Short-term investments - what they are, types and tips for beginners

Any person strives to increase his income in order to be able to provide for the needs of not only himself, but also his family. In addition to the income received from a traditional job, you can pay attention to investments. Owners of large capital choose long-term investments that bring significant profits, but in the future. If you do not want to part with your money for a long time, but want to make a profit, you can choose short-term investments.

Short-term and long-term investments are investments of money in an investment project with the aim of receiving interest on the amount or a fixed return. Short-term investments are those lasting up to a year. At the same time, there are also options with investments for 24 hours, which also allow you to receive income.

Short-term investing does not require parting with money for a long time, but the risks of losing capital are extremely high. This is due to the fact that high incomes in a short time are usually promised by fraudulent companies.

Not all methods of placing funds for a short term are fraudulent. There are options that allow you to earn on investments from 3% to 20% per year. This is a short period for which predictable investments can be made with minimal risks. There are still risks, since the investment sphere is built on them.

Short-term investments - what is it?

Short-term financial investments are investment activities that involve investing funds for a period of up to 12 months. This does not mean that if 13 months pass, the investment will automatically become long-term, it’s just that such a framework is used to distinguish between concepts. Directions for such investment initially involve quick returns, although practically none of the instruments provide precise timing and exact returns. Such investments are usually preferred by people who are inclined to make quick decisions and are focused on specific indicators.

All conservative ideas for making money have long been standardized and may differ only in some parameters. Investments in the short term are much more variable in this regard. Here, the investor’s ability to quickly navigate the situation, make an investment on time and also exit with a profit on time comes to the fore. It is on this that success and profit indicator largely depend. If competence is low, there may be losses, sometimes quite significant. Of course, this does not apply to all short-term investments, but this is the general picture.

The goal of a short-term investment is to make a profit. It may be large, or it may be very insignificant, but the main thing is that it is there. There are other goals - increasing capital turnover, providing financial support to someone through an investment (in this case, the income may be very small or completely absent), but this is a very small percentage of most investments.

The second most common option is hedging risks, for example, buying options. Technically it's an investment, but in reality it's just insurance against your main source of income.

Tips for Beginner Investors

All experienced investors made mistakes at the beginning of their activities. Now they are analyzing their mistakes and willingly sharing their experiences. Taking their advice into account, we have compiled recommendations for those new to investing that they should try to adhere to:

• Gain practical experience on small accounts;
• Develop intuition;
• Regularly study financial market news;
• To delve into the activities of new companies emerging in other countries;
• Constantly develop, look for new ideas for business development;
• Distribute funds that should be invested in more than 2 assets. Diversification of investments helps to obtain large profits;
• Before investing, it is necessary to evaluate financial priority with the amount of savings;
• Invest only your own funds. If you take out a loan for investments, they may not be effective. The borrower will have a debt obligation (liability) that requires regular payments. The investment will be lost and further investment will not be possible.

Types of short-term investments

Formally, any investment for up to a year can be called a short-term investment. But in this vein, specific areas are usually considered, namely:

1. Short-term financial investments in market instruments. For example, these could be well-known stock and foreign exchange markets. Currency can be bought and sold in just a few clicks of the mouse, and no one sets limits on the timing of such transactions. Now the ruble has strengthened and the exchange rate with the dollar on the stock exchange has dropped below 61 rubles. Many people do not believe that the ruble has a bright future, for this reason they buy the currency when it declines. Then they sell when the ruble sinks again. Exactly when this will happen is unknown, but obviously faster than in a year.

   
   The same can be said about stocks. The State Duma is considering some kind of bill that will harm the interests of a large company; its shares are beginning to fall. Then the idea fails and the stock rises again. Basically the same as on a larger scale, but much faster. An investor can make a solid profit in just a couple of weeks, even without leverage. There are more volatile markets, there are less, taking into account the possibilities of trading via the Internet, everyone can find a suitable option for themselves.

2. Investments in microfinance organizations and any other business. Some people think this business is not entirely normal from a moral point of view, but it is still thriving. Investments in such organizations are usually highly profitable - up to 15% per month, sometimes higher, and in some cases tens of percent. MFOs are most indicative of short-term financial investments, but in general any business can be considered as an object; the speed of capital turnover and capabilities are just important. Such investments are called investments in real production.
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3. Short-term cash investments via the Internet. HYIPs, PAMM accounts, crowdinvesting and others. All this implies quick returns, a fairly high percentage of profit and, at the same time, relatively moderate risks. It is worth noting sites where people lend money, for example, the WebMoney system has such a service. The advantage of this type is that the potential profit is usually high, especially if you carefully study this investment environment. On the other hand, without knowledge you can suffer serious losses.

