How to Profit from Short-Term Investments

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Editor’s Note: This is a guest post by Emma Martin writes of J.G. Wentworth

A lot of people think that when it comes to investing money, you have to be in it for the long haul if you want to see any kind of sustainable growth in your portfolio or a significant payoff down the line. And if you’re looking to invest in a safe and responsible manner during a stable economic era, this is probably excellent advice. However, it isn’t the only way (or necessarily even the best way) to see your money grow. Short-term investments can offer a relatively quick return, but the trade-off is that there is a higher risk involved. You have to know what you’re doing and tackle the right opportunities if you want to succeed with short-term options. There are a few things to consider before you start.

First of all, you need to understand what a short-term investment is. Generally, it’s a stock or bond that expires within a year and can be easily sold before that time is up (unlike say, a Roth IRA, 401K, or other long-term investment or retirement plan that comes with penalties for early withdrawals – or even stocks and bonds that the holder has no intention of selling because they yield dividends, for example). Some people like to think of buying a family home as a long-term investment. In this scenario, a property that you plan to flip could be considered short-term. However, for the sake of expediency, let’s just stick to stocks and bonds.

Going short-term has its benefits and drawbacks. The major benefits are earnings and liquidity. You can see large profits accumulate rapidly and sell at a moment’s notice to get them. Of course, the drawback is that you could just as easily lose it all in the blink of an eye. You need to be aware that putting your money into these types of investments is a gamble. But that doesn’t necessarily mean you can’t stack the deck a bit. Whether you’re day trading, buying futures, or collecting notes (just to name a few possibilities), you need to be careful about what you choose to invest in and keep tabs on your money situation.Seeking the help of a professional couldn’t hurt. Although they will take a cut on every trade, it’s in their best interest to stay abreast of trends in the market in order to make you money. Also, they can keep an eye on your investments so that you don’t have to. By the same token, however, you don’t necessarily want to put all your trust in another person (look what happened to those who gave everything to Madoff). Knowing where you’re placing your money and making an effort to understand how stocks and bonds work will allow you to make informed decisions about your investments.Further, you need to have a sense of when to hold ‘em and when to fold ‘em. Quick draw is the name of the game, so if you start losing money, be prepared to pull out fast. And if you’re earning quite a bit, don’t wait too long to sell or you may suffer a reversal of fortune. You have to be able to pull the trigger (and never look back) if you want to dabble in short-term investing. You should also spread your money around. Don’t put it all into one “miracle” stock and don’t put it all in short-term options. You can take some risks with your money, but you want to have some left for your golden years. So invest in short-term, long-term, and keep some in savings. This way if you lose in one area, you have something to fall back on.

Emma Martin writes for J.G. Wentworth, the largest purchaser of future payments to individuals who hold assets in the form of structured settlement and annuities.

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