Got some money lying around? Don’t put it in some account where you can’t access it that pays you under 1% interest…
There are better ways to grow your money — even if you’re short on time. Want to know the best way to invest money short term? There are a few ways — let me tell you about them.
In this article, I’ll share the 12 best short term investment options to put your money to work now — including high yield short term investments, lower-yield but more safe short term investments, and more.
Best Short Term Investments Platforms in 2023
You’ll find 12 of the best short term investments in the article below. But for starters, here are just a few of our favorite platforms:
- Best for investors who need flexibility: Wealthfront
- Best for investors who want reliable returns: CIT Bank
- Best for low-risk diversity: M1 Finance
- Best for accredited investors: Percent
- Best for short term investing in stocks: moomoo
What are the Best Short Term Investments?
The bottom line: The best short term investments for you depend on your goals and objectives.
The best short term investment is one that fits your investment goals and appetite for risk and pairs well with the rest of your investment portfolio. Short term investment options with high returns can come with higher risk, so it’s up to you to decide what suits you best.
For example, if you’re saving money for a downpayment on a primary residence and you need to park money somewhere for six to twelve months, the stock market probably isn’t your best option.
But if you have extra money to play with and want to try swing trading, picking some stocks might be your best option for potentially high returns. It depends.
What is a Short Term Investment?
Before we get to the best short term investments, let’s talk about what “short term” means.
Everyone has a slightly different definition of what counts as a short term investment, but I like to keep things simple. If I expect an investment to yield returns within one year, it’s a short term investment. That’s it.
You’ll often see much lower risk in short term investments since short term investors are often looking to preserve capital (read: fight inflation) rather than pursue aggressive growth.
That doesn’t mean that short term investments can’t offer respectable returns. I just mean that they should play a different role in your broader investment strategy.
Best Short Term Investments in 2023
Note: This list is roughly in order of my personal preference and what I think will work best for most people.
1. Cash Management Account
Time period: Any
Potential returns: 4%–8%
Who it’s good for: People who need flexibility
A cash management account (CMA) is basically a savings account, checking account, and investment account rolled into one. They’re very flexible — and great if you want options for your short term investments.
One of my favorite things about CMAs is that the savings account part usually has a much higher interest rate than a traditional savings account. At writing, traditional savings accounts are yielding around 1% APY, while CMAs are in the 3.5% to 4.5%. It’s a no-brainer.
The other nice aspect of CMAs for short term investments is that most don’t have a lock-in period. This gives you all of the convenience of an ordinary checking or savings account with a much higher return.
CMAs also give you access to a full-fledged investment account. This makes CMAs one of the best short term investments for people who want the safety and convenience of a regular bank account with access to the financial markets.
I like Wealthfront for high-yield short-term investments. The company’s high-yield savings account (HYSA) gives you unbeatable rates, and its investment offerings include fully-automated portfolio management and pre-made portfolios.
2. Short-Term Bond Funds
Time period: Any
Potential returns: 1%–4%
Who it’s good for: Investors with low risk tolerance
Another one of the best short term investment options is putting your money in a short-term bond fund.
Bond funds are mutual funds or exchange-traded funds (ETFs) that hold bonds and debt securities instead of stocks. If you’re familiar with stock ETFs — like NYSEARCA: SPY or NASDAQ: QQQ — then you already know how bond funds work.
One point of confusion I see many people get stuck on is that the “short-term” in the phrase “short-term bond fund” does not mean that the investment is short-term. Short-term bond funds hold bonds with shorter maturity periods, typically between one and five years.
With that said, short-term bond funds happen to make excellent, safe short term investments. Bond funds have way less volatility than funds built with stocks, which means you don’t have to worry as much about being at a loss in the near term.
Another great thing about short-term bond funds is that you can take your money out whenever you want, just like you can with a stock ETF.
I prefer eToro for short term bond funds due to its simple user interface and low commissions.
eToro securities trading is offered by eToro USA Securities, Inc. (“the BD”), member of FINRA and SIPC. Cryptocurrency is offered by eToro USA LLC (“the MSB”) (NMLS: 1769299) and is not FDIC or SIPC insured. Investing involves risk, and content is provided for educational purposes only, does not imply a recommendation, and is not a guarantee of future performance. https://www.wallstreetzen.com is not an affiliate and may be compensated if you access certain products or services offered by the MSB and/or the BD.
eToro is a multi-asset investment platform. The value of your investments may go up or down. Your capital is at risk.
3. Certificates of Deposit (CDs)
Time period: 1, 3, 6, or 12 months
Potential returns: 3%–5.5% (but varies)
Who it’s good for: Investors who want guaranteed returns
If you’re looking for an extremely safe short term investment option, it’s hard to beat CDs. They have known returns, are backed by the FDIC, and usually have slightly higher returns than savings accounts.
Most banks offer 1-month, 3-month, 6-month, and 12-month CDs, with the longer term options sometimes coming with marginally higher rates, depending on how interest rates are expected to change.
