14 Best Short-Term Investments

Every few weeks, someone emails me asking for the best short-term investment.

They’re usually saving for their first home and they want to optimize their earnings. They don’t want to gamble it in some bitcoin. Or put it all on black. They want some kind of return without putting it at risk.

When I think about my money, I think of it as being in time capsules. Anything I need in the next five years must be non-volatile and safe.

I still want to get a few cents in interest, though. With inflation, anything in cash is losing purchasing power every single day. If I can slow down that process, I’m all the happier.

The following investments are considered among the highest-yielding products with the lowest risk over the short term.

Table of Contents
  1. What Is a “Safe” Investment?
    1. Debt Investments
    2. Equity Investments
  2. What’s Considered a Short-Term Investment?
  3. Short-Term Savings Accounts
    1. Bank Deposit Promotions
    2. Online High-Yield Savings Accounts
    3. Money Market Accounts
    4. Cash Management Accounts
    5. Certificates of Deposit
    6. Brokered CDs
  4. Short-Term Funds, Bonds and Bills
    1. Money Market Mutual Funds
    2. Series I Savings Bonds
    3. Short-Term Treasury Bills
    4. Municipal Bonds and Funds
    5. Short-Term Corporate Bonds
    6. Small Business Bonds
  5. Short-Term Real Estate Investments
    1. Real Estate-Backed Notes
    2. Tax Lien Certificate Auctions
  6. A Note About Low-Risk Investments
  7. FAQs
  8. Final Thoughts

What Is a “Safe” Investment?

When you talk about investments, they come in two main varieties: debt and equity. Neither are inherently safer or riskier.

Safe investments are loans to entities deemed safe. Lending money to the U.S. Government is safe because it’s likely to be repaid. Lending money to your cousin and his new business venture is less safe. Lending money to your 6-year-old nephew is even less safe.

Safety does not mean you will not lose money or purchasing power. Inflation is ever present and it’s why you could get a pack of baseball cards for 5 cents many many years ago (though you could probably still find bazooka gum for a nickel!).

Interest rates are also a concern. As interest rates rise, any fixed interest rate investment loses relative value. If you try to sell it on the market, it’ll be worth less than what you paid to get into it (in the case of a bond fund). If you hold it until maturity, you’ll still get all your safe money back. Safe means your principal is safe.

Debt Investments

With debts, you lend your money to an entity and they pay you interest. The safety of that loan depends on the entity. Most safe investments are structured as loans.

With a loan, I’ll give you a little extra interest if you promise you won’t ask for your money back sooner than I expect. If you lend me money for 12 months, I’ll give you one interest rate. If you lend me money for 30 years, I’ll give you a higher one. If you want your money back earlier, I might claw some of that interest back (this is, essentially, what happens with a certificate of deposit).

Equity Investments

With equity, you buy a piece of something and can sell that piece later, hopefully for a nice gain. Riskier investments are often structured as ownership.

With ownership, you buy a piece of me, my business, or some other asset. You may get a periodic payment (dividends) but the bulk of the return is on equity appreciation when you sell. It’s riskier because the ownership piece can go up or down in value. Sometimes it can go up and down in value independent of the asset, like with publicly traded stocks.

What’s Considered a Short-Term Investment?

Short-term investments usually have an investment period of two years or less, and they often share the following traits:

  • High liquidity: You can usually sell or withdraw your position within a few days or weeks penalty-free and at face value.
  • Minimal risk: Most short-term investments are considered “risk-free,” thanks to being federally insured and having a short investment period and excellent financial credit rating. Full disclosure: Every investment has some risk, but most short-term assets allow you to sleep peacefully knowing that your principal investment is safe.
  • No fees: Many don’t charge transaction fees or monthly service fees. If they do, it’s minimal. However, your investment income may be fully taxable in a non-retirement account.

The various investments, which we’ll explore below, have different yield potentials, risk levels, and redemption options. 

Short-Term Savings Accounts

Classic savings accounts are the original way to invest your money — you put some funds into a bank, and the bank pays you a bit of interest in exchange. However, traditional savings accounts don’t offer much return on your deposit.

