Best Short Term Investment Plans: Maximizing Returns

Investing wisely is important for securing the future financially. However, not all investment solutions are the same. In the case of short term investment, the main objective is wealth creation within the shortest time possible with low risks. Whether a person has planned to save for a down payment on a house, a vacation or a rainy day, the type of investment plan selected determines the campaign’s success. This blog shall focus on identifying the most appropriate short-term investment ideas whereby one can invest, and possibly earn the most from his investment while not losing his investments to some risks.

Understanding Short-Term Investment

One of the best investment plan is the short-term investments. Short-term investments are those investments where an average maturity of less than three years. These are the investments that make it possible to provide quick liquidity and simultaneously, the rate of their return can be relatively higher than in other types of investments.  This investment is suitable for meeting short-term objectives. Here are some key features of short-term investments.

  • The short term investment has lower risk and is safer as compared to long-term investments.
  • It can be liquidated easily into cash without bearing any significant loss on the value.
  • It offers predictable and flexible returns.

Best Investment Plans – Short-Term Investment

There are different types of short-term investment plans which can be used by an individual to fulfil their short-term financial objectives.

Saving Accounts

Savings accounts are arguably as secure and as easily accessible as some of the best short term investment products. It is cheaper than conventional credit as it charges a very low interest rate. Although the yields are not as high as in the case of other investment tools, the level of protection and accessibility make savings accounts the most popular products in the field.

Money Market Accounts or MMA

Money Market Accounts are quite close to savings accounts but may have a higher interest rate and are accompanied by the right to write checks. An MMA is also protected by the Federal Deposit Insurance Company FDIC hence it is safe to deposit your money in it knowing that you will have a better return than a deposit account that just offers you interest on the amount of money you have deposited.

Certificates of Deposits or CDs

Certificates of Deposit are a kind of deposit whereby customers set their money with a specific rate of interest for a certain amount of time, starting from a few months up to several years. CDs on the other hand pay better than savings accounts and MMAs but they come with a condition that you have to fix your money to a particular CD for the period that the CD has been issued. Early withdrawal is subject to a penalty, so it makes sense to keep the money that you will need before the CD expiry.

Treasury securities

Another short-term investment plan is investing in treasury certificates. Treasury securities are government securities that include T-bills, T-notes, and T-bonds used as instruments of financing by the treasury. T-bills are the most appropriate as short-term securities with maturity of less than a year, ranging from a few days to one year. They are regarded as one of the sound investment tools because they are fully guaranteed by the US government.

Corporate Bonds

Corporate bonds are the debt securities which are offered by the companies to gather funds. Corporate bonds with a maturity of not more than three years pay a higher return than government securities, though with slightly higher risk. Corporate bonds better known as investment grade bonds are comparatively safe but promising to invest in.

Short Term Bond Funds

Short-term bond funds buy shorter-term bonds that range from one to three years till they are due. These funds provide more returns than savings accounts and CDs and have less risk than long-term bonds. It is one of the best investment plans for those investors who need to look for a valuable but not excessively liquid investment.

Peer-to-Peer Lending

This type of investment involves direct lending of money to borrowers by individuals who wish to lend out their money, earning a higher interest than that offered by banks’ savings accounts. This is why P2P lending is associated with higher risk as compared to lending to banks – borrower’s default is always a possibility; however, it can be avoided by loan splitting.

Key Considerations for Short-Term Investments

When selecting short-term investment plans, consider the following factors;

Evaluate the risk tolerance as it is important to understand that while some short-term investments are very secure, others are relatively more risky but they guarantee better returns.  Also, define the frequency at which you will require the money. There are those that like the CDs which allow the customer to fix the amount of money for a certain period, while on the other hand, there are those like the savings accounts which allow immediate withdrawal. In addition, ensure that the returns you’re seeking are reasonable about the amount of risk you are willing to take. In most of the cases, higher returns are associated with higher risks. Furthermore, select an investment depending on the period in which you can wait for the profit. Thus, short-term investment is good for goals that will be accomplished within a period of one to three years.

Conclusion

In conclusion, the fundamental principles when selecting the desirable short-term investment plan are considered to be the approach to risk, liquidity, and income yield. Savings accounts, Money Market Accounts, and High-Yield Savings accounts are safe with acceptable yields and the funds are easily accessible. Certificates of Deposit and Treasury securities have slightly higher return rates, with a tad more involvement. For those who do not mind marginally higher risk, there is Corporate Bonds investment opportunity, Short Term Bond Funds investment option, and Peer to Peer Lending investment type.

So always remember that these must involve your investment goals, how much risk you are willing to take, and the time before you intend to acquire those assets. This means that by investing your money in the right short-term investment tools, you will tap into high returns while at the same time having the assurance that your money is safe and easily within reach.

Featured image : freepik.com

Author: 99 Tech Post

99Techpost is a leading digital transformation and marketing blog where we share insightful contents about Technology, Blogging, WordPress, Digital transformation and Digital marketing. If you are ready digitize your business then we can help you to grow your business online. You can also follow us on facebook & twitter.

Leave a Comment