In October 2022, there will be 8 good short-term investments.

If you want to invest money for the short term, you’re probably looking for a safe place to put money until you need it in the near future. As the coronavirus crisis dragged on, many investors kept their money in cash because the markets were unstable and the economy was in a slump. Things are still uncertain because inflation is rising and the economy is still in a slump.

Short-term investments have less risk than long-term investments, but the best long-term investments could give you higher returns. So, you’ll be sure to have cash on hand when you need it and won’t waste the money on a risky investment. So safety should be the most important thing for investors to look for in a short-term investment.
What is an investment for the short term?

Most of the time, you make a short-term investment because you need the money at a certain time. If you’re saving for a house down payment or a wedding, for example, you need to have the money ready. Investing for less than three years is considered a short-term investment.

If you have at least three to five years to invest, and even more time is better, you can look into investments like stocks. Stocks give you the chance to make much more money. In the past, the stock market has gone up an average of 10% per year over long periods of time, but it has been very volatile. So, having a longer time horizon lets you ride out the stock market’s ups and downs.

Investing for the short term: Safe, but with less money.

Short-term investments are safe, but they cost money. You probably won’t make as much money with a short-term investment as you would with a long-term one. If you only want to invest for a short time, you won’t be able to buy stocks or stock funds, which are riskier investments. Here’s how to buy stocks if you can invest for the long term.

There are a few good things about short-term investments, though. Most of the time, they are easy to sell, so you can get your money whenever you need it. Also, short-term investments tend to be less risky than long-term investments, so you may not lose much or anything at all.

Overview: Top investments for the short term in October 2022

Here are some of the best short-term investments that will still make you money.

1. Savings accounts that pay a lot

A high-yield savings account at a bank or credit union is a good alternative to keeping cash in a checking account, which usually pays very little interest on your deposits. A savings account will always get interest from the bank.

Who do they benefit?

A high-yield savings account is good for investors who don’t want to take risks, and especially for those who need money quickly and don’t want to take the chance that they won’t get it back.

Risks: Savings accounts are protected by the Federal Deposit Insurance Corporation (FDIC) at banks and the National Credit Union Administration (NCUA) at credit unions, so you won’t lose money.

There isn’t much risk with these accounts in the short term, but investors who keep their money for longer periods may have trouble keeping up with inflation.

Rewards: Most of the time, you can earn much more interest at an online bank than at a national bank with a building.

Plus, you can usually get to the money quickly by sending it to your main bank or even using an ATM.

Liquidity: Savings accounts are easy to get money out of and you can put more money into them. Most savings accounts, though, only let you take out or move money up to six times per statement cycle without having to pay a fee. (The Federal Reserve is now letting banks get out of this rule.)

Of course, you’ll want to keep an eye out for banks that charge fees for keeping an account or using an ATM, so you can keep those costs to a minimum.

Where to get them: People who want to save money should compare high-yield savings accounts because it’s easy to find out which banks have the highest interest rates and it’s simple to open one.

2. Funds that buy short-term corporate bonds

Corporate bonds are bonds that big companies sell to raise money for their investments. Most people think they are safe, and they pay interest at regular times, like every three months or twice a year.

Who do they benefit?

Bond funds are good for investors who want a diversified portfolio of bonds without having to analyse each bond individually.

Individual investors who don’t have enough money to buy individual bonds and people who don’t like taking risks should also like them.

Risks: The government doesn’t back short-term corporate bond funds, so they can lose money.

But bonds are usually pretty safe, especially if you buy a large number of different kinds.

Also, a short-term fund has the least risk exposure to changing interest rates, so the price of the fund won’t change much if interest rates go up or down.

Bond funds are groups of corporate bonds from many different companies, usually from a wide range of industries and sizes.

Because of this, a bond that doesn’t do well won’t hurt the overall return as much.

Interest will be paid on the bond fund on a regular basis, usually once a month.

Liquidity: A short-term corporate bond fund is very liquid and can be bought and sold on any day that the financial markets are open.

You can buy them from just about any online broker that sells ETFs and mutual funds.

3. Accounts on the money market

Money market accounts are another type of bank deposit. They usually have a higher interest rate than regular savings accounts, but they also usually have a higher minimum investment.