That’s why it’s better to pursue high-yield options that still offer a safety net, but with much better returns.

Bank Deposit Promotions

You can earn bonuses at banks that are running huge sign-up promotions. Banks are competing for business and that includes giving you a few hundred bucks to open an account. In most cases, you deposit some money, set up a direct deposit, and wait for the cash.

I keep an updated list of the best bank promotions with a minimum $100 bonus. If you don’t have a direct deposit to move around or don’t want to deal with it, here are bank bonuses that don’t require a direct deposit.

You have to keep an eye on the minimum deposit amount (often to avoid a maintenance fee) and other requirements but the money is out there just for the taking.

Why We Like Deposit Promotions

  • 100% safe because nothing is at risk
  • Lots of competition means lots of options to choose from
  • Access your money when you want

Downsides and Potential Risks

  • Often require a high minimum deposit
  • One-time payout rather than ongoing earnings

Online High-Yield Savings Accounts

Your brick-and-mortar bank pays you nothing in interest. Those 0.01% APY rates are a farce.

But online banks will pay you 5% or more, depending on prevailing interest rates. You won’t get rich, you won’t even beat inflation, but you’re beating brick-and-mortar banks.

high-yield savings account can earn significantly more than accounts offered by traditional brick-and-mortar banks.

The best part is that you still get up to $250,000 in FDIC insurance benefits. 

Most accounts don’t have any minimum balance requirements, although you may have to deposit $100 or more to get started. In addition, online accounts require you to transfer funds from a linked account through your bank’s website or mobile app. You can’t deposit funds in person.

High-yield accounts offer plenty of liquidity as your deposits are available for withdrawal within a few business days. However, the number of free withdrawals may be limited, so you won’t want to use this account for paying bills. A rewards checking account is a better place for spending money.  

Why We Like High-Yield Savings Accounts

  • Earns a competitive interest rate
  • No monthly service fees
  • Little or no balance requirements
  • No minimum investment period
  • Up to $250,000 in FDIC insurance

Downsides and Potential Risks

  • Variable interest rates
  • Potential lower yield than CDs and fixed-income investments

For help finding the best high-interest savings account yields, check out MaxMyInterest.

Money Market Accounts

Banks also offer money market accounts, which share many similarities to online savings accounts, including FDIC insurance, higher-than-average interest rates, and low or no balance requirements.

A primary difference is that you can request a debit card to make ATM withdrawals or pay for purchases. As a caveat, you’re limited to six monthly withdrawals, so a free checking account is still better for day-to-day spending.

Money market accounts earn a competitive interest rate, but you should compare the yield to high-yield savings accounts to see which one has the highest rate. You may consider opening one of each to transfer your funds to the higher-yielding product. The rates are variable for savings accounts and money market accounts.

Why We Like Money Market Accounts

  • Competitive interest rate
  • No account service fees
  • Low or no minimum balance requirements
  • You may receive a debit card for withdrawals
  • Up to $250,000 in FDIC insurance coverage

Downsides and Potential Risks

  • Variable interest rates
  • May have a lower yield than savings accounts and CDs
  • The debit card can make withdrawing funds too easy

Cash Management Accounts

cash management account has many overlapping traits as a high-yield savings account, but it can be a better fit if you want to keep your uninvested cash and stocks with the same platform instead of transferring it to an online bank.

Some of the best account benefits include:

  • High interest rates
  • Can be insured up to $5 million (varies by platform)
  • Unlimited monthly withdrawals
  • Optional debit card
  • Zero account fees

Your interest rate should be competitive with high-yield savings accounts. In addition, unlike the six withdrawals per month limit inflicting most high-yield accounts, you can also make unlimited monthly withdrawals and transfers.

One key difference is that cash management accounts offer “passthrough” FDIC coverage or SIPC insurance exceeding the standard $250,000 insured deposits threshold. These accounts offer higher coverage limits as they have multiple partner banks, but the platform you open an account with may not be federally insured.

Additionally, high-net-worth households that already bank with a passthrough insurance partner will have a lower insurance limit. This is because any banking account you have directly from that partner reduces the $250,000 of coverage per bank limit with your cash management account.

