Top 11 Ways To Invest Money Short Term
So what is a short term investment? A short-term investment is also called a temporary investment or marketable security. This is an investment type that yields its returns usually in a year or less than five years. In an unstable market, people prefer to invest short term than long term due to safety concerns. This post will give ideas and make suggestions of likely places you can invest your money short term and be able to withdraw it at the end of the term.
Also, there are various short-term investment accounts that you can start but, it depends on your choices and the funds you have. But note that in investment, the rate of returns depends on the risk you are willing to take. Also, the riskier your investment is, the more returns you could earn.
Best Way To Invest Money Short Term
Below are the best ways to invest money on a short term basis, according to Finanticum:
1. Online Savings Account
Savings is the safest investment you can make provided the bank does not go under. Even if it does your savings investment is insured by the FDIC. So if you need a bank to invest your savings to earn a high-interest rate, visit Discover Bank.
Also, their interest rate of 1.70% is among the highest for online savings accounts. Besides, there is no minimum balance to open the account and no charges of monthly maintenance fees. But withdrawals and outgoing transfers on the account are limited to six times per month.
2. Money Market Account
Money Markets account pay close to the Annual Percentage Yield of one year Certificate of Deposits. That is why I included this investment type as one of the best ways to invest money short term. The advantage you have here is immediate access to your funds.
Also, if you open that account you will get ATM cards, checks, and deposit slips. And the money market account depends on your account balance, not on the length of time of your investment. Moreover, you can get a higher rate of return with little risk.
3. Peer To Peer Lending: Lending Club
This is another investing platform called a peer to peer. Also, it is a lending platform where anyone can go to borrow money. But it is investors that provide the cash that this platform lends. In lending clubs, rates of return on this investment are in double digits.
Besides, you can begin your investment with $25 for a single loan note. So, if you invest $1,000 you will have up to 40 notes in different portfolios. But, the limitation is that most States set a minimum an investor must have, to invest in this platform. Note that there is no FDIC insurance for this investment.
4. Certificates Of Deposit (CDs)
Banks have many terms for their deposit accounts, ranging from 3 months to 5 years. So you are the one that knows what length of time you want to invest. Also, if you are risk-averse you can invest in these Certificates of deposit.
This investment is among the best way to invest money short term that you can start. So, if you want to keep your money safe and insured by FDIC, invest in CDs. It will reduce your losses to inflation. But the earning is low at 1.5 to 2,.5 %. You may try Citibank no-penalty CD. You may also find out the highest interest rates for CDs at online banks like Compass Bank and Discover Bank.
5. A Roth IRA
A Roth IRA is a solution for individuals who wants higher returns but want the ability to withdraw their contributions if they have to. Also, because you finance your Roth with after-tax income, you can withdraw any contributions you make at any time you want. Besides, if you use a Roth IRA for short term investing you will be able to:
- withdraw funds.
- And get higher rates of return since you can invest in other types of investments like mutual funds, ETFs, and bonds.
6. Cash Back Rewards Offers Using A Credit Card
Cashback rewards offer using a credit card is part of the best way to invest money short term. With this strategy, you can earn some easy money in the short term, from “credit card rewards. And you don’t have to do much. Here’s how it works.
Assuming you signed up for the Chase Sapphire Preferred card, to get the huge signup bonus you will get an award of 50,000 points worth $500 after you spend $4,000 on the card in 90 days, in their current offer.
Also, because they waive $95 annual fee in the first year, you can earn this bonus without paying any fees. But you must meet the minimum spending requirement with the things you buy like groceries, gas, and your regular monthly bills. Also, just try to pay off your card balance and avoid credit card interest.
7. Online Checking Accounts
You can open an online checking account for short-term investment needs. Also, if you open this account you will get many of the benefits of online savings accounts and more liquidity because there is no limit to the number of withdrawals. But be ready for low-interest charges.
So if you use checking account for short-term investing you will get these benefits:
- A guarantee that you will not lose principal if you keep your total deposit below FDIC coverage of $250,000.
- Also, you will get a small, risk-free return as the interest rate charged on the current account is very low.
- You have high liquidity as you can withdrawals via transfer, debit card, or ATM in an unlimited way
- Besides, it is easy to open an account without any stress.
8. Short-Term Bond Funds and ETFs
Professional financial advisors are the ones that normally manage Short-term bond funds. Although Bonds are not as stable as money markets, you could earn a higher yield in bonds. And so it naturally forms part of the best way to invest money short term.
Also, bond rates are according to the market’s current condition and fluctuate with the monthly payments. Short-term bonds normally mature in 2 years or less, making them an attraction for investors looking for short term investments.
But to start the investment, you have to open a brokerage account like Betterment, TD Ameritrade or E*Trade and start trading in bond funds and ETFs.
9. US Treasury Securities
Buying US Treasury Securities is one of the best ways to invest money short term. If you want to take little or no risk at all, invest in US Treasury Securities. They are debt obligations that the US government issues to pay the national debt.
You can invest in a security with a range of 30 days to 30 years. If you invest in a longer-term and sell it before it matures, you risk your capital. Start investing by visiting the US departments Treasury Direct. The denominations are as low as $100. You can also sell the security in that portal.
This company is like Lending Club and is in the list of the best way to invest money short term. In Prosper, you can start at $25 and spread your investment in many loans. But the limitation is the State minimum net worth required for you to qualify to invest. According to Prosper, you could get a return of 16% annually on a single note.
11. 5-year Treasury Inflation-protected Securities
You can consider investing in the 5 year Treasury Inflation-Protected Securities, also called TIPS. It is a government bond that is indexed to the inflation rate. However, you will get a fixed interest rate, but the basic value of the security rises with inflation which is measured by the Consumer Price Index.
Also, you might get only a 0.5% interest (paid semiannually), but over 5 years the value of the bond might increase up to 2.5% per year.
But at the end of the term, your initial investment will increase a little due to the interest on top. To buy TIPS directly visit the government website atTreasury direct website.