart, layered approach works so well.
0–3 Months: Liquid Funds & Arbitrage Funds
The HNI pick for: High liquidity, safety, and better post-tax returns than FDs
Instead of parking money in low-yield savings accounts, wealthy investors prefer:
- Liquid mutual funds
- Arbitrage funds
Liquid mutual funds invest in ultra-short-term debt instruments maturing within 91 days. Because these funds lend to highly rated institutions for short durations, they offer minimal risk, low volatility, and same-day liquidity. This makes them far more efficient than savings accounts, especially for those in higher tax brackets.
Arbitrage funds, on the other hand, benefit from price differences between the cash and futures markets. The fund buys in the cash market and sells in the futures market simultaneously, locking in a predictable gain. Although classified as equity for taxation, the risk is closer to debt because the positions are hedged.
Why HNIs prefer them:
- Better post-tax returns than savings accounts
- Lower tax impact than fixed deposits
- Same-day or next-day access to money
- Extremely low volatility
HNIs want liquidity and returns and these funds deliver both.
6–12 Months: Equity Savings Funds
The HNI pick for: Low volatility + tax efficiency + stable growth
Equity savings funds combine:
- Arbitrage
- Equity exposure
- Debt instruments
This combination keeps volatility low while still offering equity-style taxation and better potential returns than short-term debt. For HNIs in the highest tax brackets, this category is significantly more efficient than traditional FDs or savings schemes.
12–24 Months: Balanced Advantage / Hybrid Funds
The HNI pick for: Dynamic allocation with controlled risk
These funds automatically adjust their allocation between equity and debt depending on:
- Market valuations
- Volatility
- Interest rate trends
Wealthy investors use these funds as a bridge product, ideal for parking money for 1–2 years while maintaining the right balance between growth and safety.
Why HNIs love them:
They combine downside protection with the ability to capture upside when markets recover.
3+ Years: Large-Cap or Flexi-Cap Funds
The HNI pick for: Long-term compounding and wealth creation
For goals beyond three years, HNIs shift to growth assets such as:
- Large-cap funds for stability
- Flexi-cap funds for diversification
Both categories offer:
- Consistent long-term wealth creation
- Favourable equity taxation (better than FD interest)
- Strong compounding power
At this stage, liquidity matters less disciplined growth becomes the priority.
You may also like
- Delhi Airport: 95 IndiGo flights cancelled since morning amid nationwide operational disruptions; Chennai and Kochi also take a hit
- Madhavan, at 52, lost weight in 21 days without gym or workout or diet food. His unusual eating method while eating food stuns fans
- Uttarakhand CM Pushkar Singh Dhami attends 'Smriti Samaroh' in the honour of Pandit Ramsumer Shukla
Air India reported 3 technical glitches on Boeing 787 planes since July: Minister- 'Obligated to provide': Supreme Court tells states to deploy more staff for SIR; TVK plea flags BLO plight
Why India’s Rich Avoid FDs and Savings Accounts
For high-income investors, fixed deposits offer poor post-tax returns. An FD yielding 7% may shrink to just 4.5% post tax for someone in the 30% tax bracket.
Meanwhile, debt and hybrid funds offer:
- Lower tax incidence
- Tax deferral
- Potential for higher, market-linked gains
HNIs understand that idle cash slows down wealth creation — so they ensure every rupee is optimised.
What Retail Investors Can Learn from HNIs
Most retail investors leave surplus money in:
- Bank accounts
- FDs
- Low-yield savings products
- Emergency funds that never earn meaningful returns
But Maheshwari’s breakdown shows how the wealthy ensure no money sits idle.
Key lessons for regular investors:
- Align your investments with your time horizon
- Build a layered liquidity strategy
- Use tax-efficient instruments instead of defaulting to FDs
- Let emergency funds earn better returns without losing liquidity
- Understand that safety does not mean sacrificing growth
More from our partners
Loving Newspoint? Download the app now
