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However, money market mutual funds are not FDIC-insured, so it is important to note the difference. Money market accounts act in a similar fashion to regular accounts in that you can often write checks or use a debit card for your account although you may be limited in how many times you can use it. While perhaps not a traditional investment vehicle, Roth IRAs are actually similar to many of the other short-term investment strategies in that you can withdraw funds at any point without penalty.
Because the Roth IRA is post-tax meaning your contributions are taxed before they're invested , you can withdraw them without having to pay taxes or penalties. Additionally, Roth IRAs can be good short-term investment options because you can often invest in higher return options like ETFs and mutual funds. This is a great option for a quick, high return on investment read: double-digit returns. Paying off high-interest debt like credit cards is a smart choice because you can get a great return while improving your financial situation - and, guarantees a return.
In general, paying off high-interest debt will get you great returns, so it's definitely worth looking into. Albeit a bit of a more conservative option, online savings accounts can still get you a better interest rate than many traditional banks.
Because there are no limits on withdrawals, liquidity is higher for online savings accounts and maybe a draw for investors. Despite being a somewhat unorthodox short term investment strategy, taking advantage of promotional and cashback deals can help you earn money fast.
Because of their time frame, short term investments are often seen as safer than long term investments, especially on the stock market. While long-term investment positions especially on the stock market are subject to market fluctuations, bull and bear markets which may erase gains or yields and other risks, short-term investments are often thought to be safer and can still produce decent profits for the investor.
Of course, short-term volatility is always possible, and short-term investments - like with any investments - should be seen as inherently risky endeavors that have their positives and negatives as any other investment would. Just because you have a limited time frame in which you'd like to invest doesn't mean you can't get decent returns. Be creative and research your options for unique ways to earn money in the short term. Receive full access to our market insights, commentary, newsletters, breaking news alerts, and more.
I agree to TheMaven's Terms and Policy. What Is a Short-Term Investment? Best Short-Term Investments So, what are your options for short-term investing, and what are the best short-term investments to maximize profits and minimize risk? The average returns for CDs range from around 0.
Treasury Securities As a refresher, treasury securities are bonds issued by the U. Bond Funds If you've got a shorter timeline around two years or so , bond funds could be a great option. Municipal Bonds Municipal bonds are a bit riskier than TIPS or other kinds of bonds, but there's pretty high yield potential. Money Market Accounts These FDIC-backed accounts allow investors to invest their money, earn a higher interest rate than a savings account, and protect their money in the meantime.
Roth IRA While perhaps not a traditional investment vehicle, Roth IRAs are actually similar to many of the other short-term investment strategies in that you can withdraw funds at any point without penalty. Paying Off High-Interest Debt This is a great option for a quick, high return on investment read: double-digit returns. Online Savings Accounts Albeit a bit of a more conservative option, online savings accounts can still get you a better interest rate than many traditional banks.
Promotional Deals Despite being a somewhat unorthodox short term investment strategy, taking advantage of promotional and cashback deals can help you earn money fast. Why Make Short-Term Investments? The Bottom Line Just because you have a limited time frame in which you'd like to invest doesn't mean you can't get decent returns.
By TheStreet Staff. By Vanessa Fayzulin. By Brian O'Connell. Sponsored Story. By TurboTax. By Katherine Ross. The third short term investment option for you is peer to peer lending on a platform like LendingClub. Peer to peer lending is a type of lending that happens outside of banks where individuals like you can also lend money to individuals like you. So this is a pretty juicy return.
However, I would only consider LendingClub if you have at least 2, to invest. And the fourth short term investment option that I have for you is to invest actually in the stock market , but with a very conservative allocation. And this is really easy to do through robo advisors like Betterment, where you tell them how much money you want to invest and when you need that money by and they will invest the money for you in a very conservative portfolio of stocks and bonds.
But you have to be okay with actually taking that small chance of ending up with a little bit less than you started with. You can just keep it in there longer because as you know, the stock market in the long run always goes up. So to do this, I recommend using a robo advisor like Betterment or Ellevest. I actually did a couple of videos on robo advisors, so you can check those out here.
But these robo advisors, you just tell them what your time horizon is. And the fifth and final short term investment option for you is certificates of deposits , also known as CDs. CDs have a fixed maturity and they are not as flexible as savings accounts and money market mutual funds and even the Betterment short term stock portfolio that I talked about because they have a locked withdrawal period. Meaning that if you buy say a three month CD, then you cannot withdraw this money until those three months are over.
