Short term investments are those investments that can turn a profit in less than a year. Short term investments by definition are investments with a life span of one year or less. Figuring out which investments may be best for you or for your business has a lot to do with evaluating the risk of the investment over the term of investment. These are important concepts that should to be paid close attention to.
There are two ideas presented here that help to determine what goes into the best short term investments. The first concept to be considered is the risk of the investment. The second concept is the term of the investment. To evaluate fully these two concepts, the investor should look closely at what types of investments are available as short term investments.
Best Short Term Investments -The Options:
Putting your extra money into a bank account is a safe way to invest your money but the pay off or profit may be next to nothing. There is very little risk in savings money, but the bank itself is probably going to make more off of your savings then you are. This is where the goal of the investment should help to eliminate poor investment choices. Return on investment is an important part of choosing the best short term investments. Depending on the other investments and the risk of the markets that affect the other investment types, savings accounts may not be the best investment option.
Lending Money: This can be a risky way to invest money. The banking industry has made billions of dollars on lending other people’s money to make profit. For the individual, this may not be the best way to invest because the method of holding collateral would be difficult. Without collateral, the risk of non-payment would be very high.
Buying Stocks: Stocks can be lucrative as investments, but they can also be risky. The best short term investments in stocks should be manageable, but the risks of individual stocks would need to be weighed against the risk. Stocks should also be chosen that match the investment goal.
Investment in Houses/Homes: This type of investment was once a really lucrative type of short term investments. The current housing market still has potential for short term profit, but the return on investment is not as great as it once was. This may be a better long-term investment than a short term investment.
Buying Gold or Silver: Right now both of these markets are red hot as investments. It is still good to check the spot price of gold and silver before investing. Both of these metals work well as short term investments because they are easy to liquidate or sell off. A Real Estate transaction can take a very long time to complete. Precious metals are one of the best short term investments.
Buying Collectables: Collectables are a specialty investment that requires an intimate knowledge of the market. Even then, these investments take a great deal of work. Anything that is already a collectable usually comes with an already inflated price tag. While there are a few cases of people making a huge return on investments buying and selling collectables, this is not the norm.
Buying Mural Funds: Mutual funds are usually a safe investment with a predictable outcome. There is always the possibility that there could be loss within the investment community and thus, a loss in the mutual fund. These funds are professionally managed, and the investment is spread out over many different investment types, so the risk is reduced. One of the concerns about mutual funds is that they often come with service fees. In the current investment market, mutual funds have been hit and miss in terms of return on investment. These can be safe investments, but should be examined carefully.
Short Term Investments – Strategy:
Finding a good strategy for shorter investments is wise. Knowing how to use excess capital is the beginning process of investments. Finding a strategy and following a strategy allows investors the control of measuring success and failure of investments and investing goals. Being able to measure success and especially failure allows investors to learn and grow. Investment strategy also includes making loss protocols as a means of cutting losses before losing an entire investment. Strategy begins by making goals and finding investments that live up to those goals. Measuring how those investments perform enables the investor to limit loss and duplicate success.
Of the types of short investments that were reviewed here, gold and silver investments seem to be the best opportunity for the current market, but that is conjecture. To figure out if precious metals are the right type of investment for you, find the strategy and see if they fit into your investing goals.
Short term investments need to be active because they have less time to make their goals than do long term goals. Setting goals is important but keep in mind that goals should also be realistic and obtainable. Risk should be evaluated and make part of the goal setting process. A good blend between risk and reward is usually a good strategy or at least a component of a good strategy. A short term investment differs from a long term investment in the time frame for which the investment should realize its goal. This means that long term investments can be allowed to develop slowly over a longer period of time. Short term investments must perform quickly to meet their investment goals. This often means higher risks than those found in long term investments but using strategy and risk analysis can help short term investments pay off.