A Suggestive Guide to Top 10 Short Term Investing Plans

estate planning

Are you looking for a smart investment plans for your family with a short term planning? Confused with huge number of policies, savings plans, and investments, unable to make your decision due to risks? Then this is the right place for you to understand and take a right decision.

Short Term Planning – Is it Secured or not?

Short term planning ranges between 3 years to 5 years at maximum. As you are switching to short term plans, obviously there will be some risks that attached to your plan. There are many factors that affect the short plans and one must be aware of the risks and should also understand how to overcome those risks to get complete benefits without losing your hard earned money.

If you invest in business and market, the cycle lasts for more than 3 years and it is not possible to recover from a loss or show immediate profits.

You should synchronize goal timing with your assets. If you are willingly to invest money for 12 months, 3 years or 5 years you must invest in products that generally match your investment horizon. For example if you saving for down payment for a house within six months then look for an investment that would assure returns in 6 months.

There a number of short term investment options that are available in order to help you decide where you would like to invest for a short period of time with less risk and more returns.

Suggestion 1
Online Savings Account

Online savings account get 2% interest rate compared to the offline savings account where you can withdraw your money at any time you want, that to without any charge.

Suggestion 2
Certificate of deposits or CD

In CD investment, you can invest the money by depositing for three to five years and get the interest rate. It is the best plan for very short term investment plans as the plan starts from one month tenure. Penalty will be levied of you withdraw your money before maturity.

Suggestion 3
Money Market Account

Money Market Account is similar to CDs the only difference is in money market account you can withdraw money whenever you wish whereas in CDs you need to invest the money for a particular period.

Money market accounts often provide investors with deposit slips, checks, and ATM cards and while CDs are time bound the returns in the money market accounts are based on the amount of money in your account.

Suggestion 4
Lending Club

In a lending club you give money to a borrower in the hope that he will pay you back with interest. Online peer to peer or P2P platforms connect you to qualified borrowers and you offer loan like a banker.

The borrower is screened and only those who are likely to pay back the loans are allowed to participate. These borrowers return some amount of money every month which includes interest and loan taken.

You can start with lending small amounts of money and increase the amount gradually as you gain more confidence in the P2P platform.

Suggestion 5
Short Term Bond Funds

These are the type of bonds that have maturity terms of less than one year. These type of investments protects your money from stock market events and increases the interest rates. Short term bonds are available in three primary categories.

Government Issued Bonds, Municipal Bonds, Corporate Bonds. These bonds have lower risk as they are backed by the US government. To invest in short-term bonds you will need to open a brokerage account.

There are numerous brokerage firms through which you can invest in bonds. You need to choose the right firm for your specific investment needs.

Suggestion 6
Treasury Securities

They have no risk and offer a return between 1.9 percent and 2.5 percent. Treasury Securities are a type of bond issued by the U.S. Treasury and backed by the government’s credit. There are different types of treasury securities like bills, Treasury Notes, Floating Rate Notes (FRNs), Treasury Inflated protected Securities (TIPs).

TIPs is the most popular short term investment options today. These are marketable securities that are designed to protect your investment against inflation. This type of investment protects you against deflation and if you invest in TIPs exchange-traded funds (ETFs) or mutual funds you can avoid paying tax on your interest earnings and you will need to open a brokerage account if you opt for this approach.

Suggestion 7
Selling Covered Calls

Selling covered calls on stocks, that you already own, is another short term investment. When an investor sells a call on a stock he owns, another investor will pay a premium for the right to purchase the stock at a specified price.

If the stock fails to reach the specified price at the expiration date, you can keep the premium and the stock. If the stock reaches the specified price you will have to sell at that price. This works well in a flat or a declining market and is a wise investment decision.

Suggestion 8
Online Checking Account

Online checking accountis similar to the Online Savings Account the only difference being that an online checking account is more flexible and you draw money whenever you want and it is very easy to open and manage the account from the comfort of your home.

This is also guarantees returns and you also don’t have to worry about losing your principal as its FDIC insured up to $ 250,000.

Suggestion 9
Floating Rate Funds

FRF are not popular among investors but they can be a wise short term investment. These are ETFs and mutual funds that focus on investing in bonds and other debts with variable interest rates.

They usually invest in bank-issued or company issued short term debt, ordinarily between 60-90 days. Floating rate fund investments require a brokerage and there are numerous floating rate funds available on the market today.

Roth IRA
Floating Rate Funds

A Roth investment Retirement Account (IRA) is another option that can help you meet you short term investment needs. One significant advantage of Roth IRA is that you can access your funds without worrying about penalties.

Roth IRA are post tax investments and you don’t need to pay tax when withdrawing.

Short Term Investments Bottom Line

There are many short term investments options available and one can decide the investment based on individual preference and investment goals. Some investments are better than the other because they have less risk and deliver good returns.

At the same time you need to understand that they is no risk-free investment. Every investment has some amount of risk and one needs to do some homework of consult a qualified adviser before you make short term investment decision.