Risk level

There is always a chance of losing money, but in the case of short-term investments it is extremely high. You should not trust promises, since too high interest rates indicate either fraud or ill-conceived schemes for using funds.

The greatest risks are:

• PAMM accounts;
• investing in microfinance organizations;
• Forex;
• crowdinvesting;
• hype projects.

The listed methods require the transfer of money to third parties for management or the investor having knowledge in the financial sector. Without this, it will not be possible to make a profit and the investment will collapse. The lowest risks are assumed when investing money in:

• fast deposits;
• company shares;
• cryptocurrency.

The first two methods are protected both by the state and by the property of the company issuing the shares.

In the case of cryptocurrencies, it is assumed that the decrease in their value, although unforeseen, does not last long. The exchange rate will not only recover, but also increase, which means profit is guaranteed for investments for a period of six months or a year.

Sources of short-term investments

In order to invest, you need funds. The advantage of short-term investments is that they seem to have no restrictions on size - you can invest at least $15, at least $15,000. There are three standard source options:

1. Own operational means . In light of the above, the amount can be any. We can buy a government bond (OFZ) in the amount of 1000 rubles, we can lend someone an even smaller amount at interest on a special loan site, or we can buy $1000 for rubles and wait for the rate to rise. That is, we work with what we have.
2. Borrowed funds . For example, a bank loan. This is not so interesting from the point of view of investment income - part of it will be spent on paying interest on the loan. If it is a consumer loan, the rate will be high. If the loan is to an enterprise, then it must be operational and successful for the loan terms to be adequate.
3. Attracting third party investors. Having developed an investment idea, a person or organization offers other people to invest, in which case the income is usually distributed. It all depends on the conditions of attraction - you can find yourself on the sidelines if the idea takes off, or you can lose nothing at all if it fails, and all losses will fall on the shoulders of investors.

The main pros and cons of short-term investments

An inexperienced person will have a hard time in increasing capital. For this reason, it is usually recommended to start with conservative and long-term options. And only after you understand the process, you can move on to options for making faster money. They differ in their advantages and disadvantages. The advantages include the following:

1. High profitability per unit of time . Everyone has their own concept of high returns, but typical short-term investment options usually involve an annualized return much higher than the 5-7% that is inherent in long-term investments. In some cases, such as speculation in the foreign exchange market or investing in cryptocurrency, the profitability can be hundreds or even thousands of percent per annum, but this requires either great luck or a deep understanding of the chosen direction.
2. The ability to keep up with trends and move along with the development of the investment space . Today one thing brings high income, tomorrow another. Accordingly, nothing prevents you from constantly shifting from one asset to another, following trends and emerging opportunities. True, in this case it is better to stick to the most liquid assets, for example, a three-room apartment is much more difficult to sell than a one-room apartment, simply because the demand for them is lower.
3. Wide range of options. Everything that gives a stable small income has long been described and has not changed for decades. But there are many directions for investment in the short term, they are constantly changing, new ones appear, but at the same time the old ones for the most part remain accessible.

In addition to the advantages, there are, of course, also disadvantages, which may seem significant to many, and in some cases unacceptable. It is curious that the most famous high-profile ups and downs occurred precisely within the framework of short-term investment of funds - the legendary deal to sell the pound to the German mark of Soros and the same serious losses from investments in Svyazinvest shares in Russia. The truth is that almost everyone knows about the first case, but very few know about the second. So, the main disadvantages include the following:

1. High risks . This does not apply to everyone, but to most. It is the high risks that turn off most investors. However, there is no big profit without big risks, otherwise everyone would be rich. However, it is possible to either increase your capital many times over or lose it completely. Anyone interested in short-term financial investments should understand this.
2. Working with this type of asset requires fairly extensive knowledge . If a person just suddenly decides to trade shares or open his own business in an area in which he understands nothing, then there is a fairly high probability of not only not making money, but also getting a negative result. This leads to a general recommendation - first carefully study the direction, try with a small amount, if possible. And only then start working fully, otherwise you may be disappointed.