There has been a growing popularity in short term investments because of it many advantages. Investments are made for homes, cars, retirement, education and many other purposes for the future. Every one of these events may or may not take place at the same time. Hence, it is important to plan ahead for our unpredictable future. With the help of short-term investments, all your financial needs can be met with, if and when any situation occurs.
Short term investments can be anything under three years. Although it may have low yields or high risks, they are dependable ways to invest your money and make more profit from your savings and other liquid assets.
Be it any occasion, from buying a new car to a down payment for a new home on the market, the concept is to save your money with the least amount of penalties and risks. Eventually, you can convert your short-term investments into cash, renew it and even make it a long-term investment.
Different ways of short term investments
The only drawback to short term investing is the high risk and low yield. Most stocks are unpredictable and investing in them is a bit risky. Another issue is the tax consequences of investment made for less than a year. No investor wants to lose their invested money. Hence, there are plenty of other safer short term investments such as treasury bills (T-Bills), certificates of deposit (CDs), and money market funds. The disadvantage of T-Bills and CDs is that they have fixed interest rates and maturity time and you will be penalized if money is extracted before the maturity time.
Consider investing your money in money market mutual funds. You may take the help of an investment professional who will guide you with details of profit and loss. Even though The yield may be lower than fixed investments, you can access your money whenever you require to do so, incase of any emergency.
Now that we’ve helped you save money on conveyancing fees, let’s get to know the advantages of short term investing.
Flexibility – As compared to purchasing a corporate bond, which has a maturity of ten to thirty years, which may not even be its worth many years later, you would rather invest in a short term investment as you do not have to lock your money up for an extended period of time.
Returns- You even receive substantial amounts with this type of investment. You may yield great returns within a short period of time. You can lock in your profit and search for something else to invest in. The choice is yours.
Tangible Results- The problem with long-term investment is that it may take a while for you to see any kind of result. Most investors believe in seeing some type of tangible results in their investing, as soon as possible. Short term investments definitely yield results quicker.
Emergency money- Investing in some kind of stocks and real estate will yield you high profits in the long run. But what if you have a financial emergency and you need cash right away. You may have to liquidate your long-term investments, sometimes at a loss. On the other hand, short-term investments are easy to liquidate in case of an emergency.