Traditionally, a short term investment is one that is held for a year or lesser. These are often preferred by seasoned investors because they offer better liquidity owing to the shorter lock in periods as compared to long term ones. The returns on these kind of investments are usually tangible but directed at different end goals. So, how do you know if a short term investment works for you and your goals? Here we take a look at that.
Things to ask yourself before you opt for short term investments
Do I have a flexible timeline?
If you are working on growing your funds within a specific time period, a short term investment might not be the way forward. Consider going down the short-term only if you don’t mind growing your money in three or four years instead of the initial one year you had in mind. Prudent investors park their funds in short term investments for short term goals such as making enough money to go on a vacation, to pay their child’s education expenses, etc.
Do I have enough savings?
It is important to have enough savings that is apart from a reasonable sized emergency fund. Opt for short term investments only after you ensure that you have sufficient savings that can help you get past rough phases in case things go south.
How should I go about it?
Before you decide to invest, you should account for some important factors:
Your financial goals
How much money you should invest to achieve the goal
How soon you need the money back
Plan B in case of investment failure
The key to a healthy investment portfolio is diversity that gives you short-term investments within a well-diversified, long-term investment plan.
There is a common misconception among people that perceive short term investments are high-risk investments that give poor returns. As such, investors tend to steer clear of them but this is no longer the case. Nowadays, there are several alternative investment routes that investors can opt for that offer higher returns on investments. KredX is one such platform that offers investors with an opportunity to grow their money in 30-90 days with high returns at minimal risk. Investors get lucrative returns on funds that were sitting idle in a short time at a much higher rate than what banks offer for traditional investments while businesses ensure a healthy cash flow.