Short-term investments typically refer to those held for less than a year. The ideal short-term investment depends on your individual financial goals, risk tolerance, and time horizon. Here are some popular options:
High-Yield Savings Accounts (HYSA)
HYSAs offer higher interest rates than traditional savings accounts, allowing your money to grow faster. They are FDIC-insured, meaning your deposits are protected up to $250,000.
Examples:
- Discover High Yield Savings Account: Offers competitive interest rates and no monthly fees.
- Capital One 360 Performance Savings: Provides high interest rates and access to online banking tools.
Money Market Accounts (MMA)
MMAs offer a slightly higher interest rate than HYSAs, but they come with a few restrictions. For example, you may be limited in the number of withdrawals you can make each month.
Examples:
- Chase Total Checking: Offers a linked MMA with a variable interest rate.
- Bank of America Advantage Savings: Provides higher interest rates on balances above a certain threshold.
Certificates of Deposit (CDs)
CDs offer a fixed interest rate for a specific term, usually ranging from a few months to several years. You can't withdraw your money early without penalties.
Examples:
- Ally Bank CD: Offers competitive interest rates and a variety of terms.
- Marcus by Goldman Sachs CD: Provides high interest rates and no monthly fees.
Short-Term Bonds
Short-term bonds mature in less than a year and offer a relatively low risk compared to longer-term bonds. They are suitable for investors seeking a stable return with minimal risk.
Examples:
- Schwab Total Bond Market Index (SWTSX): Tracks the performance of the total U.S. bond market.
- Vanguard Total Bond Market Index Fund ETF (BND): A low-cost ETF that provides broad exposure to the U.S. bond market.
Short-Term Treasury Bills (T-Bills)
T-Bills are short-term debt securities issued by the U.S. government. They are considered extremely safe and offer a guaranteed return.
Examples:
- TreasuryDirect: The U.S. Treasury's website for purchasing T-bills directly.
- Treasury Bills through Brokerage Accounts: You can also purchase T-bills through online brokerages.
Important Considerations:
- Risk Tolerance: Understand your risk tolerance and choose investments that align with your comfort level.
- Time Horizon: Short-term investments are typically held for less than a year, so consider your financial goals and how long you need to access your money.
- Investment Goals: Determine your investment goals, such as saving for a down payment, a vacation, or an emergency fund.
