When it comes to investing, there are a lot of options. From short-term to long-term, high risk or low risk and investments you make yourself or partnering with a broker, there are a lot of decisions to make.
If you’re new to investing or don’t have a lot of experience in managing investment accounts, making the right financial moves can seem a little overwhelming at first. How are you to know which investments to make and for how long? What areas bring in the most returns but also keeps your money secure without constant fear of losing it? What are the best options for your stage in life and financial situation?
Even if you’re looking for a quick return on a small amount of money, there are investment options that can help you meet those financial goals. You don’t need thousands of dollars to invest. You don’t need to have a multi-year plan to get any sort of return. With a minimum deposit and some time, you can watch your money grow.
Choosing the right short-term investment option is an important move you want to think about first and do some research. Here are some things you’ll want to keep in mind as you make an investment plan that works for you:
Choosing an Investment Strategy
Determine Your Risk Level
Short-term investments come with either high or low levels of risk. There are benefits and drawbacks of each method. Generally, a higher risk investment comes with a greater return opportunity. However, as it’s riskier, the dependability and security of the account is a key factor. Low risk investments tend to have lower rates of return but are more sure and expected in getting back your investment. When looking specifically for a short-term investment, typically low-risk options fare better than long-term investments. As you select the right investment for you, be sure to keep the risk level of the account in mind.
Low Risk Doesn’t Mean Guaranteed
If you’re choosing to opt into a low risk investment, know that such a risk level doesn’t mean your returns are guaranteed. Whether through loans, mutual funds or many other opportunities, there always remains the possibility of something happening within the market to change your expected outcomes. Things like inflation and interest rates may be a factor in your investment down the road. For more of a guaranteed investment, look into selecting short-term certificate of deposits (CDs) or bonds.
Consider a Diversified Portfolio
If you’re trying to figure out your best approach to a short-term investment, it may be best to think the context of putting forth several investments at varying levels of risk and duration. This method of diversifying your portfolio gives you a greater chance at better returns as you’re not depending on only one account or fund. When choosing investments of different lengths, you can plan out when you anticipate needing those funds back and plan an investment around those targeted dates.
Choosing a Broker or On Your Own
When venturing out on a new investment journey, you’ll also get to choose whether you want to do all your investing on your own or work with a broker or other financial advising resource to help you make those important decisions. Working with a financial planner can do much of the legwork in finding the best investment options for you based on your money goals. This can save you a lot of time in trying to do all that important research on your own. However, working with someone also charges a fee and cuts into your overall earning potential. Choosing to partner with a broker or not is an important decision to make as you make your financial investments.
Beware of Stocks
When you first think of investing, the stock market may come immediately to mind. Investing in public companies through stocks certainly can be a great financial move. However, when thinking strictly in a short-term time frame, an aggressive and high risk approach to investment in the stock market may pose some challenges if the market overall isn’t doing so well. Such investment options are better utilized in the longer-term approach where you have time to account for those market fluctuations.
Choosing Short Term or Long Term
When breaking down investments into time frames of short or long term, it’s important to keep in mind what your overall goal is with regards to your investment. If you’re looking to save for retirement and you’ve just started your career, a short-term investment might not be the best choice. Since you’re several years away from retirement, it may be in your best interest to plan out a long term investment that can take more time to get you your return. However, if you’re looking to earn some extra cash as you save up for a home purchase, a short term investment, or one where you’d like to see the returns in just a couple of years, may be the better option. Before making an investment, be sure you know your end financial goals you hope to accomplish.
Keeping these points in mind, you can make the right short-term investment decision that can get you to where you want to be with your finances. Particularly with a short-term investment, you want to be sure your money is secure, which most often means choosing a lower risk investment that can still get you great returns.
When it comes to choosing a short-term investment option, or a collection of options, there is a lot out there. From investments through the federal government to private loans, the opportunities are abundant for you to get a little boost in the money that you’re currently not using. But what opportunity should you choose? Here are just some of the many short-term investment options you can make, today:
Best Short-Term Investment Options
A bond can be a safe and easy short-term investment that can get you the returns you want. Bonds are basically a loan to the government or a company. Short-term bonds are low risk and can get you interest on the principal you offer. The interest rate you can earn on a bond varies based on duration and available offers.
When it comes to choosing the right kind of bond for you, you can choose between a bond mutual fund, which is a collections of several bonds, or an exchange-traded fund, which is offered through the stock market. As you make your selection, make sure you know the related fees and tax implications for which you are responsible. Each type of bond may come with unique implicates when it comes to reporting taxes. Bonds through a corporate entity, for example, are subject to taxes. Local government bonds, on the other hand, aren’t subject to federal income taxes. Keep this in mind, as well as any other potential fees, when making your financial investment plan.
Cash Back Credit Cards
When you think of using credit cards, making an investment might not come right to your mind. However, through new credit card offers, you can earn some great rewards through cash back programs. Sign-up bonuses through credit card companies can get you a percentage of cash back into your account as you spend. When you make purchases you need to make anyway, but with a particular credit card, you can get an impressive return.
As long as you stay on top of your monthly payments and don’t carry a balance from month to month, using a credit card to get returns on your payments can be an easy way to get rewards. You can use this card for all your regular purchases like groceries, utility bills and getting gas in your car, and get rewarded for doing so.
