The investment market comes with many options, but not all offer investors the same amount of stability and flexibility. Short-term investments are often the go-to options in the financial market when it comes to low-risk and easy access to liquidity. Here, we’ll discuss the top three options in this asset class as investments with quick turnaround and chances for immediate liquidity. But before that, let’s briefly overview what short-term investments are.
Short-term investments, often called temporary investments, are highly liquid assets that can be easily converted into cash within five years or less. While the financial market keeps getting broader along with numerous options for investors, volatility and high risk in the market are a factor of concern. Short-term investments are assets that lower the exposure to risks and upscale the flexibility for investors to withdraw their funds quickly.
Although they might offer less yield than long-term investments, short-term investments allow users to get in and out quickly, make their profits, and find the next profitable venture to maximize their gains. This contrasts long-term liquid assets that must be bought and held for a long time; common short-term assets are high-yield savings accounts, certificates of deposits, money market mutual funds, short-term corporate bonds, and more.
The forex market is another existing investment in this category with one of the highest liquidity, mainly because it is the world’s largest market in terms of trading volume. Top forex trading platforms like MetaTrader 5, amidst many others, account for thousands of traders globally with an effective brokerage system to meet up their demands. It’s safe to say that the system does have a unique amount of stability that investors look to in short term investments.
Short-term investments are ideal for anyone with a low-risk threshold and pressing liquidity needs. If the odds of you belonging to this category are high, then this next section is for you.
High-yield savings accounts work like almost every other savings option with an interest. However, the difference in this case is that it often requires a larger deposit and is accompanied by higher stakes. High-yield savings accounts guarantee about 10–15 times higher interest than conventional ones. Most importantly, your money is available for instant liquidity and can be withdrawn anytime. This saving account option works with a compound interest model where customers can earn interest on their principal balance alongside the interest on the balance. High-yield savings accounts are an excellent alternative for tripling your emergency fund or saving towards a target.
Money market funds are a hands-off approach for investors looking to increase their holdings without getting too involved. It is a collective investment opportunity where several people contribute to a fund manager and have the manager distribute these funds into high-yield and high-liquidity pools. Investment pools often considered here are cash, high credit rating, and cash equivalent securities, among others. This investment option is regarded as low risk in the financial market and has loads of potential benefits owing to its highly liquid nature. Although it is a hands-off option for investors, funds can still be quickly withdrawn anytime. The collective model allows for a lower risk threshold, especially since credible firms mostly carry out investments.
Marketable securities are another popular and highly liquid short-term investment for investors. They are investments that can be easily traded on public exchanges. They can be bought, sold, or flipped for interest in a short period. Widespread options of marketable securities involve stocks, bonds, ETFs, and preferred shares. In addition, many derivatives like options and futures can also be considered marketable securities. The over-the-top supply and demand for marketable securities is one factor that makes it highly liquid. For an asset to get high on the liquidity threshold, there is a need for a working market with high transaction volume and people ready to buy and sell constantly. Most marketable securities tick the box for these requirements, making them one of the highest investment options in terms of liquidity. Although less risky due to their liquid nature, these assets are not immune to market fluctuations and losses. In addition, they incur transaction costs that could affect investors’ interests.
There are countless other options for investors needing instant yield and liquidity. While the options above are enough to get you started, you’re not limited to these alone. Other leading short-term assets to consider are money market accounts, certificates of deposits, treasuries, municipal bonds, and many more. The investment market is broad, and there is enough to accommodate every investor. It’s up to you to research and weigh the pros and cons before settling for any investment that works for you.