Some of the best cash management providers include:

Many robo-advisors offer cash management accounts — which is beneficial if you prefer managed portfolios. In most cases, you don’t need a brokerage account to open a cash management account.

Why We Like Cash Management Accounts

  • Competitive yields
  • Unlimited monthly withdrawals
  • Can quickly transfer funds to investment accounts
  • No monthly fees
  • Low balance requirements
  • High account insurance limits

Downsides and Potential Risks

  • The provider might be SIPC-insured but not FDIC-insured
  • Passthrough federal insurance is from partner banks
  • Account balances at partner banks reduce your total FDIC insurance limits
  • May require opening an investing account first

Certificates of Deposit

Certificates of deposit are the textbook example of trading flexibility for more interest. CDs are popular because they’re FDIC-insured and will not lose value. They’re also easy to compare because most banks offer the same terms.

The only difference to look at (beyond the interest rate) is the early withdrawal penalty, which is what you pay by closing a CD early. Most banks will take out 90 days of interest on CDs with a term shorter than 12 months, and 180 days’ on terms greater than 12 months. Banks that offer 60+ month CDs may take as much as 365 days of interest.

But with a no-penalty CD, you can usually withdraw your funds beginning seven days after the funding date without sacrificing your earned interest. Most no-penalty CDs have a maturity date of 12 months or sooner, although some banks offer weird CD term lengths from one month to 15 months.

So, you can park your cash in this short-term investment vehicle with your desired rate and maturity date. If you find a better investment, you can redeem your CD early without any penalties and start earning a higher return.

If interest rates decrease, you can continue squeezing out a higher yield until the maturity date. When your CD matures, your redemption options are to either cash out or renew for a similar term but at the then-current interest rate. If you don’t anticipate needing your funds before maturity, locking up your cash for a specific term is an easy way to get a higher yield.

You can increase your total return by taking advantage of CD ladders. This is when you stagger your savings into longer maturity CDs.

Why We Like No-Penalty CDs

  • Redeem as soon as after the first seven days
  • No early redemption penalties or fees
  • Low deposit requirements
  • Earn a fixed interest rate until maturity

Downsides and Potential Risks

  • Yields can be lower than traditional CDs or brokered CDs
  • The interest rate at renewal can be lower if rates decrease 

Related: Best CD Rates Today

Brokered CDs

Brokered certificates of deposit are slightly different than regular bank CDs, so I broke them out into their own category. They’re called “brokered” CDs because you buy them through a brokerage firm, like Vanguard or Fidelity. A brokered CD is still initiated by a bank, so it has the same FDIC insurance protections as regular CDs, they’re just purchased through brokerages.

What’s nice about brokered CDs is that the brokerage will sell you CDs from a variety of banks. This can include better yields at obscure banks you may have never thought about. This also means you could, in theory, sell the brokered CDs on the market but generally speaking the market is small for these.

Brokered CDs can also come in two varieties: callable and non-callable. Callable means the bank can “call” the CD and buy it back. Regular CDs can also be callable and non-callable, though most are non-callable. Callable CDs typically have higher interest rates because you take on more risk — the bank can simply call the CD if they can get rates lower.

Lastly, the minimum deposit amount for most brokered CDs will be much higher.

Why We Like Brokered CDs

  • Better yields than traditional CDs
  • Access CDs from a variety of banks
  • FDIC-insured

Downsides and Potential Risks

  • Best interest rates come with higher risk
  • Usually require a high minimum deposit 

Short-Term Funds, Bonds and Bills

Bonds and funds are safer invesment options than playing the stock market — especially when you start looking at options like government-backed savings bonds. If you want to invest rather than just drop your money into an account, but still ensure a relatively safe return, the following are some solid options.

Money Market Mutual Funds

If your brokerage account has a sizable cash position that you don’t plan to invest in the markets in the near future, a money market mutual fund can help you earn a higher yield. You get to keep the cash in your portfolio, earn a higher rate, and enjoy ample liquidity.

Money Market mutual funds invest in low-risk, short-term securities such as government and corporate assets and tax-exempt municipal bonds and are easier to buy than individual bonds.