Important: Some CDs come with penalties if you need to take your money out before the maturity date. If you know for sure you won’t need your money before the maturity date, that’s fine, otherwise, look for no-penalty CDs.
I use CIT Bank as my go-to for short term CDs. It offers multiple terms and competitive rates, which makes it easy for me to find the right combo I’m looking for.
Keep in mind that CD returns fluctuate with interest rates. In a high-rate environment like we’re in now, CDs are one of the best ways to invest money short term.
4. Money Market Mutual Funds (MMMFs)
Time period: Any
Potential returns: 1%–4% (but it varies)
Who it’s good for: People who want to preserve capital
Money market mutual funds (MMMFs) or just money market funds are often used for capital preservation since they offer low but stable returns. MMMFs usually hold short-term debt securities like Treasury Bills (T-Bills), corporate debt from reputable companies, and short term CDs.
I like to use MMMFs as a catch-all for when I’m looking to diversify my short term investments. They make it easy to get exposure to rates without having to put together a basket of CDs and T-bills myself.
One potential downside to MMMFs is that they have low yields in low-interest-rate environments. Throughout most of the 2010s, for example, most MMMFs had APYs between 0% and 1%.
I like Vanguard for MMMFs. I use Vanguard for some of my longer timeframe investments and appreciate the low expense ratios and minimum investments.
One thing to note before I move on: MMMFs are not the same thing as money market accounts. I’ll discuss money market accounts in a little bit, but for now, just know that MMMFs have slightly higher risks and returns than money market accounts.
5. U.S. Government Treasury Bills
Time period: 4, 8, 13, 17, 26, and 52 weeks
Potential returns: 3%–5%
Who it’s good for: Investors with low risk tolerance
Treasury Bills (T-bills) are one of the best investments for short term yields. They have virtually no risk because if the U.S. government can’t pay, you and I have bigger problems to worry about than our investments, like which post-apocalyptic tribe we want to join.
Seriously though, T-Bills are perfect for people who need a place to park their money for a few months. The returns are modest — typically a few percent — but the interest you earn is exempt from state and local income taxes, which gives T-bills a slight edge over other safe short term investments.
The easiest way to purchase T-bills is directly from the Treasury through the aptly-named website TreasuryDirect. The minimum purchase for T-bills is $100, and you can purchase in increments of $100.
6. Money Market Account
Time period: Any
Potential returns: 1%–4%
Who it’s good for: People looking for modest, steady returns
Money market accounts (MMAs) are similar to MMMFs but are offered by banks and credit unions instead of investment firms and brokerages.
MMAs offer higher yields than traditional savings accounts but usually fall a few percentage points short of MMMFs in exchange for lower risk.
One of the key differences between MMAs and MMMFs is that MMAs are insured by the FDIC since they’re deposit accounts, while MMMFs are not.
Another advantage of MMAs? Most come with check-writing capabilities and debit card access. If that’s not something you’re interested in, you may be better off with a MMMF.
I like CIT Bank for MMAs. The company has a low minimum of just $100 and usually offers the best rate available at any given time.
7. High Yield Savings Account
Time period: Any
Potential returns: 3%–5%
Who it’s good for: Investors with a 6 to 12 month horizon
A high yield savings account (HYSA) is one of the best high yield short term investments you can make and is my pick for the best 1 year investment. They offer higher yields than MMAs and are FDIC-insured, unlike MMMFs.
Most HYSAs don’t come with check-writing or debit access, so you’re better off with a MMA if those options are high priority to you.
You’ll have to contend with withdrawal limits. For longer time frames, between six and 12 months, this shouldn’t be an issue.
Even with these minor disadvantages, I believe HYSAs are the best short term investment options for high yields. I have had good experiences with CIT Bank’s HYSA offerings and wholeheartedly recommend you take a look if you’re interested in opening an HYSA.
8. Treasury Inflation Protected Securities (TIPS)
Time period: 5, 10, or 30 years
Potential returns: Tracks inflation, adjusted biannually
Who it’s good for: People who want their money to grow with inflation
Here’s a tip: TIPS, or Treasury Inflation Protected Securities, are excellent investments when inflation is running rampant.
TIPS are a type of U.S. government treasury bond with a value that grows based on the Consumer Price Index (CPI). When inflation is high, TIPS yield similarly high returns. When inflation cools off, TIPS offer deflation protection since you receive 100% of your principal at maturity even if CPI dips into the negative.
Speaking of maturity, why am I recommending a vehicle with a 5-, 10-, or 30-year time to maturity in an article about short term investments? While it’s true that TIPS have longer time frames to maturity than anything else on this list, you can always sell your TIPS on the secondary market if you need to.
The easiest way to invest in TIPS is through an ETF like NYSEARCA: TIP. You can also purchase them directly from the government through TreasuryDirect.
9. Corporate Bonds
Time period: 1–5 years
Potential returns: 1%–3.5%
Who it’s good for: People who want to diversify with low risk
Corporate bonds are just like government bonds, except — instead of buying the U.S. government’s debt — you’re buying debt from individual companies. The main advantage of purchasing corporate bonds is that they have higher yields than other types of bonds.
