7 Best Short-Term Investments for 2024

Investing in the right assets can yield significant returns in a short period. However, it’s important to conduct thorough research and analysis before making any investment decisions. To help you navigate the market and make informed choices, here are the 7 best short-term investments of 2024.

What is a short-term investment?

Short-term investments are all about making your money work for you quickly, within five years or less. They’re ideal for anyone looking to grow their extra cash with a safety net. Think of them as the steady eddies of the investment world, including things like money market funds, treasury bills, and certificates of deposit. These options are pretty straightforward and backed by reliable sources, making them a secure choice for your investment dollars.

What really sets short-term investments apart is how accessible your money remains. You can get to it easily if you need to, without losing a chunk to fees or waiting forever. This flexibility is perfect for covering unexpected expenses or jumping on a new investment opportunity that pops up.

While they might not offer the big returns of longer-term investments, short-term options have a solid place in your financial plan. They help you meet your near-future goals with less risk, providing a reliable, if not eye-catching, growth opportunity. It’s about finding the right balance between making smart moves now and setting yourself up for future success. 

Top short-term investments for 2024

With recent global events shaking up financial strategies, planning your short-term investments for 2024 might seem daunting. I’ve sifted through the options to highlight some of the best places to consider for your money.

High-yield savings accounts

High-yield savings accounts offer several benefits and features that make them attractive to savers. Firstly, these accounts provide a higher interest rate compared to traditional savings accounts, allowing individuals to grow their savings at a faster pace. Typically, high-yield savings accounts offer interest rates that are significantly higher than the national average.

Additionally, high-yield savings accounts are protected by FDIC insurance. This means that even if the bank or credit union fails, the savings up to $250,000 are insured by the government. This provides peace of mind and ensures that the hard-earned money is safe.

Furthermore, high-yield savings accounts often have minimal account fees. This is particularly beneficial for savers who want to avoid unnecessary costs and maximize their savings potential. With minimal fees, individuals can keep more of their money in the account, allowing it to earn even more interest over time.

To open a high-yield savings account, it is crucial to compare options and carefully select a bank or credit union that offers competitive interest rates and FDIC insurance. It is recommended to research and read reviews from reputable sources to ensure the chosen institution is reliable and trustworthy.

Some top recommendations for high-yield savings accounts include CIT Bank, Discover, and Save Better. These institutions are known for their competitive interest rates, excellent customer service, and strong reputation in the industry.

Certificates of deposit (CDs)

Certificates of Deposit, commonly known as CDs, are a popular investment option for those looking for a safe and low-risk avenue to grow their money. Offered by major banks, CDs provide a reliable way to invest your savings.

Investors deposit a predetermined sum of money for a specific length of time, known as the term. At the end of the term, they receive their principal amount back along with the interest earned. This predetermined interest rate is typically higher than what a regular savings account would offer.

One of the major advantages of CDs is their safety. They are FDIC-insured, which means that even if the bank fails, the investor’s money is protected up to $250,000 per depositor. Therefore, CDs are considered one of the safest investments available.

However, it’s important to note that CDs typically offer lower returns compared to other investment options. This is because they involve less risk. So, while CDs may not provide the highest returns, they offer stability and predictability. They are particularly suitable for individuals who prioritize the preservation of their capital over high returns.

Read also: Bonds vs. CDs.

Money market accounts

Money market accounts (MMAs) offer several features and benefits that make them an attractive option for savers. One of the key advantages of MMAs is the higher interest rates they offer compared to traditional checking accounts. The interest rates on MMAs are typically tiered, meaning that the higher your balance, the higher the interest rate you can earn. This makes MMAs a great option for individuals looking to maximize their savings.

Another feature of MMAs is the ability to debit or write checks directly from the account. This provides flexibility and convenience, allowing account holders to easily access their funds when needed. Whether it’s to pay bills or make purchases, MMAs offer the flexibility to do so without transferring funds to a separate checking account.

One of the main benefits of MMAs is the low risk associated with these accounts. They are insured by the Federal Deposit Insurance Corporation (FDIC), which means that even in the event of bank failure, deposits up to $250,000 are protected. This provides peace of mind to account holders, knowing that their hard-earned money is safe.

