The investment realm presents plenty of opportunities for investors through different assets and other financial instruments. Two things are certain regarding investments: 1. They can generate returns when wisely managed and 2. There will always be risks associated with them. So, whether you go for a long term investment or short term investments, you will deal with risks and potential returns (or losses). There is no escape from that.
But short term investments, although the term may sound dubious to some, offer a great boost to an investor’s portfolio, making it one of the most widely used trading strategies.
Short term investments are a type of investment that normally reaches maturity in 3-12 months. Some financial pundits say that they can span over up to 3 years because normally a long term investment matures every 5 years or more.
The best-known feature of short term investment is its liquidity. That is to say, your investment can be quickly converted into cash. But for investors who are not risk takers, this can be a good option as it entails low risks because of the shorter period of time in which one’s assets are exposed to market volatility. Thus, investing in short term assets is a great way to protect your hard-earned money as there are smaller chances it can be affected by risks.
Among the best short term investments are bank accounts, certificate of deposits, and money market securities. By creating your account in a bank, you are simply lending your capital to the firm. It earns more profit as the bank will pay you in the form of interest. This may be enticing as there is almost no risk in this investment, but there are very limited returns.
Certificate of deposits work just like bank accounts, only you lend your money to non-bank establishments. The only difference is that money cannot be withdrawn unless it reaches its maturity.Arguably the best short term investments to secure your funds are carried out through money market securities. They are also in the form of lending but as their name suggests, they provide higher security and are very liquid.