subject: Knowing How A Short Term Investment Operates [print this page] Knowing How A Short Term Investment Operates
For a short term investment loan, the payback period is a year and two years at the most. The interest rates are normally lower than other loans but it will still yield a small profit to the lender. The best thing about a short term investment is that in addition to the payback of the loan you will also gain interest at` the same time that the payment is due.
You need to realize that making a short term investment may not make you rich in interest but they are less risky than other types of loans. Christmas funds or a savings passbook are just a couple of investments that are not risky. The longer that the money sits in such an account the more interest that it will grow. Some of these types of accounts cannot be accessed before a certain amount of time has passed. You may have to pay sizable fees if you take them out early.
Before you go and put your hard earned money into any investment, make sure that you plan ahead for it. You should know what you are doing before hand before any money goes out; research is the key when you invest. Life throws everyone some curveballs; sometimes that is not within out control. Emergencies do come up where you may need some extra cash in order to pull you through the hard times. When this happens we are more willing to take the early payout and pay the fees.
A safer short term investment may be in certificates of deposits, money market funds or in treasury bills; these mature in a certain amount of time and are fixed in their interest rates. It may not be a good idea to invest in stocks because you could lose all of your money quickly because the pay back depends on how the market is at the moment. So your investment and dividends paid depend on the day's highs and lows. In essence you will never be sure where and when money is going to be a sure thing.
In the event that you have an emergency you want to make sure that the money that you have invested is ready and available when you need it. You may take a small loss for taking it out before it fully matures but you will have it when you need it. In the long run, your short term investment will help you gain your long term goal, whether it is planning for your child's future, buying a home or for your retirement.