Legacy brokers, such as Schwab, Fidelity, or Vanguard, provide in-house money market funds with minimum investments as low as $0 and no transaction fees. There are multiple fund options, and you can quickly compare the 7-day yield to help choose your best option.

Shares usually trade at a static $1, yet shares can trade at a discount price. If you sell during this uncommon event, you can lose money. 

Yields are variable, so you will need to monitor the current rate regularly and be ready to switch funds to chase a higher return. Having multiple funds can diversify your portfolio as these products are not FDIC-insured like a savings account or the similarly sounding money market account. 

You will usually need to use a discount brokerage instead of a micro-investing app to buy a money market fund.

Why We Like Money Market Funds

  • Earn competitive rates on uninvested cash
  • Low minimum investment
  • High liquidity with no minimum holding period

Downsides and Potential Risks

  • Variable yields
  • Not FDIC-insured (although they invest in regulated assets)
  • Cannot select investments held within the fund
  • The share price may decline and result in investment losses

Series I Savings Bonds

Rising inflation is hard on long-term bond investments that are a traditional shelter for conservative investors. In addition, long-term bonds historically outperform short-term investments with a higher yield. But that’s not the case during an inverted yield curve.

Inflation-linked bonds can provide higher yields and the flexibility of holding for a brief or extended period.

Series I Bonds offer the most flexibility, and you own the physical bond. The minimum holding period is one year, and they mature after 30 years. Early redemptions result in a three months’ interest penalty. 

You can purchase I Bonds from the U.S. Treasury Direct site in $25 increments. The yields adjust semi-annually. Your interest income is subject to federal taxes but exempt from state and local. If you use the interest for education, they are exempt from federal taxes as well.

If you buy a Series I bond issued between November 2023 - April 2023, you will earn 5.27% APY for the next six months.

Series I Savings bond interest rates are determined by a fixed rate and a floating semiannual inflation rate. The current fixed rate is 1.30% and the semiannual inflation rate is 3.94% — this will be recalculated every six months and a new rate will apply.

The composite rate ends up being 5.27% APY.

(It is only this high because of inflation so while it’s attractive, remember why it’s that high!)

You can buy a maximum of $10,000 in electronic bonds or $5,000 in paper bonds each year (using Form 8888 for your tax return) and you can do so through TreasuryDirect.

(Do you have existing savings bonds? Here’s how to check how much your savings bonds are worth.)

Why We Like Inflation-Indexed Bonds

  • Can have higher yields than standard investment-grade bonds
  • Yields can be higher when core inflation increases
  • Low minimum investment
  • Can purchase ETFs through a brokerage or retirement account

Downsides and Potential Risks

  • Yields decrease as inflation cools
  • May need to hold for at least one year
  • Mutual funds and ETFs may perform differently than actual bonds

Short-Term Treasury Bills

Treasury securities are bonds sold by the U.S. Treasury. They are backed by the full faith and credit of the United States Government.

U.S. Treasury Bills (T-Bills) carry minimal risk and can have a higher yield than longer-term government or corporate bonds.

T-Bills have a maturity date of 4, 8, 13, 17, 26, and 52 weeks. Auctions are held weekly for most bonds and monthly for 52-week terms at TreasuryDirect. The minimum investment is $100 per note, but you may need to buy $1,000 per auction.

There are a ton of other Treasury products, such as:

  • Treasury Notes: T-notes are bonds you buy at face value but pay interest every six months until they mature (maturity terms are 2, 3, 5, 7, and 10 years).
  • Treasury Inflation-Protected Securities (TIPS): TIPS are marketable securities (so you can sell them on the secondary market) whose principal is adjusted by the CPI (Consumer Price Index). When the TIPS matures, you get get the adjusted amount or the original principal, whichever is greater (i.e., deflation doesn’t hurt you).
  • Treasury Bonds: Treasury bonds are only available with a 30-year term and pay interest every six months until it matures.
  • Floating Rate Notes (FRNs): FRNs are two-year notes that are sold below, at, or above face value. When it matures, you get face value.

You can get these from your bank or broker but you can also buy them directly via TreasuryDirect.gov.

