10 Short-term Investments to make today with your money
If you’re considering putting money to work for yourself, short-term investments are ideal if you need to see a return in less than a year.
These financial investments have become very popular, since in recent times the options you have to invest your money have become quite diversified without having to wait years to obtain a return.
Based on this, it is essential that you know everything related to short-term investments so that you can make an investment decision based on your risk profile and the objectives you have.
In this article we will explain how short-term investments can help you improve your personal finances in the immediate future, you will learn how their markets operate, and above all, how to be a good investor.
What are short-term investments:
Short-term investments are extremely temporary, that is, they are made for a period of less than one year.
Indeed, they are quick and easy transactions that yield a return on investment in a matter of months, which is one of their most important attractions.
So when you invest your money, you should think about your objectives and decide if you are willing to wait a long time to wait for a return, or if you want to obtain it in a matter of months.
If you prefer the second option, short-term investments could become your best allies, and in the following lines we will tell you more about it.
Characteristics of short-term investments:
To understand more clearly what short-term investments are, you need to take a look at their main characteristics:
- They are placements that become effective in a short term, and therefore, the risk within the market is usually not that high (this will depend on the assets).
- Short-term investments generally consist of marketable debt or equity securities, which are purchased with cash that you don’t need urgently, or at the present time.
- Short-term investments are fully tradable, or in other words, they can be easily sold should you need to convert their value into cash.
- They offer you great financial stability and favorable liquidity.
- They allow you to diversify your investment options: you can invest in fixed income or variable income, such as stock purchases.
- Short-term investments allow you to perceive quick profits.
However, it is necessary that you define and know your investor profile, at the same time that you study the market in depth before making this type of investment, or else you would be risking more than necessary.
Examples of short-term investments
The starting point is to understand what a fixed income or variable income investment consists of, since knowing the difference between one and the other is crucial to decide which investment strategy is best for you.
The first, fixed income investments, are executed with a previously established interest rate, while the second is carried out without knowing the return that it will generate in a period of less than one year.
With that clear, let’s take a look at what types of short-term investments are out there so you can make a decision about how to put your money to work for you.
1. The actions:
They are variable income investments, and therefore, their profitability is subject to market volatility. The first thing we recommend is that you learn how to invest in the stock market before placing your money in these instruments.
A share represents a security and is issued by a company in order to increase its capitalization, or to solve a financing problem.10 Short-term Investments to make today with your money
It is important to know that, in investments in shares, their profitability is very volatile, so there is a considerable risk of losing money if you do not have good advice from professionals in the area.
In fact, you cannot buy shares on your own since legally only a broker, or trading platforms, are authorized to do so.
That is why we recommend you contact a truly experienced one so that your investments turn out as expected.
What can you buy on the stock market?
You can not only buy shares on the stock market, but also other investment instruments that offer a good return, such as:
- The titles.
- The certificates.
- The bonds.
2. Commodities:
Commodities are raw materials that are traded in the stock market; some are of an energetic, metallic, input or food nature. For example, one of the famous ones is to invest in gold.
Best of all, they are often easily and quickly traded as they drive the production of goods and services.
One of the options you have is to make short investments in Commodities, but the return times will vary according to the type of product in which you are finally going to invest.
The value of Commodities increases as demand increases, and experts agree that the price of an underlying commodity fluctuates by 30% on average.
3. Investment funds:
Within this type of short-term investments are investment funds in transferable securities and variable income funds.
However, investments in mutual funds fit the profile of riskier investors who aspire to receive high returns.
So if you are looking for security in exchange for profitability, it is best to invest in more stable financial instruments.
Now, the profitability and risk will depend to a large extent on the investment fund you choose, since there are quite a few offers depending on your level of risk, your level of financial leverage, objectives, among other variables.
4. Treasury Bills:
These are one of the safest short-term investments you can make. They last between 3, 6 or 12 months and constitute fixed income securities.
