When we hear about the stock market, we often think of rich executives on cell phones. The truth is that the majority of Americans have investments in the stock market, but only a slight majority of around 55%.
Amongst the lower half of the income bracket, almost nobody has any investments, and many of those with investments don’t have substantial ones. But, while investing may seem like a rich man’s game, it doesn’t have to be.
Clever use of short-term investment strategies can help you get ahead. We’ll discuss a couple of these strategies and how they work in this article.
About Short-Term Investments
Short-term investments are difficult to define because many people don’t agree where short-terms end and long-terms begin. There is a popular consensus that any investment that pays off in five years or less is short-term.
Short-term investments are popular because they are considered low-risk. The profits aren’t as big as longer-term investments, but they’re high compared to the initial investment and pay off far more often.
Except for government bonds, which we’ll discuss later, income from investments is taxed by the government. The tax rate can differ for them, though, so you’ll want to look into that. Rvwwealth.com knows about investments and can help you determine your tax rate:
- Savings Accounts
A savings account is the safest investment available. A savings account is any investment left in a bank in a secondary account. The investment will accrue interest the longer you keep it in the bank.
These types of accounts tend to differ from bank to bank, though. Many banks charge a fee to deposit money into a savings account.
The downside is that the average interest rate is .04%, so it will take a long time to earn much money back.
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- Bonds
Bonds are another low-risk investment that comes in two categories: corporate and government. The biggest difference between the two is who you get the bond from.
The basic premise behind both is that you’re letting the government or corporation borrow money from you. They, in turn, agree to repay that loan and a certain amount of interest.
The reason these types of investments are low-risk is that they can only default if the seller goes under, and even then it’s uncommon. Most companies have policies in place to ensure that the investors earn their money back even if the company doesn’t.
What Are the Best Short-Term Investment Strategies?
Some of the best short-term investment strategies are those that sacrifice speed for success. They tend to pay off more in the long run than bigger investments. This may sound strange given that it’s a short-term investment, but it still pays off.
We’ve talked about a few of the best short-term investments in the paragraphs above, but there are more opportunities that we didn’t have the space to mention. Feel free to do more research on your own if you’re interested.
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