Types of Short term Investments
Following can be classified as short-term investment
- Bank Deposits
- Money-market funds
- Fixed Deposit
- Treasury Bills
Advantages of Short Term Investments
Passbook savings accounts and money-market funds
Fixed Deposits and Treasury Bills
Short-term investments are comparatively safe because they are guaranteed by the government.
Disadvantages of Short Term Investments
Short-term investments pay a very low rate of interest, like three to five percent.
Short-term investments may lose value after adjustments for inflation.
Although your money earns interest in a bank account, inflation can take away its real value. Money in a bank’s savings account and in money market funds often can’t make enough interest to compensate the losses from inflation. That is why it is important to understand the other ways to investments.