Treasury bills are issued at a discount, which means that they cost less than face value and that the return is earned at the time of redemption.
Another notable point is that you can buy treasury bills independently, or through an intermediary (through another person or a bank).
5. Cryptocurrencies:
Did you know that there are more than 1,500 cryptocurrencies on the market? Likewise, and the good news is that you can invest in them through various payment mechanisms such as cards, bank transfers or via PayPal.
These short-term investments have gained a lot of popularity in recent years, however you need to understand that their volatility is high, which means that their prices vary greatly from one day to the next.
It is essential that you learn how to buy bitcoins, or the currency you wish to invest in, before making a decision.
In addition, this market is not subject to regulations, and in this sense it is best to invest only the money you are willing to lose –in the worst case-.
Another piece of advice that we can give you is to seek advice from an experienced trader in the market, instead of investing by yourself without knowing exactly what you are doing.
6. Investments in Forex:
Forex is the market that encompasses all the operating currencies in the world. It is 100% decentralized and the daily volume of operations is greater than 5 trillion dollars.
There are more and more traders interested in investing in currencies and the most profitable strategies are usually those of Scalping, Intraday Trading and Swing Trading.
Some of them allow you to reduce the risk margin to a minimum, but you should study which one is most satisfactory for you before investing in the Foreign Exchange.
At the same time, the starting point for investing in Forex is knowing that all operations involve two currencies. For example, the euro and the dollar, since you will basically be betting the value of one against the other.
If you want to know more about this, we have created a guide explaining how to invest in Forex.
Read More- A guide to Investing in Long-Term Stocks
7. Contracts For Difference (CFDs):
These short-term investment instruments allow two parties to exchange the difference between the entry and exit price of a certain underlying asset.
In financial matters, the seller must pay the buyer the difference between the current value of said asset, and its value at the time of the contract.
Therefore, when the contract is closed, the investor must collect, or pay, the difference between the closing and opening value of the Contract for Difference, and that of the underlying assets.
Consequently, when you decide to invest in this type of contract, you are betting that the price of the asset will rise, which will make you earn money.
Whereas when you sell a CFD you are betting that the price of the underlying asset will go down, in which case you will also make a profit by being short that asset.
In essence, Contracts for Difference allow you to earn money when a financial asset goes up or down in price.
According to Nasdaq, with CFDs both buyers and sellers register some margin.
However, these investments carry a high risk as they involve placing bets up and down.
One of the key aspects of CFDs is that they are not listed on an organized market and that they do not have an expiration date.
Therefore, they are more attractive to investors than financial futures. Currently, CFDs are one of the most widespread investment instruments on the planet.
Additionally, they offer great liquidity and enjoy financial leverage. These are its main types:
- About an action
- CFD on a stock index.
- About raw materials.
- CFDs on currencies.
8. Stock market promissory note:
With stock market notes you could also make short-term investments. These are debt securities issued by a private company on the stock market.
They are generally issued at a discount, offer less liquidity than bonds, and are equivalent to Treasury Bills in public debt.
Although financing through promissory notes tends to be more expensive, it is also more flexible than those offered by a bank.
In parallel, the concept of “nominal value” is key, since it represents the amount of money that will be delivered to the investor once the promissory note matures.
For its part, the price that the investor must pay to buy these instruments is calculated using the compound or simple interest formula.
Currently, stock market notes can be listed on regulated markets, or on Multilateral Trading Systems.
If you are interested in making this type of short-term investment, you must also have certain guarantors.
These would be natural or legal persons who will answer for you, in case you cannot meet your payments.
Several important figures are involved in this type of investment, such as:
- Registered advisor.
- Banking entity.
- Placing entity.
- Agent bank.
- Legal adviser.
- Rating agency.
9. Crowdfactoring:
It is an investment modality that allows companies to anticipate their obligations, based on the contributions made by private investors, and even other companies.
