Are short-term investments profitable? Short-term investments are a great way to make money.
It can be challenging to know which short-term investments are the best for you, but there is no need to worry because this article will break down the differences between short-term investments and help you decide what’s best for your needs.
A short-term investment is an investment that you can easily change back into cash – such as a high-interest savings account or a money market account.
Are Short-Term Investments Profitable?
Depending on the amount of time you put your money in, the type of investment you go for will determine your profitability. It’s good to consider carefully before jumping in, and if you are in doubt, it’s worth consulting a financial advisor who could help you invest your money.
Online Savings Account
An online savings account can be a good option, especially under the year mark. They are low-risk and low reward options. But it delivers what it promises when you sign up to a guaranteed interest returns rate and can withdraw easily.
High Yield Savings Account
We have discussed savings accounts but make sure you compare all different options before deciding on a savings account.
Money Market Accounts
Money market accounts are short-term investment with the same risk as an online savings account but usually has higher interest rates.
Cash Management Account
A cash management account is a short-term investment with low risk. This short-term investment can be a great option depending on the amount of money you have for short-term investments. The downside is that you need a high balance to enter into this type of short-term investment.
Two to Three YearsShort-Term Bond Funds
A short-term bond fund is a short-term investment assuming that you want to invest in the short term until you need it.
Government Bonds
As the name suggests, government bonds are debt instruments offered by various governments to fund public spending.
Money Market Mutual Funds
Money market mutual funds (MMMFs) are short-term investments that allow you to invest in short-term debt products.
Money market mutual funds are considered to be low-risk, short-term investments. The risk associated with money market mutual funds is typically lower than with other short-term investment options, such as short-term bond funds and short-term stock funds.
Three to Five YearsCertificates of Deposit (CDs)
A certificate of deposit, or CD, is a short-term investment offered by a financial institution, such as a bank or credit union.
Peer-to-Peer Loans
Peer-to-peer loans, also known as P-to-P loans, are short-term investments that allow you to invest in consumer and small business loans.