However, it is important to note that MMAs have limitations on certain actions. Firstly, there is often a minimum deposit requirement to open the account. Additionally, there may be a limit on the number of transactions or withdrawals that can be made from the account each month. These limitations are in place to maintain the stability of MMAs and prevent excessive activity that could disrupt the returns or risk profile.

Treasury bills

Treasury bills, also known as T-bills, are short-term debt instruments issued by the U.S. Department of the Treasury. They are considered one of the safest investments available in the market as they are backed by the full faith and credit of the U.S. government.

The purpose of Treasury bills is to raise funds to finance the government’s operations and to manage its cash flow. Investors purchase T-bills at a discount to their face value and receive the full face value of the bill at maturity. They typically have maturities of 4, 13, 26, or 52 weeks.

Treasury notes, bonds, and TIPS (Treasury Inflation-Protected Securities) are other types of government securities with longer maturities. Treasury notes have maturities ranging from 2 to 10 years, while Treasury bonds have maturities of 10 to 30 years. TIPS, on the other hand, are designed to protect investors from inflation by adjusting their value based on changes in the Consumer Price Index.

Though all Treasury securities are backed by the U.S. government, they differ in terms of maturities and inflation protection. T-bills have the shortest maturities, making them highly liquid and suitable for short-term investors. Treasury notes and bonds offer longer-term investments with potentially higher yields. TIPS provide inflation protection, making them suitable for investors who want to preserve their purchasing power.

However, there are risks involved in investing in Treasury securities. One key risk is that if an investor sells a Treasury security before its maturity date, they may receive less than the principal amount originally invested. Additionally, while Treasury securities are considered low-risk investments, there is always a possibility of default, although this is extremely rare for U.S. Treasury securities. Investors should carefully consider their investment goals and risk tolerance before investing in Treasury securities.

Short-term bond funds

Short-term bond funds are investment vehicles that primarily invest in fixed-income instruments with short maturities, typically ranging from one to five years. These funds are generally considered less volatile and less risky than long-term bond funds due to their shorter duration.

Characteristics of short-term bond funds include regular income payments and relatively low interest rate risk. As interest rates rise, the prices of bonds decline, but the impact on short-term bonds is usually less severe compared to long-term bonds. Additionally, short-term bond funds provide investors with the flexibility to reinvest their funds in higher-yielding investments as interest rates increase.

However, it is important to consider the risks associated with short-term bond funds. They are subject to credit risk, meaning there is a chance the issuer may default on their payments. Short-term bond funds are also exposed to reinvestment risk, as the yield on newly invested funds may be lower than the expired bonds. Furthermore, fluctuations in interest rates can impact the overall performance of short-term bond funds.

Potential interest rates for short-term bond funds can vary depending on market conditions and the credit quality of the underlying bonds. It is recommended to buy short-term bond funds through reputable financial institutions such as banks, brokerage firms, or mutual fund companies. These platforms often provide a variety of short-term bond fund options and offer professional advice to help investors select suitable funds.

Short-term municipal bond funds

Short-term municipal bond funds offer several benefits to investors looking for a relatively safe and steady income stream. The primary advantage of these funds is their tax-exempt status. Municipal bond interest is generally exempt from federal taxes and can also be free from state and local taxes if the investor resides in the issuing municipality. This tax advantage can significantly increase the after-tax return for investors, making these funds appealing for those in higher tax brackets.

Additionally, short-term municipal bond funds are generally considered safer than other types of bonds, such as corporate bonds. Municipalities have a legal obligation to repay their debts, and historically, the default rate for municipal bonds has been relatively low. This safety is further enhanced by the fact that these funds typically invest in bonds with short maturities, reducing the risk of interest rate fluctuations.

However, it is important to note that short-term municipal bond funds generally offer lower yields compared to corporate bonds. This is because of the perceived lower risk associated with municipalities. Additionally, there is always a possibility of default by municipalities, although it is relatively rare.

When considering short-term municipal bond funds as investments, several factors should be carefully evaluated. Credit quality is an important consideration, as it indicates the likelihood of repayment. Investors should also assess the fees associated with these funds, as they can eat into overall returns.

