The best short-term investments offer flexibility, low risk, and substantial profits. Learn how these top seven safe investments can yield high returns.
Do you have some extra cash idly sitting, and you’re unsure what to do with it? Do you want to invest without waiting five or more years before seeing a return?
Short-term investments offer rewards similar to long-term investments but are often less risky.
What Are Short-Term Investments?
Short-term investments are investments that you make for three years or less and that you can quickly convert to cash. These opportunities are great for those who need money at a specific time, perhaps before home buying.
Even if you have a limited time frame, you can grow your money with these high-yield, low risk investments.
1. Crypto Interest Accounts
Crypto interest accounts are similar to traditional savings accounts, except you are staking coins for a set time at a much higher interest rate.
Choose from flexible 1-month and 3-month staking periods with interest paid out every seven days. Interest rates vary based on crypto choice and stake length.
A stablecoin matches the value of an ordinary currency like the dollar. The price of a stablecoin rarely deviates more than one cent away from a dollar, and its accuracy only continues to increase.
Stablecoins generate passive income by accumulating interest between 3% and 20%. You can stake your stablecoins and earn high interest without dealing with the volatility of the crypto market.
The five largest stablecoins:
3. High Dividend Stocks
Dividend stocks pay out a percentage of the company’s earnings to investors each quarter, and high dividend stocks have reputations of paying out higher portions.
So if you want to invest in something very low-risk that pays you regularly, look into the stock market. First, research stocks that pay dividends on financial sites and evaluate them by comparing dividend yields.
Next, decide how much stock you want to buy. You may choose to put all of your money into one stock or diversify. Some high dividend stocks include Altria Group Inc. (6.47% yield), ONEOK Inc. (5.9%), Universal Corp (5.39%), and ALLETE Inc (4.38%).
Take caution if you see yields at 10% or more; this falls into risky territory.
A fixer-upper is a house that has substantial maintenance issues and is therefore available at a low price. Real estate investors will buy these homes in need of repair, fix them up, and then flip them for a profit.
While this investment can yield high returns, it is also riskier as there is no guarantee that you will recoup your money or make a profit.
Try to find homes that require only cosmetic repairs and not costly structural work, which can cause unforeseen maintenance. You should also reserve extra money for any surprise costs that will likely come up.
Finally, if you don’t want to incur a capital gains tax, you must hold onto the property for longer than one year before selling.
5. Peer-to-Peer Loans
Peer-to-peer (P2P) lending is when individuals go to each other for funding instead of the bank. As a result, borrowers can get the money they need without being turned away from financial institutions, and lenders (you) can get a better return on their cash savings.
P2P lending websites connect borrowers and lenders and facilitate rates, terms, and transactions. These lending websites can be for general loans or specialized funding like small businesses and patient care.
As an investor, you would open an account with a P2P website, deposit a sum of money, and wait for applicants to accept your offer. Peer-to-peer investing can yield a high return, but you should research the default rate for whatever company you choose.
6. High-Yield Savings Account
A high-yield savings account will typically pay you more interest than a regular savings account. This type of savings account is for emergency funds and available savings for the future.
Most big banks offer an interest rate of 0.06% or less on annual savings. However, there are many options for higher rates online.
This investment is very low-risk, but it also doesn’t offer as high a return as the other options. However, you can enjoy the perks of earning more on your savings while still being federally insured.
Open an account with Bread Savings and earn interest immediately. Its high-yield savings account has an interest rate of 1%, and its 1-year CD has a rate of 1.5%.
7. Certificate of Deposits
Considered one of the safest investment options, CDs are saving accounts that hold a fixed amount of money for a specific period, such as 6-months, 1-year, or 5-years.
When the CD has matured, you can redeem your money plus any accrued interest. You can purchase a certificate of deposit from banks, brokerage firms, or deposit brokers.
The average rate for a 1-year CD is 0.23%, and 0.39% for a 5-year CD. This investment is perfect for those who won’t need to touch their money for a set amount of time. Interest rates increase the longer you hold your money.
Check out Live Oak Bank for one of the best CD rates at 1.75% for 1-year.
If you have some money saved and it’s currently sitting in an account that’s either not growing or increasing very little, you should consider investing.
However, short-term investing is the way to go if this money is something you will need in less than five years. Short-term investments can be lucrative but with minimal risk.
You can often hold these investments for six months to a few years and enjoy the benefits of passive income. The short-term investments with the least risk include high-yield savings accounts and certificates of deposit.
The federal government backs these two options, making them extremely safe. If you don’t mind taking on a slight risk for a higher payout, consider the other options like crypto accounts, high-dividend stocks, and P2P loans.
Don’t let your money sit idle; put it to work and make income in your sleep!
Short-Term Investments FAQ's
Read the answers to the most common questions about short-term investment.
If you need this money within the next two years, it’s best to invest $10,000 into an interest-earning account like a high-yield savings account, crypto interest account, or a certificate of deposit.
These are low-risk investments that will grow your money passively. If you want to take on more risk for a higher reward, consider high-dividend stocks, P2P loans, or flipping houses.
When you invest for short periods, it’s best to choose less risky investments because you will need your money sooner. On the other hand, long-term investors will often take on more risk because their money has more time to recover.
Of course, it’s possible to make substantial profit with both strategies, but long-term investing yields a greater return over time.
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