Investing is a great way to prepare for the future. There are many ways that you can invest your money – by purchasing real estate, for example. However, these types of investments could take decades to see any big payoff. But there are several investments that take anywhere from just a few months to a couple of years to see some beneficial returns. Short-term investing can be a great way to earn money without tying up your funds for a long time. You can also use short-term investments for financial goals, such as saving for a wedding or home renovation. If you’re looking for a short-term investment, keep on reading!
1. High Yields Savings Accounts
High yields savings accounts can be great because they earn more interest than an average savings account, but still preserve the liquidity of your funds, meaning your money won’t be tied up in a way that you can’t access it quickly. These accounts typically have an APY of between 0.4% and 1%. However, some accounts have restrictions on how much money you can withdraw at a time, or a minimum balance that you must maintain at all times. Be sure to compare accounts with different banks to find one that works for you.
2. Certificates of Deposit
Certificates of Deposit (CDs) will often offer a higher interest rate than savings accounts, but don’t have any liquidity, which means that your money is locked in for a specified period of time. Your interest rate won’t change, however, so you’re guaranteed to see a return on your money. This is good if you get a high interest rate, but if interest rates go up further, your rate won’t change either, meaning you could potentially lose out on a higher return. If you need to access your money in a CD, you may need to pay a fee to terminate the CD early. Certificates of Deposit generally last anywhere from a couple of months to five years, so be sure to shop around for a high interest rate and a time period that you want. Furthermore, some banks offer no-penalty CDs, which can allow you to access your funds before the CD matures.
3. Money Market Accounts
Money market accounts can offer an interest rate that’s usually a bit higher than a standard savings account, but often have withdrawal restrictions, making it potentially hard to access your cash when you need it. Money market accounts can come with debit cards or check books, but most accounts only allow six transfers or purchases each month. Furthermore, they tend to have a higher minimum balance requirement. Therefore, money market accounts can be a great place to keep your savings, but due to the withdrawal restrictions, should only be accessed when truly necessary.
4. Treasury Bills
Treasury bills aren’t offered by a bank, but rather, are bought from the United States Treasury. These bills are essentially a loan to the federal government, and offer multiple maturity dates, ranging from just a couple of days to one year. Treasury bills with a longer maturity date will have a higher interest rate, and investors can choose to reinvest their cash after the bill matures if they wish.
Like treasury bills, municipal bonds are also issued by the government. However, these bonds are offered at a state or local level of government, which means that by investing in them, you can be helping your local community. Corporate bonds aren’t offered by the government, but rather, are offered by corporations. They can be riskier than municipal bonds, but often have a higher rate of return. If you’re interested in investing in bonds, you can also get a bond fund, which is a mutual fund that only invests in bonds. Bond funds can allow you to have a diverse investing portfolio while typically allowing you to have more freedom with withdrawing your money. Furthermore, bonds are able to be sold through the financial market, allowing you to liquidize them and access your funds.
Depending on your financial goals, the most important qualities of a short-term investment are liquidity and stability. Short term investments should be low risk, easily accessible, and very safe. However, you typically won’t see as high a rate of return as you would see with a longer-term investment.
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