As you select the right credit card for your short-term investment plan, be sure to pick a card option that doesn’t come along with hefty monthly maintenance fees or other hassles that may reduce your overall return. Always pay your balance in full each month so you don’t lose money on your investment and fall into credit card debt. Choose the credit card that provides the best rewards opportunities for you, whether that’s earning cash back or travel and airline points or other gift card options.
Certificates of Deposit (CD)
If you’re looking for a low-risk investment for your portfolio, a Certificate of Deposit, or CD, can be a great choice. Typically banks offer CD terms that are competitive and available at several lengths of time. Choosing the right CD for you depends on your balance and how long you intend to keep the CD. Typically, banks offer time frames anywhere from 1 to 5 years. Generally, the longer the CD duration is, the higher the rate, which can end up getting you maximum reward for your investment.
One concern of Certificate of Deposits is the lock it puts on your investment. If you need to remove money from the account before the CD timeline is done, or its maturity date, you’ll end up with paying a fee on the account. That’s why picking a CD for the right amount of time you can stash your cash away is important before you jump into a specific timeframe.
Different banks offer different opportunities and rates for CDs, also dependent on what state you live in. Check your local bank or other bank offers you’re interested in order to see current rates and offers for you to start investing with a low-risk yet rewarding CD.
Online Checking Account
Similar to earning cash back rewards through a credit card offer, banks can also offer rewards through an online checking account. There are several debit card options that can allow you to spend money on what you need while also earning rewards and cash back. You can even add a debit card to your existing credit card routine to maximize your rewards however you pay. When using both cards, you can see the benefits of both. Be sure to check with your bank first of any monthly maintenance fees or other related costs that may limit or cut down on your reward potential for this short-term investment option.
Online Savings Account
Like an online checking account, an online savings account can provide an investment option that keeps your money secure and also proves some opportunity to earn a little extra cash. While the interest rates you’ll earn on a savings account is small compared to some other investment options, the security of your money makes it a safe way to go. Especially when choosing an online banking option, you can find return rates in the 1-2% range.
As you select a savings account that matches your financial choices, be sure automatic deposits is free and watch out for any other associated fees that may pop up with your account. You don’t want to end up with a dent in your investment just because of inattention to fees. Look around at your current bank as well as other online only options that provides a competitive return rate so you can amp up your short-term investment strategy.
A quick and easy way to earn interest on your money is through peer to peer lending. Through a platform like LendingClub, you can put out loans to consumers that are looking to borrow. Rather than a bank giving out loans, it’s you. When you join, you’ll get monthly repayments and interest from the loans you’ve given out. You can get access to competitive return rates, such as between 3% and 8% per year. This platform also allows you to diversify your portfolio by spreading out your investment with several personal loan borrowers so your risk is minimal.
Setting up an account through LendingClub is quick and easy and gives you the chance to choose which account type you want. Choose from a general investment, retirement planning or a corporate account. Once you have your account set, you can pick an investment strategy. If you don’t want to put in a lot of time in yourself in selecting which loans you want to invest in, you can automate the process through a pre-selection strategy. If you want to make those decisions yourself, you can browse loan options yourself. With as little as just $1,000 you can start investing by funding an account. Offer funds by linking your bank account and pay by ACH, wire transfer or a check. When you earn back the principal and the added interest, that money can go right back into your LendingClub account so you can easily keep on investing.
With peer-to-peer lending through platforms like LendingClub, you can make easy short-term investments with little risk and the potential for great rewards. Even with platform fees, you can still earn a competitive percentage back in your investment. Through several account options and diversification, LendingClub can be a great option for you to make your next money moves.
Like bonds, treasury securities are offered through the U.S. Department of Treasury has several loan options that can get you a return on your money. They are a type of bond that can carry a range of maturity dates so you can pick the timeframe that works best for you. If you choose a bond that has a maturity date less than two years, it’s called a treasury bill. When it has a maturity date between two and ten years, it’s called a treasury note. There are also several other bond options with various timeframes and stipulations when it comes to other investment factors. You choose your schedule and what method works best for you.
While these bonds are offered through the government and therefore are considered a very safe investment, they do carry some minor level of risk. Inflation and interest rates do affect return rates, so keep that in mind as you make your decisions. Most often, partnering with a broker can help you decide on the right approach to treasury securities you should take. However, you can also buy them directly from treasurydirect.gov. Using their services makes it easy to continue your investments, such as through direct deposit and easy monitoring of your account and repayments. They also offer a wide range of helpful tools and services as you make your investment decisions. When looking strictly at a short-term investment, lower maturity dates, such as those in a treasury bills, can help get you your money back faster.
Invest in the Short-Term
Whether you’re looking to pay off your car loan or save up for a house, a short-term investment can help you add a little extra cash into your account. When it comes to a short-term investment, a lower risk option is most often the safer choice, as it doesn’t allow you the flexibility and recovery time such as in a long-term investment. By keeping your financial goals in mind and being mindful of your investment options, you can create an investment plan that maximizes your money that you’re not currently using. Discover what investment options may work for you and get on your way to reaching your financial goals.