I need to invest $65,000, but I want to earn more than the bank is willing to pay. Where can I put my money right now to receive a good return on a short-term investment with minimal risk?
The Federal Reserve has kept its short-term interest rate at 0% for many years. Although the Fed has lately begun to raise rates, the Federal Funds rate remains at a pitiful 0.33 percent.
Short-term bond rates are still below 0.5 percent, and rates are actually harmful in numerous European countries! People, businesses, and governments, for the most part, PAY the bank to keep their money.
Short-term investing becomes extremely tough as a result of all of this. Gone are the days when your granny might profitably invest in savings bonds.
Savings accounts pay practically nothing - my bank still pays 0.1 percent!
To make any profit today, you must take on more significant risks than you could have previously.
That's why cryptocurrency savings accounts pique my interest, and I've put a little amount of short-term cash in Blockfi, where I earn 7.25 percent. Unfortunately, the SEC made headlines when it began cracking down on these types of accounts, so new investors won't be able to access them through BlockFi right now, but there are still choices. So...
Where should you put your money RIGHT NOW to make the best short-term investment?
At the end of the day, it all boils down to two key factors:
What are your financial objectives?
What do you mean when you say "short-term"?
The first question is relatively straightforward. However, "short-term" could mean something different for a variety of reasons. Are you attempting to make a 6-month investment? 1 year? 3 years? Maybe 5?
Your investment time horizon will determine which of the suggestions in this article are suitable for you. In any case, we provide you with numerous options to examine.
Here are the finest short-term investments to make in 2022, whether you're investing $10,000 or $100,000, with little or no risk and the assurance that their money will not be tied up for long periods of time.
What I Look For When Buying Short-Term Securities
Before converting to cash or other short-term investments, the average short-term investment is expected to increase for a period of months to years.
Short-term investments appeal to me as a way to protect the money that I might wish to spend wisely in the future. I don't want to lose a lot of money; thus, I'm not willing to take a big risk.
An excellent short-term investment must contain the following characteristics:
Stability - There is a low historical risk of losing money in a short period of time. In this case, stocks do not work for me.
Liquidity - I'd like to be able to get my hands on the money as soon as feasible. Non-liquid investments, such as real estate, are an example.
Low transaction costs: The cost of entering or exiting the investment should be as low as possible, ideally zero.
(In the realm of investing, "long-term" investments are sometimes decades-long, leaving room for short-term investments that can span a few years.) Here are some of the best long-term investments to think about.)
You can choose from various short-term investing accounts, and which one is best for you depends on your circumstances.
The Top 12 Risk-Reducing Short-Term Investments
- Bank Savings Accounts for Cryptocurrency Earnings
- Accounts in Money Markets
- Investing in Alternatives
- Deposit Certificates (CD)
- Roth IRA
- Accounts Checking
- Bond ETFs and Short-Term Bond Funds
- Treasury Inflation-Protected Securities (5-Year)
- Corporate Bonds and Municipal Bonds
- Getting Rid of High-Interest Debt
- Offers for Cash Back Reward
- Bonus Thought: Prosper
1. Account with Crypto Earn
You won't make any money in a bank savings account, let's face it. That's why, of all the things on this list, I think opening a bitcoin savings account is the most sensible, and I've already deposited a considerable sum of short-term cash into it. Please follow along with me.
You deposit cash by purchasing a stablecoin on crypto exchanges such as BlockFi, Gemini, and Celsius Network (not actual cash). Your funds are particularly liquid since they can be accessed at any moment. You can always swap 1 stablecoin for 1 US dollar because it trades 1:1 with the currency.
Gemini operates similarly to a bank in that it offers loans to third parties, but in bitcoin.
Gemini can pay you up to 8.05 percent in stablecoins (USDC and GUSD) that can be transferred back to US dollars.
8.05 percent is more than 16 times what you'd get from a bank. So, what's the catch?
A bitcoin savings account is not the same as a traditional bank savings account. As a traditional bank, there is no FDIC insurance on your money. Digital theft is also a source of concern.
Gemini does have its own deposit insurance that protects against theft and other issues, but it's not clear how it varies from FDIC protection.
Despite these concerns, I believe Gemini to be a credible bank choice. If you're interested, start with a little amount of cash (not all of it) and work your way up based on your comfort level.