And if you do, you would have to pay hefty, hefty penalties and fees. And CDs, you can buy these either through your bank or at a brokerage. And I have found some CDs that are currently paying up to 2. So as for my final thoughts, I think it really depends on what you need your short term investment money for, and that will help you decide which of these five options is the best for you.
In that sense, for an emergency fund, a CD is not ideal because there is fixed withdrawal times and I would say the stock market allocation, the conservative stock market allocation option is not ideal because the stock market will do what it does when it does. I would say for an emergency fund, a good short term investment for that would be either the high interest savings accounts or the money market mutual funds.
I know that not everyone is ready to always just dive right into stock market investing right away. So short term investing is a good way to just dip your toes into the financial world.
We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. You have money questions. Bankrate has answers.
Our experts have been helping you master your money for over four decades. Bankrate follows a strict editorial policy, so you can trust that our content is honest and accurate. The content created by our editorial staff is objective, factual, and not influenced by our advertisers.
We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories.
Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. A 3-month CD could be a great place to invest for short-term financial obligations, like establishing a rainy day fund you can eventually transfer to a savings account.
Savers have tons of places to park their cash. But choosing between a savings account and a certificate of deposit CD can be difficult. A CD allows you to tuck away your money at a bank and earn fixed interest on that money until the CD matures. But because 3-month CDs are pretty short investments, banks tend to offer lower interest rates on these when compared to a high-yield savings account.
The top savings accounts pay around 0. But the average yield is much lower 0. The best 3-month CD rates available from banks and credit unions pay more than five times the national average of 0. APYs may have changed since they were last updated. The rates for some products may vary by region.
Hundreds of top publications rely on Bankrate. At Bankrate, we strive to help you make smarter financial decisions. We follow strict guidelines to ensure that our editorial content is unbiased and not influenced by advertisers. Our editorial team receives no direct compensation from advertisers and our content is thoroughly fact-checked to ensure accuracy. Bankrate regularly surveys around 70 widely available financial institutions, made up of the biggest banks and credit unions, as well as a number of popular online banks.
To find the best CDs, our editorial team analyzes various factors, such as: annual percentage yield APY , the minimum needed to earn that APY or to open the CD and whether or not it is broadly available. All of the accounts on this page are insured by Federal Deposit Insurance Corp.
But the top 3-month CD rates are usually found in the form of a traditional CD. It has more than , members and offers nine terms of CDs. The three-month CD is the shortest term and the five-year CD is the longest term. Bethpage also offers a month bump-up CD. Besides CDs, Bethpage offers checking accounts, savings accounts, loans and other financial products. All BrioDirect savings deposit products are provided by Sterling National Bank, which was founded in BrioDirect only offers CDs and a high-yield savings account.
Both of these savings products offer a competitive yield. BrioDirect gives customers a variety of CDs to choose from since it offers 13 different terms — starting with 30 days and going out to five years. Navy Federal Credit Union has more than 8.
It has a global network of branches. The credit union, created by school employees, has 50 branches. Treasury Bills. The goal of a money market fund is to provide investors with ongoing income while protecting their principal investment. Like with mutual funds, each investor owns shares. Interest on the investment is then paid out to shareholders as dividends. Remember, money market funds and money market accounts are two completely different investment options. Unlike money market accounts, money market funds are not FDIC insured.
Are you a homeowner looking for a relatively safe way to invest? Paying off your mortgage early could be one of the best investments you can make — especially if you live in an area where housing prices remain relatively stable. Paying off your house early can do some really important things for you. First, it saves you some significant interest charges. Every dollar you pay beyond your monthly minimum payment should count toward lowering your principal balance.
Additionally, knocking your mortgage out early eliminates a huge chunk of debt and a major monthly expense. Things like investing more in the stock market, starting your own business, and learning how to invest in real estate suddenly become easier.
Owning your home free and clear reduces your risk in other ways, too. If you get sick, fired, or experience any other major financial hardship, you just need enough money to keep the lights on and food on the table. At a bare minimum, be sure to meet any company match that is offered. While many people consider this one of the safest investments you can make, keep in mind that none of these ideas come with zero risk. However, if you plan to stay in your home for a long time, this is one of our favorite ways to invest money.
