A short-term investment will be ideal if you want a safe place to stash your cash (not under the mattress) and use it shortly. However, the fear of inflation and unstable financial markets can make you feel like it’s not a good time to invest.
So, which are the best short-term investment ideas?
You can invest your money for a short while in several ways: rental property investment, savings account, money market, short-term bonds, and certificate of deposit, among others. This way, your parked money will be earning interest to fight inflation. Currently, the interest rates are higher, making it an excellent time to invest with your head high.
Keep reading to learn more about your options for short-term investment.
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What Is Short-Term Investment?
A short-term investment brings significant results in a short period, like a year or less. It’s an investment plan that gives you quick cash when needed. Usually, short-term investors aren’t interested in the long wait of many years to get their money multiplied. Instead, they search for quick and effective ways to grow their money.
Nonetheless, short-term investment plans can bring good returns, just enough to meet your financial objectives, and are not as massive as long-term investments. Still, you can break down your long-term investment plans into short terms.
For instance, you have long-term real estate yet can invest in short-term rentals. But are rental properties investment a good investment?
Experts from tech vestor stated that all you need is an excellent digital investment platform to show you how you can make money from rental property as soon as 3-6 months after investing.
Short-term rental property investment has several options, like learning how to invest in apartments or even buying a vacation rental property investment. Just talk to the experts and learn.
So, what other options for short-term investments do you have?
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Money Market Accounts
You have to pay more to own a money market account than a savings account, though the amount is usually the minimum rate. However, the interest rate can be slightly lower than the inflation rate. Besides, that’s not a concern for anyone who wants a secure place to keep their money for a short while.
So, if you decide on getting a money market account, ensure it’s FDIC-insured to protect your money in case of unforeseen circumstances like a bank failure.
High-Interest Savings Accounts
Usually, many banks refuse to offer their customers the chance to open a high-interest savings account. But, recently, upcoming banks have provided online savings accounts that attract higher interest rates than what you can find in the brick-and-mortar bank.
Consequently, this is possible because online banks spend less on their operations, thus giving customers better rates. So how does the bank benefit from the high-yield savings account?
Your deposit is a way of lending the bank cash. They use this cash to invest and grow more by lending to other customers in the form of loans.
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Buying bonds is ideal if you’re looking for a low-risk, short-term investment plan. Bonds or treasury securities are a way of loaning the government money, so you have the guarantee that the government is paying you back.
You can buy short-term government bonds directly from the state’s treasury offices on their official website. Treasury bills (T-bills) mature within 52 weeks, equivalent to a year of waiting.
Still, the government tries to raise money for local projects by selling municipal bonds.
While bonds are secure, they offer a meager rate of return. Find out the current interest rate your government is offering for buying bonds. It can even be about 4 cents for every $100 you spend.
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Certificates of Deposit
Like a savings account, a certificate of deposit (CD) also involves loaning the bank your cash for some time. The only difference from the savings account is that you can only cash out on the agreed time, whether 3 months or longer.
So, the interest rate provided increases as long as you keep your money in a CD. But, in case of emergencies that require you to withdraw it sooner, the bank will find your penalties. Typically, CDs are FDIC insured even though the return rates are lesser than government bonds or the stock market.
Because of these low rates, financial advisors advise exploring other short-term investment plants with better rates.
The only difference between Treasury Notes from T-bills is that you’ll be loaning the government for a more extended period here.
T-notes take 2-10 years to mature, but the interest is paid every 6 months. Still, even with the fixed maturity period, you can buy and sell your T-notes on the bond market, like stocks.
The T-note return rate is not as high because it’s the cost investors pay to ensure stability. Also, T-note rates often fluctuate, which can favor you most times. You can purchase your T-notes, like T-bills, directly from the treasury’s official website for convenience.
Getting a brokerage account can be an excellent short-term investment if you’re familiar with buying and selling stocks. But if you choose to invest in this strategy, it would help to do some piggyback investing and learn from stock experts to avoid hypothetical stocks from unverified companies.
However, due to the unstable nature of stocks, they are better off as long-term investment plans because the rates increase over time.
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Peer To Peer Lending
Finally, peer-to-peer loans are great short-term investments since the longest you can keep your money ranges from 1-3 years. With peer-to-peer lending, the return on your investment is higher, but there’s a risk if the borrower fails to pay back the loan.
An intelligent peer-to-peer lender should distribute their money to different people to avoid giving one person the whole amount. So, if one fails to pay, you are still others paying to make up the difference with the interest rates.
A significant advantage of peer-to-peer lending is the monthly payment inclusive of the interest. That way, after several months, you have a good amount you can lend to more people, increasing your returns.
Many people only think of long-term ideas when it comes to investing. This makes it hard to find the ideal short-term plans due to the low returns.
However, short-term investments have a lower risk of loss and work best for people who want quick cash. Better still, they are great if you also have short-term goals like buying a car or short-term rental property investment.