The 5 Smart Types of Short-term Investments

A short-term investment fund is defined as something that fetches returns on investments made for a short time span like 1 year up to 10 years. This is quite different from long-term investments like pension or retirement plans that produce better yield simply because funds are for a longer period and the investment company is free to deploy such funds in the best manner it deems fit.

Though long-term investments generally yield better returns, there are several short-term investment plans that give good returns and mature in a short period as well. Short-term investments are preferable as you can make financial plans better than with long-term investments. If the long-term goal is to buy a house on mortgage, the short-term investment will yield the necessary down payment required for the mortgage loan.

An all-time favorite with most short-term investors and others in general has been gold. Gold ranks number one when compare with other precious metal like platinum and silver. Gold is easy to store, transport and has very high liquidity.

Today there are options where you don’t have to actually invest in gold physically, there is an instrument called Exchange Traded Fund or ETF that is equal to gold in value. A unit of ETF will be equal to the current price of gold. The market value of gold is governed by the demand and supply position and can fluctuate several times in the course of a day. It automatically becomes dearer when the economy faces inflation or there is a war raging. However, on an average it generates comfortable returns in the short term investment portfolio.
Investing in government securities and bonds is a very viable option. It offers assured returns and the investment is safe in the control of the government authorities. You can opt to invest in the Legacy Treasury Direct and buy the securities direct from the US Government. The other option is to buy from the secondary market through registered brokers who authorized agents are selling government bonds and securities.

The various securities available include Zero Coupon Bonds that are the most preferred as the money remains locked in for a specific period and cannot be redeemed midway. This helps the investor get a better rate of return and a tidy sum of money on maturity. Another popular instrument is the Treasury Bill that can only be redeemed on maturity. However, the period of investment is considerably shorter, usually in months and not years.

The other government backed securities include Treasury Bonds that have a lock-in of 10 years and above. This again is an attractive option as the money lies safe and multiplies while you wait. Another interesting instrument is the Treasury Inflation-Protected Securities or popularly called TIPS. As the name signifies, these securities are protected against fluctuation due to inflation. The redemption is made every 6 months. Another government security is the U.S. Savings Bond that is not traded in the secondary market or by investment companies. This instrument can only be bought from the U.S. Treasury and is guaranteed by the U.S. Government. It is one of the best short term investment options available.

Social Investing is another popular short term investment option. The term is self-explanatory and the instruments are not intended to just generate returns. They are based on causes or joint efforts that are undertaken to earn profits in the long run. The investing company believes in creating goodwill and building brand values that are affordable by more people. This instrument will have limited patronage as only like-minded people who are not keen on returns would opt to invest.

Unit Investment Trusts offer investment opportunities where the money is invested in diverse portfolios. The financial company creating such UIT instruments contains a document called Trust Indenture. There are different kinds of UITs like taxable fixed income ones that offer returns on a monthly, quarterly, and bi annual basis. The second type is the tax-free fixed income instruments, consisting of municipal bonds that have the same pay back pattern. The third type of instrument is the one that invests in real estate investment trusts and several mutual funds called regulated investment companies. The great thing with investing in government instruments is the security they offer that renders the investment absolutely safe.

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