Young people out of college often look to invest short-term, so that they can save money for upcoming important purchases, such as buying that first home or starting a family. Making short-term investments can also be beneficial during times of market uncertainty, such as what we are experiencing right now. Here are 10 of the best short-term investment for millennials:
1. Online Bank Accounts
Online bank accounts are a good short-term investment because they offer higher interest rates than brick-and-mortar banks while offering the same FDIC protections as well as convenient access to money. There are also no penalties for early withdrawals.
2. Money Market Accounts
While the FDIC does not insure money market accounts, they are generally safe, and they usually offer higher interest rates than insured bank accounts. Though sometimes accounts offering the best rates require minimum balances.
3. Certificates of Deposit
Certificate of deposits (CDs)
4. Short-Term Bonds
Bonds are a riskier investment than interest-bearing accounts, but they generally offer higher returns. Short-term government bonds with maturities of less than a year are typically the safest bond investments.
5. Treasury Inflation-Protected Securities
Treasury Inflation-Protected Securities (TIPS) are a special type of government bond that ties payouts to the rates of inflation. This protects the price of the bond if interest rates rise.
6. Floating-Rate Funds
Floating-Rate Funds are mutual funds and exchange-traded funds (ETFs) that invest in short-term debt issued by companies and financial institutions. These funds can be risky because they use leverage to purchase debt, but they can offer excellent returns.
7. Sell Stock Calls
If you own corporate stocks, you can sell call options on them. What this means is that someone pays you a premium for the right to buy the stock if it reaches a certain price by a certain date. If it never reaches the price, you keep the premium.
8. Student Loans
Sometimes the best investments can be the elimination of debt. Interest rates on student loans currently range from 4-8%. By paying these loans off early, you are effectively earning this rate of return on your money, which is higher than many other short-term investments.
9. Consumer Debt
Consumer debt is similar to student loans, with the exception that interest rates on credit cards are generally much higher. So, paying off this kind of debt is even a better short-term investment.
10. Peer-to-Peer Lending
Peer-to-peer lending gives you the ability to make small loans to those that need money. These loans, which can range from 1 to 3 years (and sometimes even longer), provide a high rate of return. But they can also be risky. To counter this, instead of making one large loan you can make many small ones.
Short term investments are literally all that millennials can take before they pull their money and run. Long-term Warren Buffett investing just may be a thing of the past.