Cryptocurrencies are here to stay, and this appears to be the next step in banking, although there will be some obstacles.
2. Account for Online Savings
A high yield savings account could be the answer if you want to earn interest on your money without taking any risks. You'll earn a tiny bit of interest just by maintaining your money in these accounts.
This approach needs almost no effort on your part, save than opening an account and depositing funds.
The most exemplary high yield savings accounts have no fees and offer competitive interest rates.
The finest high-yield savings accounts include low-interest rates and no fees.
3. Account with a Money Market Fund
Money market accounts are currently offering an APY that is pretty similar to one-year CDs while yet allowing rapid access to funds. ATM cards, checks, and deposit slips are all provided with these accounts.
Money Market accounts are calculated based on the account balance rather than the length of time invested.
Many people think of money market accounts as "savings accounts on steroids" because of these features.
While there isn't much risk, a higher rate of return is possible.
4. Diversified Investments
Alternative investments are an essential component of a well-balanced and well-diversified portfolio. The issue is that many alternative investments aren't very liquid and require at least a few years of holding period. Real estate, for example, is a traditional alternative investment. Unless the investor is flipping residences, the investor is in it for the long haul.
This is why I'm thrilled about a few new short-term peer-to-peer investment ideas that I'll outline below. Because they operate outside of the stock market, these assets are still considered alternatives, but fortunately for us, they don't come with a 10-year time frame!
Fundrise offers low-cost real estate ETFs online. Individual real estate properties are acquired and managed by each investment.
Instead of buying stock in a corporation, you lend your money to individuals or businesses through Lending Club. They reimburse you with interest!
You invest in small businesses by acquiring their bonds through Worthy Bonds. A set 5% interest rate is paid to the investor (you).
5. Deposit Certificates (CDs)
A Certificate of Deposit (CD) allows you to deposit money for a fixed length of time and receive a guaranteed return, regardless of how interest rates fluctuate during that time.
Make sure you buy your CD from a FDIC-insured financial institution (up to $250k is covered). The higher the yield, which typically varies from 3 months to 5 years, the longer the investment term.
CIT Bank has the best CD offering, in my opinion. Withdrawing early from their 11-month CD carries no penalty, and the rates remain competitive.
6. A Roth IRA
A Roth IRA is a form of individual retirement account that lets you invest in stocks and bonds.
Because a Roth IRA is funded with after-tax money, you can take your contributions out whenever you like. You must not withdraw the earnings, or you may face a fine!
To put it another way, you can invest in mutual funds, ETFs, bonds, and other securities through a Roth IRA (see recommendations below).
If you only want the money to grow for a short period, you can withdraw the contributions, which will be worth more than what you invested if the market performs well.
The following are some of the finest places to start a Roth IRA:
||$0 trading fees
||Up to 1 yr. free management
||$0 trading fees, up to $2,500 bonus
7. Checking Accounts Online
An online checking account can be used for short-term investing purposes like an online savings account.
You get many of the benefits of online savings accounts with even greater liquidity because the number of withdrawals isn't limited.
The best aspect is that online checking accounts frequently come with cash bonuses! This helps to sweeten the sale, especially since interest rates are still low.
8. ETFs and funds that invest in short-term bonds
Short-term bond funds are often handled solely by a professional financial advisor.
Bonds are less trustworthy than money markets, but they have the potential to yield a higher return.
These bonds are a market product that will pay out in variable monthly installments based on the current market conditions.
Short-term bonds typically mature in two years or less, making them an excellent choice for investors within that time frame.
Where can I get bonds? Any of the following brokerages comes highly recommended by me:
||Up to $600 cash bonus
||$0 trade fees, up to $2,500 bonus
9. Treasury Inflation-Protected Securities (5-Year)
TIPS (Treasury Inflation-Protected Securities) are inflation-indexed government bonds.
TIPS has a fixed interest rate, but its underlying value rises in line with inflation as determined by the Consumer Price Index.
Although you may only receive 0.5 percent interest (paid semiannually), the bond's value may climb by 2.5 percent each year over five years.
As a result, your initial investment will be worth the same at the conclusion of the term as it was when you first invested. On top of that, you will receive a small bit of interest.