Who do they benefit?

Money market accounts are good for people who will need their money soon and want to be able to get to it whenever they want.

Risks: Make sure you get an FDIC-insured money market account, which will protect your money up to $250,000 per depositor and per bank against loss.

Money market accounts are similar to savings accounts in that the biggest risk comes over time. This is because the interest rates usually make it hard for investors to keep up with inflation.

In the short term, though, that isn’t a big problem.

Rewards: The main benefit of a money market account is that you can earn interest on it, and you can also get to your money quickly if you need it.

Money market accounts are very easy to get money out of, but federal laws do put some limits on withdrawals.

Where to get them: Many banks and credit unions let you open a money market account.

4. Accounts for dealing with cash

A cash management account is similar to an omnibus account in that it lets you put money in a number of short-term investments.

Who do they benefit?

A cash management account gives you a liquid cash account that lets you get to your money quickly. It may also pay you interest on what you have in the account.

Risks: Cash management accounts are usually invested in safe, low-yield money market funds, so there isn’t much risk.

Some robo-advisor accounts put your money in partner banks that are protected by the FDIC. If you already do business with one of the partner banks, you might want to make sure you don’t go over the FDIC’s deposit coverage.

You can usually invest, write checks, transfer money, and do other things that banks let you do. You have a lot of freedom with the cash management account.

Cash management accounts are very liquid, which means that money can be taken out at any time.

In this way, they may be even better than traditional savings and money market accounts, which have limits on how much you can take out each month.

Where you can find them: Robo-advisors and online stock brokers are usually the ones who offer cash management accounts.

5. Funds that buy short-term U.S. government bonds

Government bonds are similar to corporate bonds, but they are issued by the U.S. federal government and its agencies instead of private companies.

Government bond funds buy investments from government agencies like the Government National Mortgage Association, such as T-bills, T-bonds, T-notes, and mortgage-backed securities (Ginnie Mae).

Who do they benefit?

Short-term government bonds are good for investors who don’t like taking risks and want to put their money somewhere very safe.

Bond funds are good for investors who want a diversified portfolio of bonds without having to analyse each bond individually.

Risks: These bonds are thought to have low risk. Even though the FDIC doesn’t back bonds from the federal government and its agencies, the bonds are the government’s promise to pay back money.

These bonds are very safe because they are backed by the full faith and credit of the United States.

Also, an investor who buys a fund of short-term bonds takes on a small amount of interest rate risk. So the price of the fund’s bonds won’t change much if rates go up or down.

Reward: U.S. government bond funds pay a steady rate of interest, but because they are safer than corporate bonds, they don’t pay as much.

Liquidity: Government bonds are some of the most traded assets on the exchanges, so funds that invest in them are very liquid.

You can buy and sell them any time the stock market is open.

You can buy them from just about any online broker that sells ETFs and mutual funds.

6. Certificates of deposit with no fees

Overview: A no-penalty certificate of deposit, or CD, lets you avoid the fee that a bank usually charges if you cancel your CD before it matures.

When you open a CD, you agree to keep the money in the account for a certain amount of time, which can be anywhere from a few weeks to many years, depending on the maturity you choose.

The bank will pay you a higher interest rate for the security of having this money in its vault.

Who do they benefit?

The no-penalty CD could be useful for people who want to have some access to their money and earn some interest at the same time.

A no-penalty CD may also be appealing when interest rates are going up because you can get your money out without paying a fee and then put it somewhere else where you can get a better return.

Risks: The FDIC backs CDs, so you won’t lose any money if you buy them. With a short-term CD, there aren’t many risks, but one is that you might miss out on a better rate somewhere else while your money is in the CD.

But the fact that there is no penalty helps to lessen this risk. If the interest rate is too low, inflation could make your money worth less.

Reward: The bank pays interest on the CD on a regular basis, and at the end of the CD’s term, the bank will return your principal plus the interest.

Liquidity: CDs are usually less liquid than the other bank investments on this list, but if you buy a “no-penalty” CD, you can get out of it early without paying a fee.

So you can avoid the main thing that makes most CDs hard to sell.

