If you have some money saved in an account that earns 0.01% interest, you can invest it to make more money. You can invest in stocks or bonds, giving you a higher return than just leaving the money in the bank. Talk to a financial advisor to learn more about your best option.

Short-term investing is tricky. If you invest your money in the stock market, you could lose it all. But if you put your money in a traditional savings account, it won’t earn much interest. What should you do?

What is a short-term investment? There is no official definition because no governing body defines it. It’s up to each person to decide what they think is short-term or long-term. For me, short-term investment is anything I’m investing money I’ll need in fewer than five years.

If you want to start investing, one of our recommended choices is Wealthfront. They have a low minimum balance, low fees, and an easy-to-use interface. They’re an excellent option for getting started with investing quickly and easily.

The stock market usually doesn’t lose money over five years. But it can happen. Looking back at the 1930s and 1940s, you will see that there were times when the stock market lost a lot of value in 5 years. For example, in 1932, the stock market lost 60.9% in value over five years.

The stock market rarely goes down, and we can fix it in five years. Usually, it takes us at least five years to pull out of a significant stock market correction or a bear market. Of course, this is not always true. We could enter a bear market that takes ten years to recover from.

The 10 Best Short-Term Investments

1. Lending Club

Lending Club is an excellent option with the potential for higher returns. This peer-to-peer lending platform makes it simple to invest in loans to individuals and businesses. It makes investing in loans to individuals and companies easy. It’s also perfect for short-term lending; the platform’s loans are for three or five years. Lending Club is a reasonable alternative if you know you won’t need the money until then.

When you invest in loans, you can get a higher return on your investment. However, this also means that there is a higher risk that you might not get your money back. Investing in a diverse range of loans is essential if one wishes to keep their exposure to risk to a minimum. It will help protect you if one of the loans goes into collections or defaults.


  • It is straightforward to invest in a diverse loan portfolio.
  • Potential for high returns in the short term


  • Not FDIC-insured
  • Cannot liquidate the loans early
  • Potential for losses

2. Certificate of Deposit

Certificates of deposit (C.D.s) is an investments where you agree to leave your money with the bank for a set period. In exchange, the bank pays you a higher interest rate than you would get from keeping your money in a savings account. The longer you agree to save your money with the bank, the higher the interest rate you’ll receive.

However, there is a risk associated with C.D.s. You might have to pay a fee if you need your money before the term. That is why it’s essential to read the terms and conditions before signing up for a CD.

You can withdraw funds from a CD before it matures. For example, you could put money into a 5-year CD but withdraw it after the first year. But if you do this, most banks will charge you a penalty. The amount of liability varies depending on the bank and the type of CD.

That’s why keeping your money in a CD is best until it matures. That way, you won’t have to worry about paying the penalty. That is why choosing the length of the CD is so important.

You want to find a CD that offers a long term so that you can make the most interest. But you don’t want to pay the penalty if you take the money out early.


  • FDIC insured
  • From six months to five years or more, CD terms are available.
  • Higher interest rates on longer-term C.D.s
  • Can create a CD ladder


  • Still relatively low-interest rates
  • Penalty for early withdrawal

3. Investing With Betterment

Betterment is an exciting way to invest money. It’s not an investment, but it’s a company that makes investing in stocks and Bond ETFs easy. It can be used for various investments, including long-term retirement investing. But if you want to use it for shorter-term investments, you must get the asset allocation right.

Betterment lets investors choose how to split their money between stock ETFs and bond ETFs. For short-term investing, putting half of your money in stock ETFs and half in bond ETFs can protect you from losing money while also allowing you to make more money.


  • Very easy to implement
  • Money can be withdrawn at any time
  • Potential for much higher returns
  • Fees are very low


  • Not FDIC-insured
  • Potential for capital losses

4. Online Savings Account

If you’re looking for a place to save money, traditional banks offer very low-interest rates, as close to zero, as you can. However, some online banks offer better rates. Today’s top online savings accounts pay around 0.50%. Chime now offers an APY of 0.50%, which is competitive with the best online savings accounts available. Chime provides a fantastic online savings and checking account for savers.

Chime is a financial technology company, which means that it provides different services than a bank. Banking services and debit cards are provided by The Bancorp Bank or Stride Bank, N.A., both of which are members of the FDIC. Chime cannot guarantee when the IRS will send files or if funds will be available.


  • FDIC insured
  • Funds can be withdrawn at any time
  • Rates better than a brick-and-mortar bank
  • No monthly fees


  • Interest rates are still low
  • Inflation exceeds the rates

5. Municipal Bonds

Bonds have one disadvantage: taxes. Bond interest, as well as capital gains, are taxed.

Municipal bonds are one way to reduce the tax burden (known as “munis”). These bonds don’t have federal income tax and might not have state income tax either. Munis are an excellent option for people in higher federal tax brackets.

The SEC yield on this fund is lower than that on similar taxable bonds. However, it is essential to compare the yields on an after-tax basis. This fund currently has a yield of almost 2%.


  • Potential for higher returns
  • Tax advantages
  • Easy access to funds without penalty


  • Losses are possible.
  • Those in lower tax brackets will be disappointed.

6. Short-Term Bonds

It would help to decide a few things when choosing a low-cost index mutual fund or ETF. You must determine if you want a fund that only invests in government bonds in the United States or one that also invests in corporate bonds. It would help if you also decided whether you want a short-term or intermediate-term bond fund.

