How to Invest for the Short Term

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How to Invest for the Short Term. When you invest in the short term, you goal is to earn maximum interest in the shortest amount of time possible. Many of those who seek to invest in the short term are willing to take big risks with some of their capital, but others simply are trying their hand at earning what they can in a hurry. Often very volatile, but never lacking excitement, short-term investments can be a great way to get what you want right now.

Things You'll Need

  • Investment options
  • Startup capital

Expect to set aside more capital up front than you would if you were investing in the long term. This offsets the abbreviated time you are permitting your investment to mature. This is truer for lower risk investments like high-rated stocks or 1-year CDs (certificates of deposit).

Find mutual funds with yields over 12 percent. These funds, while risky as short-term investments, are most often able to ensure a higher rate of return and might offer you a better chance to meet your immediate goals.

Invest in short-term bonds. Several short-term bonds can be invested in for a only a year or two. Yields on such bonds are often around 3 percent, however, so in order to see higher yields, you'll need to secure more startup capital.

Invest in real estate. This is far more difficult than simple investing, because you'll need to procure a lot more starting capital, but increasing a home's value and rapidly reselling it (called "flipping") can produce prodigious returns.

Consider investing in a loan participation fund. Loan participation funds offer a tremendous rate of return, but they are among the most volatile. A loan participation fund is basically defined as any investment you make in a company that is trying to use the funds to repay a previous debt. The threat of a default is high, but most investors recover 75 percent or more of their investment when a debtor defaults.

Tips & Warnings

  • Get the advice of a stock broker or a financial expert to help tailor a short-term investment strategy to your specific needs. With the help of your advisor, you'll be able to invest smartly in a way that best suits your own personal goals.
  • Short-term investing carries substantial risk to your finances. Any money you invest is not guaranteed to earn interest, and in some cases you can lose money on a short-term investment. Understand those risks before you decide to invest for the short term.

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