The Best Short-Term Investments for Steady Wealth Growth

Wish to grow your wealth more consistently but unsure where to start? Short-term investments might be just what you need.

These are financial investments that you hold for less than three years, offering the chance for healthy returns without locking your funds in for years, or exposing it to the vagaries of the economy.

In this article, we'll explore the different short-term investment options available and evaluate them for you. Whether it's the route of short-term funds or the more adventurous path of cryptocurrencies, we'll break down the pros and cons of each. This way, you can pick what suits your comfort level and financial goals best.

Definition of Short-Term Investments

Short-term investments are assets you can convert to cash, usually within one to three years. The goal with these investments is to earn a predictable healthy return, making them ideal for achieving near-term financial objectives.

While short-term investments offer you more immediate access to your funds, certain forms of such investments (like day trading and forex trading) may carry higher risks.

Comparing Short-Term vs Long-Term Investment Strategies

Now how do short-term investments square up against long-term investments?

Short-term investments offer returns in a shorter time-frame with greater flexibility. They allow investors to capitalise on market opportunities without committing their capital for long periods. Additionally, they have lower exposure to long-term market volatility, which can be beneficial in uncertain economic times.

However, these investments come with higher risks and often require active management. The frequent buying and selling associated with short-term strategies can also lead to higher costs, including transaction fees and taxes.

Long-term investments, on the other hand, may benefit from compound interest, allowing earnings to grow exponentially over time. They may be able to ride-out short-term fluctuations as these may be smoothed out over longer periods.

However, the main drawback here is that capital is tied up for longer periods, making it less accessible. Additionally, investors need to be patient, as returns are realised more slowly compared to short-term investments—sometimes as much as five, 10, 15 years or longer.

Types of Short-Term Investments

There are several types of short-term investments, each with its own set of advantages and disadvantages.

Short-Term Bond Funds

Short-term bond funds offer potentially higher returns to investors with relatively low risk of default. The downside is that they come with interest rate risk, and their returns can vary based on market conditions.

Cryptocurrency and Digital Assets

Cryptocurrencies are extremely volatile, with prices that can fluctuate wildly in short periods. This volatility can lead to significant gains but also substantial losses.

Moreover, the regulatory environment for cryptocurrencies in Singapore, as in many other countries, is still evolving. This regulatory uncertainty can impact the market and affect the stability of investments.

Furthermore, the cryptocurrency space is a prime target for scams and cybercriminals. Investors need to be wary of fraudulent schemes, such as fake initial coin offerings (ICOs), Ponzi schemes, and phishing attacks. Cybersecurity threats are also a major concern, as digital assets can be stolen through hacking or other malicious activities. Without proper security measures, investors risk losing their entire investment.

Forex Trading

Forex trading, or foreign exchange trading, involves buying and selling currencies to profit from changes in exchange rates. It offers high liquidity and operates around the clock, providing the potential for steady gains.

However, it is highly volatile, influenced by complex market factors such as geopolitical events, economic data releases, and interest rate changes, making it a high-risk investment.

Options Trading for Sophisticated Investors

Options trading involves buying and selling options contracts, which give the investor the right, but not the obligation, to buy or sell an asset at a predetermined price within a specific time frame. It can offer high profit potential, strategic diversity, and leverage.

However, options trading is complex and requires substantial knowledge and expertise. The high risk involved means there is a potential for significant losses, making it suitable primarily for sophisticated investors who can navigate its intricacies and volatility.

Real Estate Debt Investments

Investing in real estate debt involves lending money to property owners or developers, secured by the property itself. This type of investment offers several benefits, making it an attractive option for stable and predictable returns.

The primary advantage is collateralisation. The loan is backed by real estate, providing security and reducing the risk of loss. If the borrower defaults, the property can be sold to recover the investment.

Real estate debt investments also offer a stable income stream through interest payments. With shorter tenures, ranging from a few months to a year or two, they allow for more predictable short-term returns. The contracts are legally enforceable, providing clear rights and obligations for both parties, adding an extra layer of security.

However, these investments depend on property market conditions and may require more capital upfront. Hence, they’re usually not directly accessible to retail investors, unless offered through a fractionalised investing platform like BigFundr.

How to Manage Short-Term Investment Risks

Mitigating risks in short-term investments, especially in high-risk options like cryptocurrency and forex, is crucial for protecting your capital. To reduce your risks in short-term investments, consider the following techniques:

1. Stop-Loss Orders: Implementing stop-loss orders can limit potential losses by automatically selling an asset when it reaches a predetermined price. This helps prevent emotional decision-making and ensures that losses are contained.
2. Diversification: Spread your investments across various assets and sectors to reduce the impact of a poor-performing investment. Diversification helps balance the risk, as gains in one area can offset losses in another.
3. Risk Assessment Tools: Utilise risk assessment tools to evaluate the potential risks associated with different investments. These tools can help you make informed decisions by providing insights into market trends, volatility, and other critical factors.

By applying these risk management strategies, you can better protect your investments and achieve more stable returns.

BigFundr - Your Choice for Short-Term Investments

To grow your wealth more predictably with short-term real estate-backed investments, look no further than BigFundr.

BigFundr keeps your investments secure through a meticulous selection process. Each month, property-backed loans from countries like Australia, Singapore, and the UK are rigorously evaluated for borrower creditworthiness, location, and development type. Only the best Deals pass this stringent assessment and are listed on the platform.

Investors receive comprehensive factsheets for each Deal, ensuring full transparency. Funds are managed by an independent cash administrator and are only disbursed when all contractual requirements are met.

To explore how BigFundr’s real estate-backed investments can fit into your financial plans, learn how you can create an account with us, or drop us a line at our contact form.

Conclusion

In conclusion, short-term investments offer a range of opportunities for wealth growth, each with its own set of risks and benefits. Make sure that you do your own due diligence to carefully assess each option before investing your funds. By carefully assessing risks and choosing the right strategies, you can align your investments with your financial goals and risk tolerance, ensuring a balanced approach to wealth building.