TreasuryDirect.gov is where you may purchase TIPS directly from the government. Because TIPS interest is taxable, most investors prefer to invest in a TIPS ETF or mutual fund.
You'll need a brokerage account to buy an ETF or mutual fund shares.
If you want to open a new brokerage account, TD Ameritrade or E*Trade are both fantastic places to start.
10. Municipal and corporate bonds
Municipal bonds are significantly riskier than TIPS and other Treasury assets, although municipalities seldom default.
The "interest rate risk" is the more serious risk. In a low-interest environment, if interest rates rise in the market, the bond's value declines to compensate.
It would be a fantastic return if you could obtain 4% on a municipal bond today. You'll be on the losing end of the equation if interest rates rise and your bond loses 6% of its value. If you sell before the bond matures, however, you are simply responsible for the loss in value.
If you hold the bond until it matures, you will get back 100% of your initial investment plus interest.
Because corporate bonds are not backed by a state, local, or federal government, they are considered riskier than municipal and Treasury bonds.
As always, taking on more risk can result in a higher rate of return.
Corporate bonds face the same interest rate risk; however, holding them to maturity eliminates this risk.
You'll need a brokerage account like TD Ameritrade or E*Trade to trade individual bonds, mutual funds, and bond ETFs, and you'll need a brokerage account like TD Ameritrade or E*Trade.
11. Pay Off Debt With A High Interest Rate
Do you want to get a good return on your investment? Pay off any high-interest debt you have.
If you have a $10,000 amount on a credit card with a 15% interest rate, you have an excellent opportunity to make a significant profit.
It's like getting a 15% return on $10,000 if you pay off that loan.
You're not only obtaining a good return on investment, but you're also saving money on future expenses and improving your entire financial status. It's the ideal win-win situation.
You are capable of repaying high-interest loans on your own.
As customers feel squeezed at the end of the month, credit card debt is quietly creeping up in the United States.
If you owe money on a credit card, you should make a plan to pay it off as soon as possible.
Because interest rates are reaching historic lows now is a wonderful time to refinance your mortgage.
If you can save 0.50 percent or more on your loan, you may be putting thousands of dollars back in your pocket. There aren't many investments that can compete with that.
Debt from Student Loans
Don't have a home loan? If you have student loans, be careful to refinance if you qualify; you might save thousands of dollars in the long run!
When it comes to paying off debt, the math is simple: if your loan is currently at 7% and you refinance at 3%, you'll get a 4% return on your investment!
12. Offers for Cash Back Reward
Even though investing $65,000 has nothing to do with credit card rewards, we decided to include this tip from Holly Johnson, our resident credit card expert.
"Credit card rewards can yield tremendous returns with practically little work on your part," Johnson writes if you really want to make some easy money in the near term.
The following is how it works:
Assume you applied for the Chase Sapphire Preferred® card to benefit from the hefty signup bonus.
After spending $4,000 on the card in the first 90 days, you will receive 50,000 points worth $500. You can receive this incentive without paying anything out of pocket because the $95 yearly charge is waived the first year.
Are you still with me?
To obtain the best deal possible like this, meet the minimum spending criteria with items you were planning to purchase anyhow.
Consider groceries, gas, and your monthly expenses. To prevent paying interest on your credit card, pay it off right away.
That's all there is to it.
Prosper is a bonus idea
Prosper does not charge borrowers a specified interest rate.
Instead, the service uses online auction-style bidding to link borrowers and lenders.
Because they only accept interest rates that they are comfortable with, this system allows lenders to have greater control over their monthly income.
Borrowers describe their loan and the maximum interest rate they are willing to pay.
The interest rate is then bid down by lenders depending on the lowest interest rate they are ready to accept.
This feature ensures that the notes' income is predictable and high.
Check out our Prosper investing review if you need more information.
If you're looking for a location to store your money in the short term, don't be afraid to go outside the box.
You should have no trouble investing your money in any number of creative online platforms, thanks to the ongoing evolution of the internet.
On the other hand, short-term investing is not the same as long-term investing, as I mentioned before.
When you only have a few weeks or months to invest, you don't want to put your money into investments that are difficult to liquidate, incur fees for withdrawals, or are too hazardous for the short term.
What are some quick ways to put your money to work? Have you tried any of the strategies below?