Crowdfactoring allows companies to request the benefit of “factoring”, or an advance on their customers’ invoices.
In short, the up-front cost of these accounts comes from business or individual investors.
For many, this investment mechanism is still very new, but for others it is very attractive and interesting.
The goal is to connect small and medium-sized companies that need cash flow, through a group of investors who are willing to assume their bills, in exchange for profitability.
In most cases these investments have a higher rate of return than conventional investments.
In addition, one of its great advantages is that the return on investment is short-term (between 30 and 120 days).
As if that were not enough, the investor can complete all crowdfactoring operations over the Internet; specifically through the platforms dedicated to these investments.10 Short-term Investments to make today with your money
Additionally, you should know that you can choose invoices with low risk, in case you want to insure your investment.
Keep in mind that there are no investment limits and that you have the possibility of investing in several invoices (Their amounts may be different and they may also come from different companies).
10. Time deposits:
Fixed-term deposits work as contracts between banks and users.
Specifically, customers give their money to the bank, at a fixed interest rate, in exchange for a return.
Although the latter tends to be low, it is equally beneficial for them because the financial institution offers them support and security.
Those who make these types of short-term investments are aware that they will not risk their money in the same way that they would with long-term investments.
In essence, these savings products allow you to recover both the invested capital and the interest related to the established period.
To do this, you must understand that you will not be able to access the fund for a year or less. But after that time you will access your money again and you will also enjoy the return on your investment.
Fixed-term deposits guarantee a return. Even both you and the financial institution will be aware of the projected profitability in advance.
Additionally, you should know that the interest rate is usually higher than that of a savings account.
This is because you will not be able to access the funds during the months established by your bank.
Therefore, if you want to access your money before the expiration of the term, you must pay a special commission, or assume a sanction from the bank.
- In general, if you are a conservative investor, that is, if your aversion to risk is high, you might feel more comfortable with these types of short-term investments.
And it is that despite the fact that the return on investment is small, you will be able to access it with total safety and efficiency.
Advantages of short-term investments
Below we present a series of advantages that you get once you decide to make short-term investments.
- They help you maximize your wealth, creating new sources of passive income.
- Short-term investments make it possible to transfer risk and funds.
- Short-term investments are very favorable to increase the earnings of a surplus of capital.
- Both companies and small investors can make this type of temporary investment.
- Most of the quotes can be consulted in real time through the Internet, and therefore, they are quite transparent operations.
Recommendations for investing in the short term
As you have seen, short-term investments can offer you very good results and a positive return.
So that everything goes in order, avoid falling into scams, or losing large sums of money that affect your personal finances, it is important that you follow the following recommendations:
Know the market well:
Investing without knowing the nature of the market, its characteristics, or its operation, is like taking a leap into the void. The best thing you can do is dedicate yourself to research and analyze the business well before investing your money in it.
Remember that not all that glitters is gold, so you may stumble upon proposals or offers that could end up hurting you.
With these we mean scams or all those that try to make you lose money in a deceptive way.
Do not compromise your finances:
Experts recommend making short-term investments with additional money, or that you do not need in your day to day.
Think of it this way: you can’t get into debt with expensive interest to invest, this doesn’t make any sense and much less any benefit, so make sure your investments don’t compromise your finances.
Diversify to earn more:
This is key: don’t invest all your extra money in just one short-term strategy because the level of risk might be too high.
Being financially savvy is about understanding the power of diversification, so invest in multiple assets so you don’t have all your eggs in one basket.
Trust short-term investments:
While learning how to save money is key, keeping it static will not earn you any profit.
This is why if you have money available and you don’t need it to live, consider these short-term investment options.
As you will see, today you have multiple options to make temporary investments that generate a good return in just a few months, such as the stock market, the currency market or raw materials.
It is just a matter of knowing the business in which you will venture well so that you do not assume too high risks, or end up losing money miserably when making your short-term investments.