5 Best Short-Term Investment Strategies

If you have money that you don’t need for immediate expenses, investing is one of the best ways to put your money to work and generate solid returns. While the stock market has historically produced some of the best returns over the long run, short-term investing can also be an attractive option if you need access to your money in a year or less. Short-term investments provide liquidity while still generating passive income. Here are some of the best short-term investment strategies to consider.

High-Yield Savings Accounts

High-yield savings accounts are very low risk and provide liquidity, making them ideal for short-term investing. Look for accounts that offer higher interest rates to maximize your returns. The best high-yield savings accounts today offer between 2-2.5% APY. Your money can be deposited and withdrawn at any time without penalty while still earning interest.

Certificates Of Deposit (CDs)

CDs lock in your money for a fixed period of time ranging from 1 month to 5 years to earn a fixed interest rate. Short-term CDs mature in a year or less. They provide very low risk and higher interest rates than most savings accounts. You cannot withdraw money from a CD without paying a penalty until it matures, but short-term CDs provide access to your money in a relatively short period of time. CD rates range from 0.5% to 2.5% APY for the best short-term CDs.

Treasury Securities

Treasury bills, bonds, and Treasury Inflation-Protected Securities (TIPS) are government-backed securities considered very low risk. Treasury bills have maturities of 4 weeks to 52 weeks and currently offer returns between 0.5% to 1.5% APY. Treasury bonds have maturities of 2 to 10 years, currently returning 1 to 2% APY. TIPS provides inflation protection. Treasuries can usually be sold on the secondary market without penalty if you need to withdraw funds early.

Real Estate Investment Trusts (REITs)

Short term real estate investment strategies like Real Estate Investment Trusts (REITs) invest in real estate properties and mortgages and then pay out 90% or more of their income to shareholders in the form of high dividends. Most REITs focus on long-term, buy-and-hold real estate investing. However, a small subset of REITs targets opportunistic short-term real estate investments, with the potential for higher returns in a shorter period of time. These higher-risk REITs can generate returns of 20% or more within a year, but also higher potential for loss of principal. They provide investors with exposure to real estate investments and the opportunity to earn higher returns than other short-term options.

Money Market Funds

Money market funds invest in short-term financial instruments like commercial paper, certificates of deposits, and treasury securities, then pass the interest on to shareholders. Most money market funds maintain a stable net asset value of $1 per share. They provide low-risk income while maintaining high liquidity – money can be withdrawn at any time without penalty. Money market funds typically generate higher yields than high-yield savings accounts and CDs. Returns range between 0.5% to 2.5% APY.

To Wrap Up

There are several sound short-term investment strategies that can generate attractive returns with low risks and high liquidity. The options above provide a good mix of investment types at varying return and risk levels so you can choose the right short-term strategy based on your financial needs and goals. With the proper short-term investment plan, you can put your money to work for even a short period of time.