7 Best Short-Term Investments To Grow Your Money, #116

Retire With Ryan

With the Federal Reserve aggressively raising interest rates, it’s a great time to consider your options for short-term investments. Whether you have liquid cash or you’re a conservative investor, this episode is for you! Join me as I dive into the seven best short-term investments you can make to grow your money and save for retirement.

You will want to hear this episode if you are interested in...

• Exploring money market accounts for short-term investing [2:22]
• The benefits of a one-year CD [6:03]
• What about short-term bond funds? [7:34]
• Taking advantage of Treasury bonds [10:09]
• Is a fixed annuity right for you? [11:41]
• The best short-term investment you can make [13:00]

Staying liquid

Online banking has been a commonplace practice for many years. But did you know you can use online banks to find a good money market rate? Websites like Bankrate and NerdWallet (linked below) can help you find a competitive rate with several online banking institutions. However, not all online banks are created equal. Some may have stipulations that keep your money tied up for a fixed period, or there are specific limitations about transferring money in and out. That’s why it’s a good idea to know your options and read reviews about the online banks you're considering using for a money market account. Money market accounts are also the most liquid short-term investment option, so it’s worth exploring if that is important to you.

Another money market option for short-term investing is a mutual fund account. Rather than going through a bank or credit union, these money market accounts are obtained through a mutual fund company like TD Ameritrade Institutional, Charles Schwab, and Fidelity. This is a great investment option if you want your stocks, bonds, and mutual funds all in the same place.

Breaking down bonds and annuities

If liquidity is not a priority in your investment portfolio at this time, you may want to consider U.S. Treasury bonds. Typically, a two-year Treasury bond yields less than a ten-year one. Yet right now, the two-year bonds are paying almost 4% interest compared to the ten-year rate of 3.5%. The downside to this investment option is that anytime you sell a bond, the price could go down if interest rates have gone up. However, if you're willing to hold this bond for two years, the worst-case scenario is getting back nearly 4% interest. Treasury bonds are also not subject to state income tax which is another benefit of this strategy.

If you're willing to have even less liquidity with a little bit more yield, you could consider fixed annuities as a good short-term investment. A fixed annuity is an investment made with an insurance company where they invest your money in something else and pay you a higher interest rate because you're giving up some liquidity. For instance, if you want to take your money out early from a three-year fixed annuity, there will most likely be penalties. You may not even be able to make a withdrawal in the first year. Though interest rates for annuities are around 4.4%, they are subject to state and federal income tax, further decreasing your possible yield. Weigh these pros and cons before choosing annuities as a short-term investment. Listen to this episode for more short-term investment options to grow your money!

Resources Mentioned

• Retire With Ryan Podcast 2022 Listener Survey
• Bankrate
• NerdWallet

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