For many of us, our goal is to live comfortably — especially during the golden years of retirement.
To do so, financial investments are essential.
And as we learned from 2020, our nation’s economy and individual financial stability can be compromised, leaving many people scrambling for income.
As the coronavirus pandemic continues, 2021 could be just as rocky.
To help secure your future and give you flexibility with your finances, take the time to familiarize yourself with some of the best short-term investments in 2021.
Short-term investments are ones you would typically make for less than three years. Although there can be some risk involved, like other investment opportunities, you can end up with more money than you invested.
1. Short-Term Corporate Bond Funds
A corporate bond is a bond that has been issued by major corporations to their investments.
This form of short-term investment is typically considered safe, as it can pay interest at regular intervals.
The company or companies pay the interest rate at predetermined intervals, typically annually or semiannually. The returns on principal are then paid on the maturity date, ending the investment.
Corporate bond funds are typically a collection from different companies across a variety of industries.
The diversification can mean that a poorly performing bond won’t hurt the overall return on investment.
Short-term corporate bonds are not insured by the government, but they are still quite safe — especially if it’s a diversified group of companies.
This form of short-term fund investment offers a low amount of risk to interest-rate changings — so rising or falling rates won’t hinder the price of the fund too much.
2. Savings Account
Utilizing a savings account with a credit union is an ideal alternative for safeguarding your money in addition to a checking account.
Customers with a savings account at Hudson River Community Credit Union will benefit from earning an annual percentage yield (APY). And even though the rate can be lower than other short-term investments, if you like being able to see (and withdraw) your money, this could be the ideal option.
This form of investment is insured by the NCUA, meaning you won’t lose money. Savings accounts pose no real risk to finances.
For those who open a savings account with HRCCU, keeping an eye on your money has never been easier — even with the coronavirus pandemic. Our mobile banking app means you can check your account without having to leave your home.
3. Short-Term U.S. Government Bond Funds
A government bond is similar to a corporate bond, but it is issued by the United States government.
This form of bond purchases investments like a treasury bill (T-bill), treasury bonds (T-bonds), or treasury notes (T-notes).
The difference between bills, bonds, and notes are the maturity lengths.
- Treasury bills are issued in maturity terms of a single year or less.
- Treasure bonds in maturity terms of 10 years to 30 years.
- Treasury notes are issued in maturity terms of two years to 10 years.
Treasury bills, bonds, and notes are sold as an auction with a fixed interest rate. During times when demand is high, bidders are likely to pay more than the face value to receive the fixed rate.
The Treasury Department will then pay interest rates every six months for notes and bonds. Bills will be paid at the point of maturity.
These bonds are considered to be low-risk.
4. Dividend Stock Funds
As we saw in late January 2021, the stock market had unusual activity, leaving many to wonder what’s going to happen next.
But that doesn’t mean you shouldn’t look to invest in stocks — you just need to find the best short-term investment stocks for you.
Stock market investments are made a bit safer when the stock pays dividends.
A dividend is a portion of a company’s profit that can be paid to shareholders, typically on a quarterly basis.
Investors can earn money quickly by utilizing short-term payouts, but money can also be gained through long-term market appreciation.
As with any stock investment, there are risks involved. But dividend stocks are considered safer compared to non-dividend stocks so it’s important to carefully build a portfolio.
5. Cash Management Account
Cash management allows investors to put money in a variety of short-term investments while acting like an omnibus account.
An omnibus account refers to accounts that hold more than one item — cash or asset — and is overseen by an asset manager or robo-manager.
Investors can utilize a cash management account to invest into or transfer money in addition to many other bank-like activities. This form of investment offers a significant amount of flexibility.
There are not a lot of risks associated with this account as they are low-yield market funds.
It is advised to work with an FDIC-protected partner bank to ensure proper money management and protection.
For more ways to invest in your future and how to determine the best short-term high yield investments that will work for you, contact our financial advisors today.
We’ll be happy to answer any questions you might have and give you peace of mind about the decision you’re making.