Investing is not hinged on the premise of putting your money somewhere for long time so that you can gain huge benefits. There are many short term investment options available that can guarantee you good returns. The challenge lies in the identification of a suitable option that has minimum risks and maximum benefits. The choice of an investment option is normally determined by liquidity situation, liquidity and the willingness of an individual to take risks. The following are some of the short term investments that are worth considering when investing in the short term.
Money Market Accounts
These refer to a type of savings account that is offered by credit unions and banks. The characteristic features of these accounts is that they pay a higher rate of interest based on the current market interest rates and also require higher minimum balance, mostly above $ 1,000. Failure to maintain the minimum required balance in the account may attract some charges. These accounts can allow one to write up to three checks in a month. Withdrawal to third parties are limited at six transactions, with various restrictions mostly high charges if an individual makes more withdrawals than its required.
Microloan programs facilitate the provision of small loans to individuals who do not have the financial backing or collateral to acquire loans from banks and other lending institutions that require collateral. Investors usually give their funds to special lenders who are experienced in management and lending. These lenders also offer technical assistance to borrowers. The investors receive interests that would have been enjoyed by banks and other lending institutions. Microloans have a maximum term of 6 years and attract an interest rate of about 8 to 13 percent. Microloans can be a great short term investment idea.
Investing in Options
Options are investments or derivatives. Their total value is determined by the value of the underlying investment. Most options are secured by stocks. However, indexes and commodities may also be used as underlying securities. Stock options give the investor the right to buy or sell shares of stock at a certain price. They normally have a set expiration date. Investing in options requires one to have adequate knowledge in financial markets so as to be able to predict movement of stock, moreover the right time to buy or sell.
Exchange Traded Funds (ETF)
These are shares that trade on the stock exchanges all day long in form of funds. These funds may hold assets such as bonds, stocks and commodities. ETFs yield a return on their index. They are considered as low cost and hence it is cheaper to invest in. ETFs can be bought and sold on the same day, hence convenient as a short term investment strategy.
Fixed Maturity Plans (FMPs) and Monthly Income Plans (MIPs)
These are instruments that invest in fixed deposits and bonds that bear similar maturity period. FMPs contain a fixed maturity period. On the other hand, MIPs are flexible in that they do not have a fixed maturity period. An investor is free to withdraw the investment any time after paying an exit load, charged at 0.5 to 1 percent. Those are some of the effective short term investment options.