Benefits Of Investing In Short Term Investment Plans
Updated On Nov 30, 2021
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Short-term investments are assets that can be converted into cash or can be sold within a short period of time, typically within 1-3 years. Common instruments for short-term investing include short-term bonds, Treasury bills, and other money market funds. Short-term trading or day trading entails a significant degree of speculation and, consequently, substantial risk.
Top Advantages of Short-Term Investments
Here's a few Advantages of short term investments:
Very Useful In An Emergency
This advantage is closely related to the first one. Because short-term investments are flexible, you can withdraw at any time, especially in an emergency.
When there is an emergency, many people think that the best solution is having cash because it is handy. But cash can’t give you interest. That’s why it’s always better to invest short-term.
Short-term investments provide faster returns than long-term investments. Faster results mean tangible results. You can enjoy the results immediately after only a few weeks or months of investment.
Suitable For Those Who Have Never Invested Or Just Started Investing
If you are a beginner investor, short-term investments can be a suitable instrument. In addition to not offering the various advantages above, long-term investments also tend to have higher risks.
While investing money in the stock markets with a short term outlook, you have the benefit of being able to withdraw your money anytime you want, if there is an urgent need. Most of the other forms of investments might need a lock in period or might not extend the benefits of returns if you choose to withdraw your money before maturity.
Invest in Derivative Instruments as Well and Earn in Falling Markets
If you plan your investments properly, then you can earn profits in bearish markets as well for the short term. Derivatives are trading instruments whose values are derived from the subsequent equities in the cash market. You can choose to invest in derivative instruments such as futures and options which can help you take advantage of the negative market trend and by first selling at high value and later buying at lower value.
Agility to Withdraw Funds in Face of Losses
Many people often claim that for investments in stock markets to give proper returns, one needs to simply buy and hold. However, it is not always the case. These legendary investors have also made investments in many companies whose share prices have fallen and have led to erosion of their wealth. As a short term investor, your strategy will prevent such losses as you are likely to be more agile and careful of staying away from loss making positions.
Enjoy money that continues to grow over time, without having to wait long. And by the way, by intentionally locking your money, you also reduce unnecessary spending.
Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.