Short-term investment is the investment with three years timeline or less. This investment is not for everyone. But, if your investment goals and risk tolerance match short term investment criteria, then, now you may get trapped in choosing the best asset for short term investment.
Getting the right asset for short term investment can be hard since most of the assets are designed for long term investment. But here are some assets for short term investment that you can consider..
High Yield Savings
High yield saving can generate you significant money. Yet, the common interest rate for saving accounts these days is less than 1%. You can, however, find the interest rates which are higher than 1% if you open an account in an online bank.
These banks do not need to spend on the brick and mortar office, thus, they can offer significantly higher interest rates than the offline banks.
The other solution to get you high yield savings is the savings account at your credit union. Yet, high yield savings can only provide you less than 2% interest rates.
Certificates of Deposit (CDs)
Some certificates of deposits offer three months to five years periods. The longer you lock up your funds in it, the higher the interest rates you can get.
The maximum interest rates from CDs are higher than high yield savings. However, you can get charge of penalty if you take out the money before your CD matures.
A bond fund will give you the highest amount of money than the previous options. There is bond fund that have short term maturity. These bond funds usually mature in one to five years.
Bond fund managers, usually, buy bonds that almost reach the maturity date and replace them with new bonds as needed.
Bond fund invested in securities with short term maturity often experience lesser negative effects from the interest rate changes.