Alternatively, you can invest in mutual funds that hold Treasury bills (among others). This is “riskier” than holding the bills because the value of the fund can change based on other factors. When interest rates rise, the value of the fund will fall. The value of a Treasury bill will go down as interest rates go up and the fund will reflect this.

Some of the short-term T-Bill ETFs to consider researching include:

  • SPDR Bloomberg Barclays 1-3 Month T-Bill ETF (BIL)
  • Goldman Sachs Access Treasury 0-1 Year ETF (GBIL)
  • US Treasury 6-Month Bill ETF (XBIL)

Most bond index funds have an annual expense ratio of 0.15% or lower. Further, most investing apps don’t charge trading commissions and may allow fractional investing to invest small amounts of money at a time. 

A potential downside to buying bond funds instead of actual bonds is that the ETF share price can differ from the dividend yield. So, it’s possible that your investment performance can be negative if the fund’s share price decreases more than the yield.

For this added risk, you get the flexibility of redeeming your shares when you want.

Why We Like Short-Term Treasury Bills

  • Can have higher yields than longer terms
  • Low minimum investment
  • Minimal fees
  • Can buy directly or through passive index funds
  • Backed by the full faith and credit of the United States Government

Downsides and Potential Risks

  • Share price fluctuations impact fund performance
  • Selling before maturity can result in fees

Municipal Bonds and Funds

Municipal bonds are bonds issued by a municipality, like a county or other local authority.

They use these funds for a variety of projects, from construction to schools, but they’re backed by the municipality. The interest is exempt from federal taxes and usually most state and local taxes.

They’re low risk because the municipality can (and some have) default on that obligation. You may have heard that Puerto Rico had trouble making bond payments. Those bonds are municipal bonds.

A municipal bond can be a general obligation (GO) bond or a revenue bond. A GO bond is a bond that isn’t backed by a revenue source. A revenue bond is one that has a revenue source, like a toll road or some other tax.

You can buy municipal bonds from the municipality or through bond funds. If you buy direct, expect a high minimum investment amount. Bond funds offer greater flexibility and diversification.

For example, Vanguard’s VWITX is a municipal bond fund that invests in a variety of municipal bonds with an intermediate-term (5-6 years). Every mutual fund company has a variety of these types of muni bond funds.

Municipal bond ETFs are the best way to get short-term exposure as the investment minimum is low, and you can get exposure to several bonds with different maturity dates. 

It’s also possible to invest directly, but this method can require a long-term investment horizon to realize a profit. In addition to comparing maturity dates, you should review the credit rating of the agency. It’s also good to determine if a bond is revenue-backed (paid off from customer payments such as utility bill payments) or tax-backed (paid off from tax revenue).

Why We Like Municipal Bonds

  • Are usually exempt from federal taxes
  • Home state bonds can be exempt from state and local taxes
  • Multiple investment options

Downsides and Potential Risks

  • Potential default
  • Can require a long-term commitment
  • ETFs have a fluctuating share price

Short-Term Corporate Bonds

This is slightly riskier but you can invest in short-term corporate bonds for a slightly higher yield. Much like other bonds, corporate bonds are backed by the underlying entity, which in this case are companies. Companies are more likely to default than municipalities, so the risk is higher. Much like muni funds, you can find short-term corporate bond funds too.

Investment-grade corporate bonds can also provide reliable yields. The income potential can differ from Treasurys and government bonds and are worth keeping an eye on. 

A short-term corporate bond ETF or mutual fund is the best option for most investors, thanks to the low investment minimums and ease of access. These funds usually hold a variety of bonds with a duration of five years or less. 

You can buy or sell shares on demand as they trade like stocks with high liquidity. This flexibility comes in handy as corporate bonds may have lower yields than bank deposit accounts and government-backed bonds with a short duration.

Three ETFs to add to your watchlist include:

  • Vanguard Short-Term Corporate Bond ETF (VCSH)
  • iShares 0-5 Year Investment Grade Corporate Bond ETF (SLQD)
  • SPDR Portfolio Short Term Corporate Bond ETF (SPSB)

Free portfolio management software can help you analyze potential investments and asset allocation to assess your portfolio diversification and risk tolerance.

