Types of Short Term Investments

When you don't want your savings to be locked away for long, opting for short term investments makes abundant sense. In this article, you will be introduced to the different types of short term investments, that provide decent returns.
To organize your investment portfolio, you need to be clear about what your short and long term financial goals are. That's because, if you know what you want, getting it is simpler! While making long term investments is important, you need to ensure that you have enough liquidity in the short term to meet your day-to-day expenses and tide over emergencies. There are several kinds of short term investments you can choose from, that can ensure adequate liquidity, without locking the principal investment amount for long.

Why Choose Short Term Investments?

While long term investments can assure you a secure future, they also deprive you of the much-needed liquidity in the short term. Ergo, it's a wise move to invest a portion of your savings into short term investments, which can provide you with decent returns and ensure short term liquidity when you need it. There are several short term investments differing in the degree of risk involved. The inverse relation between risk and returns should be taken into consideration when choosing short term investment options presented in the rest of the article.

Different Types of Short Term Investments

I shall present some of the short term investment alternatives which differ widely in the degree of risk involved and the size of expected return on investment. From stocks to treasury bills and bonds, here are some of the best short term investment options, which you might want to consider.

Invest in Gold and Silver
The shiny metals never lose their luster in the investor's eyes. The prices of gold and silver have continuously been on the growth path with both recently peaking at their best prices ever. Probably the safest returns ever, buying gold and silver is highly recommended as a short term investment option. Liquidating these coveted metals is easy and good returns are guaranteed by the high demand in international markets.

Low Risk Stocks
Stocks prices being a function of human speculation, as investments, they come with a fair degree of risk. However, there are many 'safe' stocks, that are backed by solid business fundamentals and performance, which you might want to invest in as a short term strategy. It takes a fair bit of study and research to determine the inherent value of a stock. The key to making money lies in identifying undervalued stocks and holding them till they attain their true value. Short term bonds are other options which you also might want to consider as short term investment.

Certificates of Deposit
A certificate of deposit (CD) is a time deposit which guarantees you a fixed percentage of interest after a limited maturity period. Individual retirement account (IRA) CDs can provide you with a decent amount of return with maturity periods ranging from 3 months to more than 5 years. They are the safest places to park your money in the short term after treasury bonds. Another option is of course going for savings accounts with high interest rates.

Treasury Bills and Bonds
Buying short term treasury bills and bonds is the safest short term investment vehicle you could opt for. Backed by the US government, these are the best and the safest short term investment options.

Money Market Funds
Money market mutual funds are great investment vehicles to choose, which primarily invest in US treasury bills, notes and bonds and certificates of deposit. Their maturity period are short, which makes them ideal for investors who are looking for investments which can provide liquidity in the near future, while earning decent returns in a short period.

Evaluate your immediate financial priorities, the size of your current savings and decide what combination of investments, will be ideally suited for your financial goals that you wish to achieve in the immediate future. Spreading out investments over a wide risk spectrum with more money invested in low risk investment and lesser in high risk investment is a smart strategy, which you could adopt. Take help from a financial advisor who can do the math, help you evaluate your priorities and direct you towards the type of investments that can yield the best returns.
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