Best Short Term Investments that will Grow your Money in 2021 : Current School News

Best Short Term Investments that will Grow your Money in 2021

Filed in Articles by on June 24, 2021

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Best Short Term Investments: Probably you own a business, and you want to see it grow. Well, there is available short term investment that will help you with that, and that’s what I’ll be showing you in this article.

Best Short Term Investments that will Grow your Money in 2021

Money Market Funds

These stable income mutual funds invest in short-term debt securities that are comparatively liquid, this entails that they can be easily changed to cash. Money market funds goal for a steady net asset worth of $1.00 for each share.

They dispense revenue from the securities they own, such as CDs, corporate commercial paper, U.S. Treasury securities and similar short-term holdings, based on the number of shares you own.

Also, because money market shares are actively traded, you can sell them and access your money at any time without penalty.

Money market funds invest in a variety of assets. For example, prime funds invest in a diversified portfolio of short-term vehicles, such as those listed above. Government money market funds invest their assets in cash and U. S. government securities.

Municipal money market funds invest predominantly or exclusively in securities issued by state and local governments that are free from federal taxes (and sometimes from state taxes).

Money market returns vary based on short-term interest rates. In recent years, with short-term rates historically low, money market rates have been low as well.

Now that the Federal Reserve has started to raise rates, all interest rates, including those on short-term investments, likely will begin to increase.

Certificates of Deposit

Certificates of deposit are bank deposits where you invest a fixed dollar amount for a specific period of time. The majority of banks provide CDs with terms extending from three months to five years.

In return, the bank pays you interest centered on the length of the investment, with longer CDs naturally paying a higher interest rate than shorter CDs.

Banks usually pay interest on CDs annually or semiannually. A CD you buy through a federally insured bank is insured for up to $250,000 by the FDIC, which adds an element of safety to CD investing.

CDs are less liquid than other short-term investments. Most include a premature withdrawal penalty if you withdraw your money before the stated term ends.

As a result, make sure you have another source of ready cash for emergencies so you don’t have to cash in a CD before maturity.

Checking and Savings Accounts

Some banks offer interest-bearing checking accounts, and most offer savings accounts that pay interest as well. Because you can access your money at any time without penalty, rates typically are low.

But because the money is easy to access, many investors favor them for short-term investments, including for their cash reserves or emergency funds.

The bank where you open a CD, checking, or savings account doesn’t even need to be in your neighborhood. For instance, online savings accounts often offer higher rates than traditional banks.

You can search and compare banks across the country and choose the one that offers the highest interest rate and the best terms.

Short-term U.S. Government Securities

With government securities, you are essentially loaning the U.S. government money to carry out a variety of activities.

In return, the government pays you interest for using your money. The U.S. Treasury offers a number of securities with maturities of five years or less. For example:

  • Treasury bills, which are sold at a discount and mature at full face value, have maturities ranging from a few days to one year.
  • Treasury notes are issued in two-, three-, five-, seven- and 10-year maturities and pay interest every six months.
  • Floating rate notes have a two-year term, and interest payments rise and fall based on discount rates for 13-week Treasury bills.
  • Treasury inflation-protected securities (TIPS)are available in five-year maturities. The principal is adjusted based on changes in the consumer price index.

All government securities can easily be sold through a broker and turned into cash within a few days.

Short-term Corporate and Municipal Bonds

Like Treasury securities, where you are lending money to the federal government, with municipal securities, you are lending money to states and municipalities to fund their activities.

Most municipal bonds have terms of 25 or 30 years when issued, but as they get closer to maturity, a broker can help you buy bonds on the secondary market that have five years or less until they mature.

These bonds are priced so the yield reflects current interest rates. While buying bonds adds an element of market risk, they can be a good place to park short-term cash and earn a fair rate of interest.

Peer-to-Peer Lending

Peer-to-peer lenders offer personal loans to consumers — without a bank. These platforms pair those seeking a loan with investors who are willing to loan them the cash.

In addition to borrowing at low rates, you can invest in making loans to others and earn short-term returns. While the risk of investing may be higher, the potential returns usually are higher than other short-term rates. The sponsoring companies take care of checking the credit of potential borrowers and other administrative tasks.

Repay High-Interest Debt

While this isn’t an “investment” in the traditional sense, it can be a good use of available cash. After you meet other short-term needs (like saving up an emergency fund), paying off high-interest credit card debt can yield a higher return than other short-term investments, such as CDs or money market funds.

Let’s say you have credit card balances totaling $10,000 and an interest rate of 22%. If you are trying to decide how to invest cash over the short term, why not pay off your credit card balance?

Instead of paying 22% interest, you can pay off significant debt and devote the monthly payments you would have sent to the credit card company to rebuilding your investment capital. In this way, you could “earn” 22% in the process.

Most short-term investors are concerned about earning the highest possible return with the greatest safety. A number of investments are available with varying returns and degrees of protection.

Check each one carefully to determine which is best for you based on when you need the money you are investing in.

What’s your take on this? We believe this article was helpful, if yes, don’t hesitate to share this information with your friends on Facebook, Twitter, and WhatsApp.

CSN Team.

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