Although spending to save will never make you rich, spending on a credit card can come with some fairly nice perks. Cash back credit cards typically reward your spending with straight cash back. If you use it to spend on the things you normally would anyway like groceries, restaurants, daycare, or utility bills , you could earn a decent amount in cash back rewards.
Rewards cards typically provide points for your spending. Our favorite type of cards are travel rewards cards , but rewards points can usually be redeemed for gift cards, travel, cash, and more. Even better, when you create a new account, both types of cards usually provide a signup bonus.
Here are a couple of our favorite cards:. Learn how to apply Read the full review. Trust us, the interest payments are usually far more expensive than any rewards or cash back you received. Bank bonuses are another way to cash in on high returns with low risk. Banks are always competing for your cash, and some will reward you with free money for opening a new checking or savings account.
After you open your account, you might need to set up direct deposit, use your new debit card for a certain number of transactions, or keep your money there for six months or more. Not all banks have these rules, but always check the costs before signing up for a checking or savings account bonus.
Peer-to-peer lending P2P gives you the opportunity to be one. P2P lending is a little like owning your own bank, albeit without taking deposits from the public. In a nutshell, you lend your money to someone else who will hopefully pay you back. Lending Club and Prosper are two websites that allow you to make personal loans to borrowers. Websites like Groundfloor help you cash in on the lending side for real estate deals.
The ongoing income and capital appreciation of your investment also help reduce the adverse effects of inflation. Dividends typically can be used to buy more stock in the same company with a dividend reinvestment plan, or DRIP. Depending on your investment goals, it might make sense to take the dividend as income, but reinvesting dividends as part of your growth strategy may also work well for you.
Upon maturity, annuities typically provide you with income that can last for the rest of your life. Annuities come with either fixed or variable rates. With a fixed annuity, your money accumulates a guaranteed interest rate for a specific period of time. This means they often come with some relatively hefty commissions, depending on the product. Additional fees could further increase your costs and lower your overall investment return.
With the recent market volatility and the disappearance of workplace pensions, annuities can be a great addition to a retirement portfolio. Of course, that guarantee is based on the health of the company where you bought the annuity. Just like with most insurance policies, you may be stuck if the company goes out of business. Even with that risk, however, many people believe annuities are relatively safe investments that can bring stability to their portfolios.
Owning preferred stock may be another way that you can add additional stability to your portfolio. Preferred stock is different from common stock, and it typically trades far less frequently. Preferred stock still provides ownership in a company, but it typically pays out guaranteed dividends that are usually higher than those paid to common stockholders. This is essential when the company falls on bad times.
If a company suspends its dividends entirely, your preferred stock will be paid dividends in arrears before any is paid to common stockholders. Though generally considered to have less risk than common stock, you may be able to further reduce your risk by including some diversity in your preferred stock portfolio.
Preferred stocks can usually be traded at your favorite online investment brokers. With a core goal of providing stable returns even during tough economic times, stable value funds are one of the best low-risk investments available. Instead, like money market funds, their value remains stable. Stable value funds are made up of investment contracts that are designed to guard your capital against significant variations in interest rates. Their holdings typically include short and medium-term government and corporate bonds.
Since they typically hold bonds with a longer maturity date than money market funds, stable value funds are often able to provide higher interest rates. Stable value funds are also insured, protecting investors from losing both their principal and interest. Overall, stable value funds are fairly low-risk investments that come with a diversified portfolio of high-quality investments. With the contracts from banks and insurance companies helping to protect your capital against drops in interest rates, these are generally considered to be relatively safe investments.
You can often find these funds as an option with company sponsored retirement plans like a k. When it comes to investing, higher risk is often associated with higher performance. However, if your goal is to keep as much of your original principal as possible, low-risk investments are sure to make you smile. Thanks so much for reading and good luck!
Do you invest in any of the above methods? Share your experiences below! What is an Exchange-Traded Fund? Greg and his family travel the world for about 20 weeks each year, and he has visited over 40 countries - focusing mainly on the United States, Europe, and the Caribbean. Additionally, he holds two bachelor's degrees and is the co-author of the book Zero Down Your Debt. Learn more about Greg here. Owning your own home, free and clear, is the best investment for most people.
With that said, there is some risk involved. For homeowners, particularly those living in areas where housing prices remain fairly flat, I agree — though — that it could be one of the best investments available to them. Definitely worth reading. Your email address will not be published. Notify me of follow-up comments by email. Notify me of new posts by email.