Investing with long-term goals in mind, such as retirement, is always a good idea. But prudent short-term investments—places to stash funds you think may need in a few years—can bring in some extra cash while you are planning ahead. Keeping low-risk and liquidity in mind, here are sensible options for short-term investment goals.
- High-Yield Savings Accounts – They won’t pay much, so do your homework to find the best interest rates offered. On-line banking makes it easy to open an account anywhere and transfer your funds in.
- Certificates of Deposit – CDs sold by banks allow you to deposit your money for a specific amount of time. They offer a higher interest rate than savings accounts because you’re locking that money in for that specific term. Shop around to find the best CD rates within your desired timeframe.
- Money Market Account – These are also offered by banks and credit unions, and sometimes have a return rate slightly higher than a savings account. They may include government securities and CDs that have a stable rate of income. They may also have withdrawal restrictions, so plan accordingly.
- Treasury Bills – Sold to investors through the U.S. Treasury Department, T-bills act as loans to the government for things like new highways. They may mature anywhere from a few days to a year, and the farther the date, the higher the rate.
- Municipal Bonds – Municipal bonds are issued by state or local governments to fund new schools, roads or other community improvement projects. You can find municipal bonds with term limits specific to your investing needs depending on when you need the money back. Check with your local or state government to see if they’ve issued bonds you can invest in, which will also help you contribute to improvements in your own community.
- Short-Term Bond Funds – A bond fund is a mutual fund that invests only in a diverse mix of governments or corporate bonds. They are a good option if you want to invest in bonds but would like more withdrawal flexibility.
- Mutual Funds – Some short-term mutual funds are more conservative than others, so you will need to weigh your threshold for risk against profit factors. Also, mutual funds are beholden to economic volatility, so if that worries you, they may not be the best option for you.