Making decisions always entails trade-offs. Government bonds in the United States are more secure than corporate bonds, but they typically pay less interest. Short-term bonds are less vulnerable to interest rate fluctuations than intermediate-term bonds, but they also usually pay less interest. Short-term government bonds currently pay little more than an online savings account. For example, Vanguard’s short-term Treasury fund has an SEC yield of only 1.25%.

While intermediate-term funds may lose money in a given year, their performance is generally consistent. For instance, Vanguard’s Intermediate-Term Bond Index Fund (VBILX) costs just 0.07% and yields over 2.50%.


  • While not FDIC-insured, it is still reasonably safe.
  • Intermediate-term bonds can provide significantly higher interest rates than savings accounts.
  • When necessary, funds can be withdrawn from the fund.


  • Not FDIC-insured
  • Can lose money
  • Rates are historically low

7. Bulletshares

Traditional bond funds have a disadvantage. They may suffer capital losses as the fund sells bonds to purchase new ones. If interest rates rise, the fund suffers a loss on bond sales.

Guggenheim’s Bulletshares are ETFs that offer a bond fund’s potential returns combined with a CD’s stability. With traditional bond funds, the management regularly sells bonds as they mature and replaces them with new bonds with a longer maturity. Bulletshares, on the other hand, have a fixed term of one to ten years.

Assets are returned to shareholders at the end of the term. It differs from C.D.s because shareholders can sell their ETF shares without penalty.

There are two types of Bulletshares: corporate bonds and high-yield corporate bonds. The first invests in investment-grade corporate bonds, which have a lower risk. The second type buys corporate bonds with a credit rating below investment grade. This type has a higher risk but also offers higher returns.

For example, the Guggenheim BulletShares 2020 High Yield Corporate Bond ETF has a current yield to maturity of more than 5%.


  • Higher potential returns
  • ETF shares can be purchased and sold at any time.
  • Dates of maturity fixed.


  • Not FDIC-insured
  • Funds can lose money

8. Wealthfront

Higher potential returns

ETF shares can be purchased and sold at any time.

Dates of maturity fixed.


  • Very easy to implement
  • Money can be withdrawn at any time
  • Potential for much higher returns
  • Fees are very low


  • Not FDIC-insured
  • Potential for capital losses

9. Worthy Bonds

Worthy Bond is a site where you can invest money in bonds from small businesses. The bonds are not guaranteed, but some are backed by collateral. You can invest as little as $10.

The Worthy Bonds mobile app helps you invest money. The app uses something called round-ups. The app takes small amounts of money from what you spend and puts it into your investment account. For example, if you spend $4.10 on a cup of coffee, the app will charge your account $5. It means that $4.10 will pay for the coffee, and $0.90 will go into your investment account. Once you have saved up $10 in round-ups, the funds can be used to purchase a bond through the app.


  • Invest as little as $10.
  • A $1,000 investment can be spread across 100 different bonds.
  • Weekly interest is credited
  • Your account is not charged any fees.
  • Earn interest at a rate more than twice the rate of inflation.


  • It pays only simple interest and does not compound for greater returns.
  • You can invest 10% of your net worth, annual income, or $100,000.

10. SmartyPig

Our final investment option is a novel take on online savings accounts. SmartyPig combines high yield with savings objectives. SmartyPig currently offers a high-yield savings APY of 1.55% as of August 2018.

With SmartyPig, you set specific savings goals. You can set multiple goals or just one. You then add to the account until you reach your goal. In this way, SmartyPig is ideal for short-term savers who want to save for a specific purpose.


  • FDIC-insured
  • Potential for returns higher than most online banks
  • It makes saving for a specific goal very easy


  • Low rate compared to other options.

Is the Stock Market a Good Place to Invest for the Short Term?

Understandably, you might be curious about this. After all, when the market is rising, it can be painful to miss out on potential profits. But it’s important to remember that you can also lose money in a short period if the stock market goes down.

The public is an app that helps you invest in stocks. It is suitable for short-term investments because it doesn’t have fees. You don’t have to pay a commission when you buy or sell a stock, so you can move your money in and out of the market without worrying.

How to Manage Your Short-Term Investments

You can use Personal Capital’s free financial dashboard to track and analyze all of your investments, no matter where they are located. It will make it easier for you to track them and make intelligent decisions about your money.

With Personal Capital, you can connect your 401(k), 403(b), IRAs, and other investment accounts. By doing so, you can monitor the performance of your investments and determine whether your asset allocation needs to be adjusted.

Personal Capital also offers a Retirement Planner for free. This tool will show you if you are on track to retire successfully. If this is too complicated or something you do not want to do on your own, you may want to think about working with a financial advisor or investment advisor. We suggest visiting Paladin Registry, where you can fill out a form online telling them what you are looking for. They will email you a list of three highly-rated professionals that match your needs. From there, interview each one and choose the best fit.

Read more: How to Invest During a Bear Market

Frequently Asked Questions About Best Short-Term Investments

What Are 3 Short-Term Investments?

Some good short-term investment options are certificates of deposit, short-term mutual funds, commercial papers, government treasury bonds, money market accounts, etc. If you decide to hold an asset for longer than you originally planned, it can become a long-term investment.

Why Is My 401k Losing Money Right Now 2022?

401(k)s can lose money for various reasons. The stock market might be going through a rough patch, or you could have invested in a company/industry that- currently- is not doing so hot. Fees are also another contributing factor to lost 401(k) money.

Is Short-Term Investing Worth It?

A short-term investing or savings account is where you can put your money to get it when you need it quickly. You can also earn some interest on the money you put in the account. It is a good idea because today’s interest rates are higher than in the past.

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