A guide to making short-term investments

Investing is rewarding, provided you make the right choices. Short-term investments can be great alternatives for fast returns since only some financial goals can be achieved through long-term investing. Although most investments have been designed to grow over time, sometimes you may have a short window to make investments. There are several high-return short-term investments to consider, such as KredX’s safe investments with high returns, such as invoice discounting. Usually, most investors consider these options as they are the best way to invest money for the short term and make quick profits. This article looks at the short-term investment options and factors to consider when signing for these instruments.

Understanding short-term investments

Short-term investments are time-sensitive investments that can quickly generate profit, preferably within 1-3 years. Common short-term instruments include market funds and treasury bills. High returns, liquidity, and safety often characterise these instruments. Additionally, the instruments offer flexibility to the investor since they don’t have to wait for maturity to get their money. They are less risky since the money committed per transaction is considerably lower, and returns can be realised quickly. 

How do short-term investments work?

The objective of short-term investment options is to protect capital and, at the same time, generate returns the same way long-term investment options do. For example, a high-net-worth individual can make short-term investments because they can afford to commit cash in products such as alternative investment through KredX Invest App to earn higher returns within a short period. 

An investment is considered short-term if it is liquid so that investors can buy and sell quickly. Also, invoice discounting investment can be classified as a short-term investment because investors can get their money back within 30 to 90 days. For example, KredX’s invoice discounting investment involves investors loaning money to businesses against their unpaid invoices, which they will get back once clients honour the invoices. Additionally, the investment has to mature within a short period, like 12 months.

Factors to consider when making short-term investments

Risk level 

Investments carry some risk, and if you are investing, you should understand that there is the potential to make losses. However, considering short-term investments have a short tenure, keeping risk levels at a minimum is vital. The trick is to avoid volatile instruments because there is no adequate time to recover from losses if one chooses a risky asset. 

Generally, risk-taking is rewarding for investors with long-term financial goals. For example, you could make more money by investing in instruments with more risk for your long-term goals, such as equities, instead of focusing on less risky alternative investments via KredX. On the other hand, focusing on less risky investments is ideal if you have short-term goals. 

Taxation 

When making an investment decision, it is vital to consider tax laws and possible future tax implications. Your investments may be safe, but taxation could impact potential profits. Understanding the tax regulations will help you make investment decisions to protect your investments. 

Investment tenure 

You should have a timeline for your investment goals, which indicates that the high-return short-term investments must likewise have a set lifespan. Interestingly, you can create a more extensive portfolio if you invest in a single instrument in the short term. The optimum time frame for investment is vital because while growing assets are better for the long term, liquid and income-producing assets are better for the short term. For instance, the compounding premise of equities makes it a stronger long-term wealth-generation vehicle than any other. Long-term investments also offer the potential for profit, but only some investments provide significant gains.

Investment portfolio

Your investment portfolio is a big consideration when considering short-term alternative investments. When making investments or liquidating them, timing is crucial because markets fluctuate. It is essential to diversify your investments, even if they are short-term. Therefore ensure your asset classes contain diverse instruments to protect against losses. 

For instance, if one instrument’s investment return drops, you can offset your losses with other safe investments with high returns. Additionally, portfolio diversification is crucial because it greatly affects whether you will reach your investment goals. Your investments might not generate sufficient returns to achieve your objective if you don’t take on enough risks in your investment portfolio.

Portfolio rebalancing 

Portfolio rebalancing refers to bringing one’s portfolio back to the original asset allocation blend. Rebalancing your portfolio ensures that you emphasise particular investment instruments and will have your portfolio within an acceptable risk level. Changing your portfolio composition by shifting funds from a low-performing instrument into a high-performing asset category can achieve your desired result. The decision may seem difficult, but it will turn out to be the right one in the long run.

Rebalancing your portfolio is easier when you follow a calendar. A rebalancing strategy should follow a calendar, and it should take place every six or 12 months. 

Bottom Line

In conclusion, short-term investments can be a faster way of generating high returns, but it depends on the instruments one chooses. Some of the products offered by KredX, such as invoice discounting and short term investment are examples of investment alternatives that promise high yields in the near time. Finally, a good investment strategy should consider risk level, investment tenure, taxation, investment portfolio, and rebalancing to succeed. 

If you are looking for short-term investments with high returns, consider KredX’s alternative investment and invoice discounting products.