What are the best short-term investments? Find it out!

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When composing your investment portfolio, you should not only focus on the medium and long term. While thinking about the future is important, knowing how to invest in the short term is very interesting.

Thus, you can diversify investment maturities and take advantage of advantages, such as those related to equity liquidity. However, you need to know which market alternatives can really help your strategy.

In this article, you will understand more about it and learn what to evaluate to find out how to invest in the short term for your portfolio. Check out!

What are short-term investments?

One of the ways to classify the investments available in the market is by the time to maturity they present. In this sense, there are three main options: short, medium, and long-term investments.

Short-term investments are those that achieve the expected results and you can redeem them in up to 1 year. From this, they are classified as medium term. Those with a term of more than 5 years are considered long-term investments.

What are the characteristics of these investments?

As you have seen, the short-term investment duration is one of its main features. However, this is not the only element, as there is another essential issue: security.

Normally, the idea is that investments redeemed within 1 year have a type of protection. This is necessary because a shorter period increases risk in the face of volatility. Therefore, it is common for these investments to be fixed-income investments.

Investments in this class bring predictability in relation to earnings and, in some cases, have protection mechanisms. For the same reason, as a rule, we don’t talk about the best stocks to invest in in the short term, for example.

As they are variable income, the idea is to focus on the long term to dilute risks and improve the potential for results. Otherwise, you are very susceptible to the ups and downs of stocks, which increases the risk of losses.

Another characteristic of short-term investments is that they are usually liquid. This is not a definitive rule, but it usually follows applications focused on shorter periods. When this happens, it is easier to get rid of investments and convert them into cash.

Why is it important to have this type of investment in your portfolio?

After knowing the general characteristics of short-term investments, it is worth understanding why they are important. As they are often safer, they can help diversify and balance the risk of moderate or bold portfolios.

This can also be a way to obtain more liquidity in equity. As redemption takes up to 1 year, you need to wait for less to obtain and enjoy profitability.

In addition, alternatives can be a means of contemplating specific plans, such as a trip within the next 12 months or a purchase of interest. Money, when kept invested, helps to maintain purchasing power or, at least, reduces the loss generated by time.

How to invest in the short term?

Based on what you have learned about short-term investments, it can be said that they can be suitable for all portfolios, regardless of investor profile. So, the next step is to know what the market’s possibilities are — and how they work.

Next, he brought alternatives that can be used by those looking to invest Direct deposit money with redemption in up to one year. Follow along to identify the best investments for you!

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