Why We Like Corporate Bonds

  • Earn dividends from investment-grade businesses
  • High liquidity
  • Many ETF and mutual funds

Downsides and Potential Risks

  • Yields can trail high-yield savings accounts and Treasury Bills
  • Fund share prices can fluctuate
  • Riskier than U.S. Treasury bonds

Small Business Bonds

Small business bonds can earn a higher yield than corporate and government bonds. However, they carry more investment risk as the borrowing business has a significantly smaller balance sheet.

Worthy Property Bonds earn 5.65% APY on collateral-backed loans with a 36-month term, although you can make penalty-free early redemptions. Notes are available in $10 increments and are available to non-accredited investors.

Unlike some peer-to-peer lending platforms that require you to invest in individual bonds which carry more risk, you invest in a general fund to help manage risk. The investment experience is similar to a bank CD, except you can earn a higher return as you’re a direct lender. 

Unfortunately, the bonds are not FDIC-insured and small businesses can be more likely to default before investment-grade corporations or governments. 

Why We Like Small Business Bonds

  • Can earn a higher yield than short-term CDs
  • Flexible redemption options
  • Low minimum investment

Downsides and Potential Risks

  • Not federally insured
  • Can be riskier than high-yield savings accounts or CDs
  • Investors in certain states may not be able to invest through platforms

Short-Term Real Estate Investments

While real estate is often a riskier, longer-term investment, it is possible to still pursue options that are short-term and on the safer end of the risk tolerance scale.

Real Estate-Backed Notes

Short-term real estate notes can help you enjoy a higher yield than an FDIC-insured high-yield savings account or even a similar-termed CD. This is because the issuer uses these notes as a “bridge loan” to pre-fund real estate deals before long-term investors can buy shares. 

Like CDs, once the investment term ends, you can withdraw your funds or re-invest in another offering. 

For example, investors can currently earn from 5.5% to 7.0% annualized interest through an EquityMultiple Alpine Note. The minimum investment is $5,000, with terms of three months or six months.

You may earn an above-average yield, but Alpine Notes carry more risk as they are backed by commercial real estate. If a real estate deal falls through, you can lose your investment principal or earn a reduced return. 

Additionally, they are not FDIC-insured, but EquityMultiple offers “First Loss Protection,” meaning the platform assumes 100% of the loss before investors if a note defaults.     

One of the most significant drawbacks is that you must be an accredited investor to purchase Alpine Notes.   

Why We Like Real Estate-Backed Notes

  • Investment terms as short as three months
  • Can earn a higher yield than savings and CD accounts
  • First Loss Protection reduces the risk for investors
  • Lower minimum investment than long-term real estate offers

Downsides and Potential Risks

  • Less liquidity than cash accounts
  • Not FDIC-insured
  • Backed by commercial real estate

Related: Best Investment Opportunities for Accredited Investors 

Tax Lien Certificate Auctions

When a property owner fails to pay a local or county tax, the government will put a tax lien on the property. The government still wants their money so they auction these liens.

Investors can buy the tax lien at auction, pay the government, and collect the lien plus interest. The interest rate is set by the law by the state. If the property owner doesn’t pay the lien off during the redemption period, the lien holder can foreclose on the property.

Liens are first in line for payment, ahead of even first mortgages. What you’ll often see is the bank paying off the lien because they don’t want to lose the house.

Liens are “safe” because the house acts as collateral. There is still risk in the entire process because of information. You could go to an auction and find all the liens you like are not available, because someone paid it off. You may win a lien whose property is worth far less than you expected.

It’s quite a bit of work. You have research property, attend auctions, follow up liens and try to collect. Liens can expire worthless. It’s not like filling out a form and depositing money into a CD — so do your homework.

There’s also the foreclosure part… do you want to be in the business of foreclosing on a family’s home for a few percentage points of interest? Ehh… not for me.

(This is one of the common ways you can get exposure to real estate with limited risk and low dollar amounts.)