You can get certificates of deposit (CDs) at your bank. Most of the time, they give a better return than other bank products like savings accounts and money market accounts.

7. Budgets

Overview: There are three types of Treasurys: T-bills, T-bonds, and T-notes. They offer the safest yield possible because the U.S. government has a AAA credit rating.

Who do they benefit?

If you know exactly what kind of bond you want to buy, it’s better to buy individual Treasurys than to buy a group of them. This is because the risks and rewards of each bond are different.

You might choose to buy specific securities instead of a government bond fund, depending on what you want to do.

Risks: Like bond funds, individual bonds aren’t backed by the FDIC, but the government has promised to pay back the money, so they’re very safe.

But inflation can make it harder for Treasurys to buy things, and long-term bonds are especially vulnerable to changes in interest rates.

Treasurys are one of the safest ways to invest, but that safety comes at a price: lower yields.

Liquidity: U.S. government bonds are the most liquid bonds on the exchanges, meaning they can be bought and sold on any day the market is open.

Where to get them: You can buy Treasurys directly from the government on TreasuryDirect.gov or from any broker that lets you buy individual bonds.

8. Money market mutual funds

Don’t think that a money market mutual fund is the same thing as a money market account. Even though they have the same name, the risks are different, but they are both good short-term investments.

A money market mutual fund buys short-term securities like Treasury bonds, debt from cities and companies, and bank debt securities.

Since it’s a mutual fund, you’ll also have to pay an expense ratio to the company that runs the fund.

Who do they benefit?
Money market mutual funds are good for people who want to be able to use their money and get a return on it at the same time.

Even though most of its investments are safe, money market funds are not as safe as FDIC-backed money market accounts.

Money market funds, on the other hand, can lose money, but this usually only happens when the market is very unstable.

Still, they are some of the safest investments you can make, so your money should be safe with them.

Reward: Investors in money market mutual funds get a return on their money, and the principal usually doesn’t change much.

Money market mutual funds are fairly liquid, which means that you can get to your money quickly.

They might let you write checks from the fund, but you can usually only take out six checks per month.

Where to get them: Money market mutual funds can be bought from brokers who sell mutual funds.

Best places to put money for the short term

What makes a good investment for the short term?

There may be a lot of things that good short-term investments have in common, but they usually have these three things in common:

Stability: Short-term investments that are good don’t change in value too much, like many stocks and bonds do. When you need the money, it will be there, and it is usually protected by FDIC insurance or a government guarantee.
Liquidity: A good short-term investment usually has a high level of liquidity, which means you can get your money out of it quickly. For some CDs, you’ll know when the money is available, and you can always redeem the CD, but you’ll usually have to pay a fee unless you choose a CD with no fee.
Low transaction costs: Unlike a house, for example, a good short-term investment doesn’t cost a lot of money to get into or out of. This is especially important right now, when the returns on short-term investments are at their lowest levels ever.

One of the main reasons to have a short-term investment is that your money won’t be at risk and you’ll be able to get to it when you need it. Long-term investments, on the other hand, can give you a higher return, but they are more volatile in the short term. But if you really need that money, you might have to sell at a loss to get it all.
Tips for putting money away for less than five years

If you’re investing money for less than five years, you should do things differently than if you were investing for decades. Instead, you should use the following tips when investing for the short term:

Set your expectations. Investing for a short time will give you a lower return than investing for a long time, so it’s important to have realistic expectations.
Think about safety. Most of the time, if you’re investing for the short term, you should put more emphasis on safety than on return. When you need it, your money should be there.
The extra risk may not be worth the small extra return. Since short-term investments don’t give back much, it’s easy to try to get a little more money by taking a lot more risk. But think about why you want to invest in the short term.
Choose an investment that fits your needs. You might be able to earn a little extra on that CD, but what if you need the money before it matures? Fit the type of investment you make to your needs.
Short-term investments aren’t all the same. The FDIC backs bank products, so you won’t lose any of your money. But market-based products, even safe ones like short-term bond funds, could go down over short periods of time. Know the risks that come with your investments.

When compared to longer-term investments like stocks or stock funds, short-term investments tend to be pretty safe. But make sure you know what you’re putting your money into.