So, you have some cash to invest in and a desire to gain high returns in less time. Well, investing money and making 2 dollars with 1 dollar is a good idea but that comes with risk as well.
Moreover, with changing times and uncertain inflation, investing your money for long-term investments is purely risky, it might also gain you high returns. However, if you live from paycheck to paycheck then risking the limited money you have is not that smart. So, the better way to grow your money is short-term investments. Short-term investments are better ways to grow your money as they help you out in times when you have to clear due bills next year, or buy a house in the coming 3 years or so, unexpected car repairs or any other emergencies.
Short-term investments come with benefits but it doesn’t mean there are zero risks. Risks are everywhere, especially when there is money involved. Also, you can’t keep $1000, an extra amount which you don’t need now but later in your pocket and wait for it to multiply itself. So, you need to strategically plan your investment to escape the risks.
This article assists you with 10 best short-term investments for protecting and growing your money. So, shall we get started? Well, before we jump into learning ways to grow your money through short-term investments, let’s see what is a short-term investment.
What is Short Term Investment?
A temporary investment that can yield returns in a short period is known as Short-term investment. Typically the period ranges between 1 month to 5 years. Alike any other long- term investment, most of the short-term investments gain you higher returns for a longer period. Say, you gain high return or interest for your money when you invest it for 3 years than for 1 year.
There are many options for short-term investments. This article discusses the top 10 investments you can choose to protect and grow your money.
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Certificate of Deposit
One of the first things you can consider to invest your money for the short-term is a Certificate of Deposit (CD) to expect a higher return. CD in simple words can be referred to as a loan you give to banks. You can invest for a fixed interest rate and choose a maturity date (the far the maturity date, the better). However, you can opt for a period from 3 months to 5 years based on your requirement. The downside here is you will have to bear penalties if you want to withdraw money before maturity.
You have the option to access monthly interest with CDs, but most of the investors prefer to withdraw at the end.
Average Returns for CDs is 0.5% to 3%.
Online Saving Accounts (High-Interest Rate)
The other way you can grow your money safely is online high-interest rate savings accounts. Though this doesn’t yield great returns if you have minimum money, you have the flexibility to withdraw anytime without any penalty or fee. Hence this is a great option if you are likely to see unexpected financial issues. Moreover, banks offer FDIC up to $250,000 per person.
This is in fact, the best option over traditional lower interest saving accounts. You can invest your money for any period of time of your choice and can withdraw cash unlimited times.
Online savings accounts can offer a 0.2 to 0.5% return per annum.
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TIPS (Treasury Inflation-Protected Securities) is the other best and safe option for short-term investments issued by the U.S Treasury.
This is a safe alternative as it protects your money from changes in inflation. If you are a beginner and have no idea where to go to protect your penny from inflation, then this can be a great choice.
There are two ways to invest in Treasury Inflation-Protected Securities, one is at TreasuryDirect.gov, this way you can directly invest through the government. Whereas the other way is through ETFs(Exchange-Traded Funds) or mutual funds, you will have to open a brokerage account if you choose this option.
TIPS can yield 0.5-2.5% APY. You need to hold up to 5 years to gain the maximum returns.
Read: What is Inflation and How to Protect your Money from it?
Money Market Accounts
Money Market Accounts yield higher interest rates than savings accounts. These are similar to regular savings and checking accounts but demands minimum deposit and allows only limited withdrawals. If you have a very limited amount of money, then this may not be the right fit for you.
Here are a few banks that offer the best interest rates for Money Market Accounts are Sallie Mae, First Internet Bank, CIT Bank, and BMO Harris. You will find APY ranging between 0.75% to 2% and a minimum balance between $100 to $5000.
The returns of the Money Market Account can range between 1-2%.
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If you don’t care risking your money, then peer-to-peer lending (P2P lending) is a great match for you to gain really high returns in the short term. There are platforms that connect lenders with borrowers to help both parties grow their money. As these platforms don’t act as a guarantee for your money, they are called risky. However, if you want to make good amounts of money taking some risk, then you can reach these companies. All you need to do is research trusted P2P lending platforms and create your portfolio, you can either choose to lend for individuals or businesses for any time period between 3 to 5 years or even less.
You expect 3-8% APY through P2P lending.
Though this seems a little confused and not so lucrative option, you actually save and grow your money in a short time. Companies like COF, Capital One Venture, Chase, etc offer upto 50,000-mile bonus which is equal to $500 in the first 3 months if you spend $3000 on any kind of expenses.
No doubt, this is a great way to earn some from something you are already doing. Therefore, this is not at all a bad investment, right? So, look for promotions that offer a maximum bonus for new customers and open an account to grow your money.
Bond Funds is the other high-yield short-term investment option which is also riskier sometimes. These are managed by expert financial advisers and are profitable than money markets. The upside with Bond Funds is that you can withdraw cash earlier without any penalties or fees.
Bond Funds are expected to yield up to 3% APY.
With Municipal Bonds, you can gain high returns than the U.S Treasury. Though you can escape interest tax, they are riskier than TIPS because they get affected by inflation.
You can gain up to 4% APY with Municipal Bonds.
Clear High-Interest Rate Debts
Pay off your debts that are of high-interest if you can. Yes, you’ve heard it right! Clearing off 12% interest rate debt be it any long-term or short-term vehicle loan or house loan is always better than loaning the same amount for the same interest rate. You never know inflation may rise next year which will greater than the overall interest you earn per annum. So, try clearing the debts you have, it’s worthing doing.
Last but least, invest your money in a Roth IRA. The taxes will be deducted while you invest, so there are no tax deductions or penalties when you are withdrawing. This can be a smart option for short-term investment if you have planned very nearly, a year or so. The best part is you can further invest your money in short-term ETF to grow money in 6 months to 1 year. You can easily cash out all your money from bonds or keep them in your Roth IRA to save them for free for your retirement.
Thus there are a few short-term investments to grow your money fast in a short period of time. However, you need to remember two things to grow your money effectively which are, the longer you invest, the higher interest you gain and the more risk you take the higher you gain. So, think of what you can do and pick the options from above. At the same time, you want to be on safe roads, take CDs and TIPS, and Online Savings Accounts into consideration.