To diversify their investments, investors can consider low-cost index funds or exchange-traded funds (ETFs) that hold a mix of municipal, corporate, and U.S. government bonds. This diversification can help spread the risk and potentially enhance returns.

Money market mutual funds

Money market mutual funds are a go-to for investors seeking a blend of safety, liquidity, and a modest income. These funds invest in high-quality, short-term debt securities, making them one of the safer investment options available. The beauty of money market funds lies in their ability to offer competitive interest rates compared to regular savings accounts, all while keeping the investment relatively liquid.

A standout feature of money market funds is their stability. The funds aim to maintain a constant net asset value (NAV), typically at $1 per share, making them a less volatile option for conservative investors. This stability, combined with the ease of access to funds, positions money market mutual funds as a solid choice for parking cash that may be needed on short notice.

However, it’s crucial to remember that money market mutual funds, while safe, often yield lower returns than more aggressive investment vehicles. This lower yield is the trade-off for the higher security and liquidity these funds offer. Additionally, while rare, there is a risk of breaking the buck—when the fund’s NAV drops below $1 per share—though stringent regulatory measures are in place to mitigate this risk.

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How to spot good short-term investments

To successfully identify short-term investments, it’s crucial to consider several key aspects that can influence both the return on investment (ROI) and the strategy’s overall effectiveness. Here’s a structured approach to identifying promising short-term investments:

  • Liquidity Assessment: The ease with which an investment can be converted into cash without impacting its value is paramount. High liquidity means you can access your capital quickly, a vital feature for responding to new opportunities or unexpected needs. Conversely, low liquidity can lead to challenges in unloading the investment, possibly at a loss.
  • Fee Analysis: Understanding and evaluating the fees associated with an investment is essential, as they can significantly diminish your ROI. Be diligent in identifying all possible fees and their impact on your investment returns.
  • Company Evaluation: Investigating the financial health and performance history of the entity behind the investment can shed light on its growth potential and stability. Review financial statements, track performance over recent periods, and stay updated on any significant news or developments.
  • Volatility Consideration: The degree to which an investment’s price fluctuates is a critical factor, especially for short-term investments. High volatility can introduce greater risk, making it important to align the investment’s risk profile with your personal tolerance levels.
  • Diversification Strategy: Minimizing risk through diversification—spreading your investment across various asset classes and sectors—is a fundamental principle of investing. A well-diversified portfolio can provide a buffer against market volatility, contributing to more stable returns.

Which short-term investment is best for you?

When considering short-term investments, it is important to understand the characteristics and benefits of each option, as well as their ability to meet different investment factors.

For Maximizing Savings: High-Yield Savings Accounts

High-yield savings accounts stand out for storing cash, offering superior interest rates compared to traditional savings, which translates to faster savings growth. They’re particularly suited for those aiming to get the most out of their stored funds.

Pros include better returns thanks to higher interest rates, minimal fees that let savers keep more of their money, and greater withdrawal flexibility than standard savings accounts. These accounts are also FDIC-insured up to $250,000, adding a layer of security.

However, while offering more flexibility, they may still have certain restrictions on withdrawals and, despite higher rates, the returns may not keep pace with inflation over time.

Alternatives worth considering are money market accounts for similar benefits with potentially higher interest rates but slightly stricter withdrawal conditions, or short-term CDs for guaranteed returns over a fixed period, though with limited access to funds until maturity.

For Protecting Against Inflation: Treasury Inflation-Protected Securities

TIPS are a smart pick for protecting your investment from inflation. These are U.S. Treasury securities designed to counteract inflation’s impact by adjusting their principal with the Consumer Price Index (CPI). As inflation rises, so does the principal of TIPS, leading to increased interest payments and potential growth in your investment.

Their unique feature of adjusting for inflation means TIPS’ interest payments vary with the CPI, ensuring your investment maintains its purchasing power over time. Besides being a solid, low-risk option backed by the U.S. government, TIPS stand out for their ability to diversify a portfolio by adding an asset influenced by inflation trends, not just market swings. They’re particularly suited for those seeking stable income in inflationary periods or aiming to preserve purchasing power.

