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​A Brief Description on Short term investment Plans

Guest Post: A Brief Description on Short term investment Plans

An investment plan could be broadly divided into two categories: short-term investment and long-term investment. There are various options of investment following from both the categories, but a lot of factors differentiate the two. Here, we would discuss more about short-term investment and the perfect plans under this category.

Short term investments are such investment plans that can be liquidated within a period of 1-5 years. Short term investments include lower risk, and ultimately lower returns. As we all know that risk and returns in investment are directly proportional to each other, meaning we get smaller returns for minimal risk beard in short term investments. There is a low risk as you have the option to liquidate your fund at any desired time, and this does not blocks your capital which eventually concludes to decreased risk.

When is a short term investment the best option?

As learned earlier, short-term investment includes a short span of time and lower risk. So, when is the perfect time to opt one? Let’s know it in the following article:

  • Post retirement- after retirement people generally do not want to engage in a lot of risk and there are limited or no sources of income at all. At such situation, it is advisable to go for short-term investments where you would not get such high returns, but the risk is minimal.
  • A new planned purchase- If you have new recent plans to purchase a house, car or any other assets, and you do not want to engage your savings in long term investment, than short term investment plan do prove to be the best choice.
  • Can take high risk- if you cannot take high risks by investing your hard earned money in long term investments for a plan that includes more than 5 years of time to render benefits, then it is advisable to opt for short term investments that include low risk.

Best short term investment options

Savings account

Savings accounts are short term investment options where you could withdraw your money at any time you desire. It offers low yields as there is least or no risk when it comes to investing in saving accounts. It includes open deposit and withdraws, so you could withdraw your amount to the limit of minimum balance.

Certificates of deposit (CD)

The certificate of deposit or CD’S are one of the most common types of short term plans where you agree not to withdraw your money from the CD for a specified period of time. This kind of investment brings higher yields as compared to savings account, and the time of investment may range from 3 months to 5 years. This investment category may be considered at the safest short term plan as CD’s are federally insured.

Money market funds

Money market funds though include higher risk as they are not federally insured but they render comparatively higher yields as compared to savings account.

Treasury bills and bonds

Treasury bills and bonds are short term investment plans that may range from 4 weeks to 1 year of time. Treasury bills do not bring good yields for the investors as compared to other short term plans. Bonds as more flexible as compared to treasury bills but they offer lesser security in terms of returns.

Thus, this is how you can benefit yourself with a short term plan that includes lesser risk and more reliability. Short term plans could not be used as an investment for higher benefits.