4 Short Term Investment Options That Pay off in the Long Run

short term investment options pay off long run roi

Can you imagine being a secret millionaire?

Living a quiet life as an auditor for the IRS, Anne Sch1eiber had a meager income. However, when she passed away at the age of 101, the truth came out.

Over the years, Anne made several wise investments and acquired a surprising $22 million in assets. In her will, she donated the entire multimillion-dollar fortune to Yeshiva University.

Anyone who wants to gain financial independence can learn a thing or two from Anne’s story. When you know how to choose the right short term investment options, you can slowly and safely grow your money.

Are you ready to make your money work for you? Read on to learn about 4 different investment opportunities that pay off in the long run.


Choosing Short Term Investment Options

Before you start learning about the different short term investment options, it's important to remember that risk is relative. Take into account your financial situation, to assess what a low risk and high-risk opportunity would look like for you. We also suggest looking into tactical asset allocation.

Here are a few questions you can ask to determine how risks will affect you

  • How many income sources do you have?
  • How much of your income is expendable each month?
  • What do your current investments look like?

When it comes to determining your risk, you have to be able to quantify the amounts. In other words, get specific about what low risk, medium risk and high-risk means to you.

Now that you have a better idea of what risk means in the financial world to you personally, we can dive into the different investment ideas.


1. High Yield Savings Accounts

Let's start by discussing how high-yield savings can help you build your financial portfolio. Banking institutions that offer high-yield savings, and or checking accounts, are great ways to slowly grow your money. Research shows that a standard savings account typically offers less than a 1% return on your money.

However, high-yield savings accounts, offer return amounts between 1.8% and 2%, or more. The percentage of your return will vary depending on what institution you go with, and how the markets are doing at the time.

Remember, when it comes to finances, risk and other factors are all relative. While a 2% return, it may not seem like a lot of money, it is when you compare it to what the standard savings accounts are offering.


2. Short Term Bonds

Moving on, short-term bonds are another safe way to invest your money. There are a few different ways you can go about getting different types of short-term bonds.

First, you can buy individual short-term bonds. Corporate bonds and government bonds offer short-term opportunities.

You can also choose to buy mutual bonds, short-term bond funds, or short-term bonds ETF's. If you're going to use short-term bonds, plan to have your money invested for about 3 to 5 years.

Typically, you can expect to see returns starting at 2.5% and up. The return rates on short-term bonds are higher than high-yield savings accounts, and so are the risk factors.

If interest rates go up, you could see a small dip in your principles. However, as long as you're willing to wait for interest rates to stabilize again, you can earn a profit.


3. Treasury Inflation Protection Securities

The third way you can safely invest your money is with TIPS. Treasury inflation-protected securities, or tips, are a long-term investment opportunity.

There are a few different ways you can get TIPs. First, you can find reputable companies that offer you the opportunity to buy them online. When you go to buy TIPS online, it's common to see the securities for sale listed in different yearly installments.

For example, you'll have options to buy 5, 10, 15, up to 30-year investment opportunities. We suggest you steer clear of choosing anything more than the 10-year option.

While TIPS are a safe way to invest your money, they aren't going to offer you incredibly high returns. Having your money tied up for 30 years isn't as wise as diversifying with multiple investment opportunities.

You can also choose to buy ETF's, or mutual funds, which are also TIPS. At the moment, the interest rate on TIPS is comparable to a high-yield savings account.

A typical return would be 1.5 to 2% depending on how long you're investing.

One great thing about TIPS is that they work to keep up with inflation. You'll also have the added in a fit of knowing the government is backing your investment.



4. Dividend-Paying Stocks

So far, we've been discussing investment opportunities that have minimal risk. Keeping in mind that risk is relative to your financial situation, next will be discussing a slightly riskier opportunity.

Dividend-paying stocks mean you'll be investing in the stock market directly. However, dividend stocks are different than regular stocks. A dividend stop occurs when a company reaches a point where they are a cash solvent.

When this happens, shareholders get the reward of being able to pay in the form of a dividend. In the stock market, there are two ways to make money. First, you can make money with appreciation, where the value of a stock grows for more than what you paid for it.

The second way to make money is with the dividend. Energy and utilities sector stocks typically have dividend options. Let's say for example that you buy a dividend stock and it doesn't appreciate at all.
You buy the stock for $10 and at the end of the year, it is still worth $10. While you aren't making any money on the appreciation and, you still get paid in the form of a dividend.

You should look for stocks that have a history of not only paying a dividend but also increasing the number of dividends your paid overtime.


Achieve Financial Freedom

It's empowering to learn about the different short term investment options that are out there. We hope that you'll take your newfound power to start making wise investments today.

When you know where you stand financially, and you know where you want to go, you can achieve all of your money goals. For more ways to reach financial freedom, check out the rest of the site. Visit the Frugal Finance and Investing sections of our blog right now!