There are many types of investments availble to those who are wanting
to invest their money. However, many people prefer to use short term investments as their
means of investing.
Why short term? It is
because majority of individual investors want to be able to withdraw their investment quickly
without incurring a penalty if a better opportunity exists elsewhere for the use of their
In the real world, there is a
well-defined rule for determining the best short term investments. However, in the real world there are only
guides from experts in money matters, proven investment practices from years of experience, and gut feel on the
part of the investor himself.
A neophyte would-be investor might ask,
“What is this thing called ‘investment’?”
Investment is the act of
placing your money in assets like financial instruments or other objects of value for the purpose of earning
profits in the form of income flow, increase in asset value, or interest. Financial instruments include money
market accounts, treasury bills (T-bills), and certificates of deposit (CDs).
Based on the duration of commitment of
money, there are two kinds of investment: long term and short term. The phrases “long term” and “short term”
have been borrowed from the practice of Accounting, wherein “long term” means a time period that is generally in
excess of one year, while “short term” is understood as one year or less.
Investment in machinery, buildings, or land
is an example of long term investment. It takes a number of years before the amount invested is recovered
through the income generated by the assets in which the investment is placed. Big business enterprises are
usually interested in long term investments.
An example of short term investment is
placing money in financial instruments that mature within one year, such as: money market account or 3-month
certificate of deposit (CD).
Finding the best short
term investments could be a challenge because sometimes it is a matter of good judgment and well-informed
opinion. What looks like the best short term investments for one particular person may look entirely different
to the rest of humanity.