If you want to invest money for a short period of time, you are probably looking for a safe place to store cash before you need to redeem it. Short-term investments, also known as temporary investments, can be an effective investing option if used correctly.
Advantages & disadvantages of short-term investments
There are a couple of advantages to investing in short-term funds. They are frequently highly liquid, allowing you to get your money whenever you need it. They typically are also lower-risk, so you have less chances of losing your cash.
However, the stability of short-term investments earns you lower yield. A temporary investment is unlikely to yield the same returns as a long-term one. When investing for the short term, you are restricted to specific types of investments and should avoid high-risk stocks or funds.
Some options to check in 2023
1. High-yield savings accounts
High-yield savings account at a bank or a credit union is better than keeping cash in a checking account, which normally pays relatively little to no or even negative interest on deposits. The bank will regularly pay interest on savings accounts.
These accounts provide no immediate risk, but investors who store their money over extended periods of time lose money to inflation.
Savings accounts are highly liquid, and you can add money to them at any time.
2. Corporate bond ETFs
Corporate bonds are bonds that are issued by large corporations to fund their investments. Although a short-term corporate bond is not insured by the government and there is a risk of losing money, bonds are considered quite safe, especially if you buy a diverse collection of them. The interest on this investment is paid on a daily basis.
A short-term corporate bond fund is highly liquid, allowing it to be bought and sold on any workday.
3. Money-market accounts
Money market accounts are a type of bank deposit that often pays a higher interest rate than conventional savings accounts, but they also have a larger minimum investment requirement. Such accounts can be opened at many banks and credit unions.
The interest you can make on money market accounts is the biggest benefit, and you'll also be able to quickly access the funds if you need them.
4. Cash management accounts
An extremely liquid cash management account, similar to an omnibus account, allows you to invest in a wide range of short-term assets. You can immediately access your money through a liquid cash account provided by a cash management account, which also allows you to earn interest on your assets.
They may even be better than traditional savings and money market accounts, which have withdrawal restrictions on a monthly basis.
5. Government bond ETFs
Similar to corporate bonds, government bonds are issued only by the federal government and its agencies. These bonds are considered very safe because they are backed by the United States government.
A steady rate of interest will be paid by U.S. government bond funds, but due to their safety, they won't pay as much as corporate bonds.
Government bonds have high liquidity and it can be bought and sold on any day when stock markets are open.
All in all, the current market situation results in lower yield opportunities, but there’s still some options good enough to redeem money lost to high inflation or typical investment products. Cryptocurrencies often offer better yield opportunities, but they are also considered to be a risky asset. Risks are related to the asset itself or the platform it is offered on. Popular assets on reliable investment platforms are considered an option by many crypto evangelists. Please note that this blog post is not intended as financial or investment advice.
Short-term investments on the Bitlocus platform
One of the options to earn interest in a short period of time is Bitlocus token staking. You can put your assets to work for 1, 3, 6, or 12 months. The annual interest rate depends on the time your assets are locked. For example, if you stake your token for 3 months, you will earn ±12% return on your investment. The longer you stake, the more BTL yield you will earn.