When we hear about investment, the first thing which pops our mind is long duration. Investments are often misinterpreted as a long-term activity where you need to block your money for several years to expect some returns. However, that is not the case. Investments can range from years to months and even few hours!
Short-term investments have gathered a lot of pace in the last few years, because the millennial investors don’t want to wait for extended period of time for their returns. Long-term investments may appear lucrative and offer lower risks, but unfortunately, people don’t have the time to do so.
Short-term investments are a perfect investment measure for all your goals which are in the near future, like buying a car or home renovation. These investments offer decent returns with the advantage that you are not bound to wait for years fir the returns.
Today we will discuss about why you should invest with short-term options and how do they work. We will also help you to find out why are short-term investments a good option for achieving your financial goals.
Table of Content
Why Short-Term Investment is a Good Option?
- What are Short-Term Investments?
- Advantages of Short-Term Investment
- Security
- Flexibility
- Risk Management
So, without further ado, let us discuss about short-term investments and find out why you should choose them.
1. What are Short-Term Investments?
Short-term investments, as the name suggests are investment options which target shorter duration of time. This can range from a few days to months. With short-term investments, you need not to tie up your capital for multiple years, unlike long-term options.
Short-term investments can prove out to be a great alternative for fulfilling your short-term financial goals. For instance, you need to accumulate enough corpus for your foreign vacation, by the end of next year. In this scenario, you cannot invest in any long-term asset because the investment horizon is in the near future. In such a case, short term investments can prove out to be a great investment option for the investors.
Let us now take a look at some of the advantages of short-term investment and figure out, why are they perfect for your investment needs.
2. Advantages of Short-term investments
Short-term investments have numerous advantages over long-term options. The most obvious one being the requirement of a shorter span of time for providing returns. However, there are some advantages as well, which make short-term investment a preferred choice for many investors. Let us take a look at some of them:
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Security
As we always say, diversification is the key to a perfect investment. Having a diversified investment portfolio with a variety of investments including both long-term and short-term assets. A portfolio with diversified assets is usually well-protected against market risks and crashes.
In case of a financial emergency, if you plan to liquidate your long-term investment, there are huge chances that you will end up incurring loss on the same. In such a case, short term investments come to rescue. You can easily liquidate your short-term investment in case of financial emergencies with minimal penalties.
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Flexibility
There can be various different goals with your money. Repaying your mortgages, planning higher education or a simple vacation, whatever your goal for investing, short-term investments provide the best opportunity for generating some extra income for such expenses.
These types of goals are never going to occur at neat intervals in your life, therefore having some short-term investment options in your portfolio can help you in being prepared for such ventures.
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Risk Management
When compared to some of the long-term investments like venture capital, real estate investment, high-yield bonds etc. short-term investments are usually coupled with lower risk. However, the return is still not as considerable as long-term options, you leave less of your return to chance.
Short term liquid assets offer you the perfect balance of decent returns and risk protection when compared with long term assets.
These were some of the reasons which make short-term investments a preferred choice for many investors. You can select a short-term investment option as per your need.
Conclusion
Investments are a great option for getting some extra income, but with investment your capital is always at risk. It is, therefore, very important to have complete knowledge and experience before you invest your money. You can also take the help of a SEBI registered investment advisor, who can guide you with your short-term investment journey by evaluating your risk bearing capacity in the markets and providing your recommendations based on the same.Happy Investing!