Why We Like Tax Lien Investing

  • Someone else’s house serves as collateral
  • Potential for high earning rates

Downsides and Potential Risks

  • Requires a lot of research
  • Riskier than options like CDs or bonds
  • Emotionally draining
  • Unpredictable rates and returns

A Note About Low-Risk Investments

The list of 100% “safe” investments is very short.

There’s a term in investing known as the risk-free rate. It’s the rate of return you can get on an investment with zero risk. For most investments, the risk-free rate is whatever the latest auction of the 30-year Treasury bond is offering.

Technically it’s not risk-free. The United States Government could collapse. And when most of your money is in U.S. dollars, a government collapse would make your money worthless. Whether you had a 2% return or a 10% return is irrelevant.

You better have some guns and gold. 🙂

Low-risk investments are investments that give you a bit more than the risk-free rate… but not that much more.

I’m of the mind that if you need it to be safe, stick with the safe “investments” and avoid low risk. Low risk is not the same as no risk! If you need the cash in the near future, you’ll regret putting it in any kind of risk for a couple percent of interest.

FAQs

What are the best short-term investments?

The best short-term investment mostly depends on the current yield, investment term, and risk tolerance. High-yield savings accounts and short-duration U.S. Treasury Bills are the best options for most investors as they have some of the highest yields and are low risk. 

Investors should hold several short-time assets to manage risk and earn different yields that can regularly adjust before an investment matures. For example, you might build a CD ladder to capture the best rate for various terms.

Are high-yield savings accounts or CDs better?

High-yield savings accounts are better when they earn more interest or you need instant liquidity before the CD matures. CDs usually offer higher yields on terms longer than 12 months and buying some of these CDs can help you earn more interest as savings accounts have variable rates that can decrease.

Raisin makes it easy to compare the highest rates for savings accounts, CDs, and money market accounts. Your assets are FDIC-insured, and the deposit requirements are low.

(As a side note, Raisin rebranded from SaveBetter in mid-2023 but will continue to have high-yield offers with zero service fees.)

How much should you hold in short-term investments?

Consider investing cash that you plan on using for expenses or other investments within the next five years. You may decide to increase your exposure to short-term assets during times of uncertainty when the upfront cash yield is higher than the long-term potential.

Where can I put my money for three months?

Federally insured high-yield savings and money market accounts are the best places for most investors as they have competitive yields while letting you make on-demand withdrawals. Short-duration Treasury Bills with a 4-week or 8-week duration are also worth considering.

Final Thoughts

As you can see, there are plenty of ways to earn a solid return on your short-term cash, especially during a time when interest rates are higher than they’ve been in years. With most of these options, the minimum investment requirement is very low, and you can withdraw your money quickly when required.

Whether you’re a short-term investor or you’re just waiting for a better long-term investment option, short-term investments can help you move forward without taking much risk.

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About Jim Wang

Jim Wang is a forty-something father of four who is a frequent contributor to Forbes and Vanguard's Blog. He has also been fortunate to have appeared in the New York Times, Baltimore Sun, Entrepreneur, and Marketplace Money.

Jim has a B.S. in Computer Science and Economics from Carnegie Mellon University, an M.S. in Information Technology - Software Engineering from Carnegie Mellon University, as well as a Masters in Business Administration from Johns Hopkins University. His approach to personal finance is that of an engineer, breaking down complex subjects into bite-sized easily understood concepts that you can use in your daily life.

One of his favorite tools (here's my treasure chest of tools, everything I use) is Empower Personal Dashboard, which enables him to manage his finances in just 15-minutes each month. They also offer financial planning, such as a Retirement Planning Tool that can tell you if you're on track to retire when you want. It's free.

>> Read more articles by Jim

Opinions expressed here are the author's alone, not those of any bank or financial institution. This content has not been reviewed, approved or otherwise endorsed by any of these entities.

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Anse
6 years ago

I completely disagree regarding tax lien certificate auctions. This is high risk investment. You can not look inside the property (previous owner can destroy it as much as he wants), you will not be able to sell it during redemption period (it’s 2 years in Houston) and there will be a people competing with you. It’s still could be profitable, but definitely not easy and safe.

Alan Nadoln
4 years ago

We have had great success with short and medium term annuity contracts.

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