How To Invest in Short-Term Options

Man taking steps in money ladder

These days people are looking for something solid and sure in everything they own and have acquired throughout the years--money not excepted. With the current financial situation and the fluctuating stock market many have lost large amounts of money to bad investments. This is why many people consider pursuing a few smart money, short-term investment options to reduce the risk of losing the initial funds you've invested. Others go for long-term assets no matter the financial climate; however, short-term options are becoming more and more common.

Lots of people are seeking the best short-term cash investment. The main reason for this is because this kind of financial investment -- while offering a modest financial return -- keeps funds available for when they are needed. This is compared to long-term investments, where there can be a substantial waiting period before you can withdraw the interest you have earned or even your principle itself. If you need extra income now, short-term investments are the way to go!

So, if you are convinced that investing in a short-term cash option rather than long-term investments is the better choice for you, then here is a list of some popular options you may want to consider:

Checking Account – While these accounts are commonly used for everyday transactions, they can be a good way to save money. Some checking accounts allow the consumer to earn a small amount of interest on funds saved.

Savings Bank Account – Savings accounts have been around for years, a mainstay in the economy. You can open your own savings bank accounts with a little deposit and no time at all through any banking institution. The minimum deposit and other qualifications will vary depending on the bank you choose, but they're never substantial. Furthermore, the maximum amount necessary to sustain the account has been lowered considerably in recent years.

A drawback to this option is the fact that the yield on your investment is so low. When it comes to money-making investments, the low interest rates of a savings account are not high on the list of investment schemes. If your balance is low, it can take a year or more to earn more than a few cents on the money you're saving.

While this is not a large income yielding investment, a savings account is still a great option for those who just want to save money in something other than a piggy bank. For folks who are money minded and would like an account that can protect surplus income while assuring a supply of liquid funds, this is an excellent choice. Most savings accounts are free with a checking account at any local bank.

Money Market – This form of short-term investment can be acquired through your local bank. This is one specialized form of mutual funds where the focus is protecting the capital and maximizing returns. Money market funds are not quite as liquid as your money would be in a savings account, but many offer very flexible terms.

Fixed Bank Deposits – These are also referred to as term deposits. The yields for this kind of investment are generally higher than for money market funds, since a 30-day minimum investment period is required.

Certificates of Deposit (CD's) – This is a more structured short-term investment plan. A CD is offered by local banks to account holders. Each CD has a minimum deposit amount as well as a time limit. The consumer cannot retrieve the money or its dividends until the time at which the CD matures, which is the last day of the commitment period.

These rules ensure the consumer will get a higher interest rate than with a normal savings account. This will yield a higher dividend at the maturity than other short-term investments that take the same amount of time. CD's are a virtually risk free method of gaining profit with a short-term money investment.

Mutual Funds – This method of short-term term investment pools funds from several clients. The invested funds are used to purchase low risk stocks and bonds. When the fund matures the investors are paid the dividends.

Mutual funds are a generally safe method of investing money, though you can lose your principal. The accountants that manage these funds do so in a way to maximize the profit while maintaining a low risk. That investment goal combination is one of the main reasons why investors choose this option.

Savings Bonds – This instrument can be bought through the government or corporations. This has traditionally been a secure way to earn money through a short-term investment. The bond is purchased for a fee. The bondholder must then hold on to the certificate until the maturity date.

The bond pays out the original investment plus a dividend at the date of maturity. These instruments are paid out on a fixed ratio with a fair yield. While you will not make a ton of money, this is a tried and true method of investing money in a short-term venture.

Other Options – When it comes to short-term investment opportunities there is an abundance of avenues that you can pursue. The following is a list of some of the best investing tips to invest funds for a short period of time (though they are more complicated than the savings options above):

  • High Yield Bank Accounts – These accounts can only be accessed by consumers who have an established relationship with their bank. If this is the case, you can utilize a high yield account as a short-term investment.
  • U.S. Government Bills – Treasury Bills are created and guaranteed by the United States government. The notes reach maturity quickly, making them excellent short-term investments.
  • I Bonds – Inflation indexed savings bonds or I Bonds are produced and backed by the United States government. Twice a year the pay out rate is adjusted to match inflation.
  • Municipal Bonds – Municipal bonds are created by the governments of cities, towns, and states. The money collected is used to build new schools, fix roadways and provide services for the community.
  • Corporate Bonds – Corporate bonds are issued by businesses. The invested money is used to expand the company.
  • Gold and Silver – Investing in gold and silver can be lucrative when their prices in the market are low. Since prices in both precious metals change from time to time, you may sell the products (coins, bullion, or precious metal funds) once the prices are at a higher rate.

These methods of saving money are common short-term cash investment options. One of the best investing tips, however, is to study every small detail carefully before entering into an investment program. You will need to check quotes from different banks to ensure that what you will be investing in is a good investment option for you and the economic environment at the time.

By doing a little research on local banks you can find the one that offers high yield short-term investment options, and online quote generator software can help as well. A financial consultant can also offer you tailored investment advice. Follow one route or the other, and in no time at all you will be saving money through short-term investments.


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