We are in a time where the stock market is behaving wildly and just recently the interest rates went up after four and a half years of it being low. It’s still considered low, however. Low mortgage rates are great, but how do you make money in the short term? In an unstable market such as this, short term investing can be a safer alternative. Here are the ten best short term investments for your money.
Online saving and Checking accounts – This is good if you want to be guaranteed that your investments will not lose money. You never lose principal on your investment as long as you keep your total deposit below FDIC coverage of $250,000.
Roth IRA – Believe it or not this retirement account can work as a short term investing account. If you withdrawal funds before retirement you get hit with an early withdrawal penalty and income tax. A Roth IRA you fund after tax income which means you can be free to withdraw at any time you want.
Money Market Accounts- People familiar with the discipline of owning a CD earn a higher return and still have access to their funds.
Short Term Bond Funds and ETF’s – These products are manages by a professional advisor. Bonds are not stable as money markets but can offer the potential to earn a higher yield. They will pay out according to the market current condition.
Certificate of Deposits (CD’s) – With CD’s, the longer the term of investment, the higher the yield will be. The only downside is if you need to pull money out before the maturity date you pay a fee.
5- year Treasury Inflation Protected Securities – (TIPS) are government bonds that are indexed to inflation. The interest rate is fixed, but the value of security rises with inflation as measured through the Consumer Price Index.
Municipal Bonds – Municipal bonds are a little more risky than TIPS, yet a majority of municipalities do not default on their bonds. The risk is the interest rate.
Corporate Bonds – These are even more risky that municipal bonds or TIPS because they’re not backed by state, local, or the federal government. The risk is the interest rate.
Pay off High Interest Debt- If you have a credit card with a 15% interest rate carrying a 10,000 dollar balance you have an opportunity for a great return. Paying off that debt is like a 15% return on 10,000 dollars.
Lending Club – Lending clubs set the interest rate on notes based on specific credit criteria. They only accept desirable borrowers, reducing the risk for default and potential loss. Lending clubs offer loans from a few hundred dollars to over 10,000 dollars.
So even though we are at a time where the stock market is behaving wildly. You can use short term investing as a safe alternative. Hopefully these top ten ideas can be useful in deciding on what to invest in.
Image credits to aisletwentytwo