For Portfolio Diversification: Corporate Bonds

Corporate bonds are a savvy choice for diversifying your portfolio, adding a layer of stability distinct from stocks or real estate. They shine in diversification strategies because of their low correlation with other asset classes, offering a safety net when the stock market dips.

Pros of corporate bonds include the potential for higher yields compared to government bonds, thanks to the increased risk from companies with varied creditworthiness. They provide a regular income stream and can balance a portfolio’s risk, reducing overall volatility.

However, there are cons, such as interest-rate risk—where rising rates can devalue existing bonds—and default risk, if a company struggles to meet bond payments. These risks necessitate thorough research into a company’s financial health before investing.

Alternatives for diversification might include municipal bonds, which offer tax-free income and generally lower risk, or diversified bond funds, which spread out potential risks across various types of bonds, sectors, and geographies, offering a mix of stability and exposure to different market conditions.

For those prioritizing security in their investments, government bonds present a top-tier option. Backed by the U.S. government, they’re among the safest investments, providing a reliable return with minimal risk.

The key advantage of government bonds is their unparalleled safety, thanks to the government’s guarantee of interest and principal repayment. This makes them especially appealing in uncertain economic times. They are inherently low-risk, a characteristic that draws in risk-averse investors looking for stable returns.

Investors can purchase government bonds via auctions, turning these bonds into a government debt obligation. The funds raised from these bonds support government expenditures and initiatives.

With a variety of government bonds available, including T-bills, T-bonds, T-notes, and mortgage-backed securities, investors can select the type that best suits their investment horizon and interest rate preferences.

Alternatively, government bond funds offer a diversified approach to investing in government securities. These funds pool money from multiple investors to invest in a broad spectrum of government bonds, providing a blend of safety and convenience by diversifying across various issuers and maturities.

For Boosting Earnings: Certificates of Deposit

CDs appeal to those seeking higher yields than what regular savings accounts offer, locking in funds for a set term at fixed interest rates. This fixed-rate feature provides predictability, allowing investors to calculate their returns precisely. The assurance of FDIC or NCUA insurance up to specific limits adds a layer of security, safeguarding your investment against bank or credit union failures.

The main draw is their higher interest rates, offering a clear pathway to grow your savings. However, CDs require a minimum deposit and commit your money for a fixed duration, which can range from a few months to several years, limiting access to your funds until the CD matures. This trade-off between higher interest and liquidity is something to consider based on your financial goals and needs.

For Secure Growth: Cash Management Accounts

Cash management accounts blend the best of checking and savings accounts, offering a versatile solution for those aiming for low-risk growth. They stand out for their higher interest rates, which help your savings expand more rapidly than traditional savings accounts would allow.

A major draw is the blend of convenience and efficiency they offer—online bill pay streamlines managing expenses, and the included debit card provides immediate access to your funds, making them as liquid as a checking account but with the earning potential of a savings account.

These accounts strike a perfect balance between accessibility and earning potential, offering the liquidity and low transaction costs of a checking account with the interest-earning benefits of a savings account. Ideal for individuals seeking both easy access to their funds and a safe, low-risk way to grow their money, cash management accounts represent a savvy financial choice for savvy savers and spenders alike.

Investing for the short term & Financial Planning

Short-term investments play a crucial role in financial planning as they cater to various goals and objectives. These investments typically have a maturity period of less than five years and are ideal for individuals with immediate financial requirements or who don’t want to lock their funds for an extended period.

The primary goal of short-term investments is the preservation of capital. Their objective is to safeguard the initial investment amount while generating modest returns during the holding period. These investments are well-suited for individuals who don’t have a high risk appetite and prefer to maintain liquidity.

Once short-term investment objectives are met, the next step in financial planning is investing for the medium to long term. Medium-term investments generally have a maturity period of 5-10 years and help individuals meet their intermediate financial goals, such as buying a house or funding education. These investments offer a slightly higher return potential compared to short-term investments but still maintain a degree of liquidity.

Long-term investments, on the other hand, are designed for retirement planning or other long-term financial goals. With a maturity period of typically more than 10 years, these investments have the potential to generate significant returns over time. They may include investment options like stocks, bonds, real estate, and retirement accounts.


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