Risk-Free Short-Term Investment Options
Introduction
If security and easy access to the cash are of paramount importance, then there are a number of no-risk completely safe-to-invest options that can assure sure-shot returns. Although interest rates on these options are low and do little for growth, your principal is secure, making them ideal for emergency funds and short-term goals.
1. High-Yield Savings Accounts
High-yield savings account is actually among the safest forms to save in the short-term. Available from online and traditional banks, these accounts can be opened and your money is insured by the Federal Deposit Insurance Corporation up to $250,000. Although the interest rate is low but not as low as regular saving accounts; the rate is much higher than normal saving accounts, and one benefit is the ability to have a very flexible withdrawal plan whenever one needs to access his or her money.
2. Certificates of Deposit (CDs)
CDs provide a better fixed interest rate with the condition of your money being fixed for a certain period of time – three months to five years. Both CDs offer safety and FDIC insurance, but their early withdrawal penalties make them unsuitable for money that requires immediate withdrawal.
3. Money Market Accounts (MMAs)
Money market accounts, similar to savings accounts, often offer higher interest rates and may or may not come with check writing arrangements. They are also like the savings account: they are FDIC insured and should not be used for long-term money storage but can be used to store money for the short-term.
4. Treasury Bills (T-Bills)
T-Bills are treasury securities that have a maturity of less than one year. They are known to be among the most secure forms of investments, mainly because they are insured by the U.S government hence being suitable for risky avoidant investors.
Conclusion
Short-term fixed investments are perfect for long-term savings as they let you invest while at the same time keeping the money on hand for emergencies that call for immediate cash. Still, index funds are still very safe types of investments, even though they do not have any perspective on profits. In Part 3, we’ll look at what you could call ‘low risk plus a little bit of extra reward for very minor losses in liquidity’. Stay tuned!