As is always the case, higher returns come with higher risks. If you purchase a corporate bond and the company can’t pay its debt, you’re out of luck.
You can mitigate this risk by purchasing corporate bonds from financially stable companies. Corporate bonds are rated on a scale from D to AAA, with AAA being reserved for the highest-quality bonds with the lowest risk of defaulting.
Even though you can buy corporate bonds directly from the companies that issue them, most people invest in corporate bonds through an ETF.
I recommend M1 Finance if you’re interested in corporate bonds. It gives you a solid selection of corporate bond offerings alongside tons of other more common securities like individual stocks, ETFs, and even some OTC securities.
10. Private Credit
Time period: 1 month and up
Potential returns: 5%–15%
Who it’s good for: People with a higher risk tolerance
Now we’re getting into some of the more interesting — and complicated — short term investment options. Investing in private credit involves lending money directly to private companies that aren’t listed on exchanges and don’t have access to public bond markets.
Basically, investing in private credit is lending money to a business in hopes that it will succeed and pay you back with interest.
Fundamentally, It’s no different than buying stock in a publicly traded company, except the company you’re investing in is not publicly traded.
In my opinion, Percent is by far the best way to get into private credit investing for people who have never been featured in Forbes.
The company’s platform makes private credit investing as easy as any traditional brokerage. Even better is that Percent offers investment horizons as low as one month, so you should be able to find an opportunity that meets your needs without much difficulty.
Unlike some private credit investing companies, Percent offers low minimum investments of only $500, which makes it way more accessible to get started than most people think.
Percent is only available to accredited investors. Want to learn more? Check out our article about the best investments for accredited investors.
11. Peer-to-Peer Lending
Time period: 6 or 12 months (but it varies)
Potential returns: 5%–12%
Who it’s good for: Investors with modest capital looking for higher returns
If you like the sound of private credit investing but don’t want to go through an asset management firm, peer-to-peer lending might be for you.
Peer-to-peer (P2P) lending bypasses the middle man and directly connects individual investors with borrowers. The minimum investment requirement is usually much lower, which benefits both the lender and the borrower.
In my opinion, P2P lending is the best 6 month investment you can make, assuming you can find a borrower with a 6-month time horizon. These opportunities aren’t as scarce as you might think, and they can really boost your returns if you find the right opportunity.
LendingClub is one of the best online resources for finding and investing in P2P lending opportunities, for my money.
If you decide to check out LendingClub and get into P2P lending, keep in mind that you’re taking on more risk than most of the other short term investments on this list.
Time period: Any
Potential returns: 5%–10%+
Who it’s good for: Investors with capital to spare
Stocks? On a list about short term investing? You can’t be serious?! I am. Let me explain.
Most of the short term investments on this list are aimed at investors who are looking to preserve capital with relatively low-risk tolerances.
But some investors are looking for short term investments as a means to maximize their portfolio’s growth, and for that purpose, stocks are king.
Swing trading on timescales less than one year is not for the faint of heart, but if you practice discipline and have a plan, it can be very rewarding.
Earnings plays, seasonal trends, and simple bandwagon trend-following can all be great ways to invest a small portion of your money if you’re already well-diversified.
In terms of swing trading platforms, I like moomoo. It’s easy to use and lets you trade stocks, ETFs, and options commission-free. It also comes with free access to level 2 data and tons of fun analysis goodies to play with.
Final Word: High Yield Short Term Investments
High yield short term investments might sound like the holy grail of investing, but they’re actually easier to find than most people think. If you’re just interested in chasing the highest yields, I think you’ll have the most success looking into HYSAs, private credit, and peer-to-peer lending opportunities.
If you’re a bit more risk averse, you can’t go wrong with a good old money market account or T-bills.
What are high yield short term investments?
High yield short term investments offer returns between 3.5% and 6% on time frames no longer than one year. Some short term investments can return more than 10%, but these are far from the norm and require more capital and risk tolerance than the average investor has.
What is the best short term investment to make money?
It depends on your goals, but T-bills or a HYSA are your best options over 3- to 12-month time horizons. Both offer virtually zero-risk and can return between 3% and 5% depending on the current interest rate environment.
What is good to invest in short term?
Any financial vehicle can be the right option short term, depending on your goals. Traditional securities like CDs, T-bills, and bond funds fit most short-term investors’ goals, but stocks, private credit, and HYSAs can also be great options.
Where to invest $10,000 for 3 months?
The answer is “it depends,” but I would consider a HYSA or T-bills if I couldn’t afford to take any losses. If I wanted to maximize growth, I’d look at putting it in stocks or a short-term peer-to-peer lending opportunity.
Where to invest $10,000 for 6 months?
Some options include T-bills, high-yield savings accounts, and CDs. Six-month CDs often have great rates in high-interest rate environments like the one we’re in now. More speculative investors might consider putting money in the stock market or a cash management account and splitting it between a broad market ETF and cash.
Where to Invest $1,000 Right Now?
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