Four ways to invest $10,000 in the short term

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Most of the time, when people invest money, they plan to do so for the long term. We put money aside in small amounts for our retirement, looking for growth over years and even decades. Time can be a powerful tool and the ability to wait can put money in your pocket. As the late Charlie Munger once said, “Waiting helps you as an investor, and a lot of people just can’t stand waiting. If you haven’t got the delayed gratification gene, you have to work really hard to overcome that.”

While most of our money should be in long-term investments, there are times when we park funds for a year or less. Some traditional investments, such as dividend stocks, are less useful in cases like this. It’s tempting to keep your money where it is in a checking account, but even if it won’t be invested for long, it can still do a lot of good. If you have $10,000 to spare and have enough in your emergency fund, letting it do nothing might not be the best move. Investing short-term money usually involves options that prioritize liquidity and capital preservation over high returns.

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Keeping it in the bank, but better

The simplest option is probably a high-yield savings account. These savings accounts offered by banks and credit unions offer higher interest rates than regular savings accounts. Current rates tend to be between 4-5% APY. It’s much better than you can get at most big banks. These accounts are low risk and provide liquidity so you can get the money when you need it if your time horizon changes. Another advantage of a high yield savings account is that it is very easy to set up. If you are interested in such an account, make sure that the fees are low and that you can withdraw as much as you want without incurring additional costs.

Another option in the banking arena is certificates of deposit or CDs. This type of savings account has a fixed interest rate and a fixed term, ranging from a few months to a few years. In some, but not all cases, you’ll earn higher interest than regular savings accounts, especially over longer terms. They are also insured by the FDIC. The downside is that you won’t have the liquidity of a savings account. You may have to shop around a bit for a good rate, and as with bank accounts, you want to keep an eye on fees.

Buffett likes T-bills, should he?

Another option for savvy investors is short-term Treasuries or short-term Treasuries. These debt instruments issued by the US Treasury Department have maturities of one year or less. The most common type of short-term treasury securities are government bills. They are sold at a discount to face value, and when they mature, the government pays the investor the full face value. The investor’s return is the difference between the purchase price and the face value. They are available in terms of 4, 8, 13, 17, 26 and 52 weeks and can be purchased in $100 increments.

One of the advantages is that they are almost risk-free because they are issued by the government. They can be resold relatively easily on the secondary market. Interest on government securities is exempt from state and local taxes, but not from federal taxes. If you’ve heard about Treasuries in the news lately, it’s probably because Warren Buffett’s Berkshire Hathaway has $234.6 billion in short-term U.S. Treasuries, more than the federal government. Buffett’s investment in Treasuries is a way to park cash and earn a profit. Treasury bills won’t make you rich in the long run, and sometimes they won’t beat inflation, but if you need a short-term investment, following Buffett’s lead isn’t a bad idea.

Risk Meet Reward

While the first two options shown are almost risk-free, there are opportunities to earn more by taking on a little more risk. EquityMultiple’s BaseCamp Alpine Notes is the perfect solution for novice investors. It offers a target APY of 9% with a term of just three months, making it a powerful short-term cash management tool with incredible flexibility.

There’s more of an element of trust here because a bank or the federal government isn’t backing your money. This does not necessarily mean danger. EquityMultiple issued 61 Series Alpine Notes to more than 1,500 investors and met all of its payment and funding obligations with no missed or late interest payments. With a minimum investment of $5,000, BaseCamp Alpine Notes makes it easier than ever to start building a high-yield portfolio.

How short is short for an ETF?

Most of the time, when we invest in ETFs, we’re looking to stay invested longer. Short-term ETFs generally have lower interest rate risk compared to long-term bond ETFs. However, even in the short-term category, the ETF’s specific duration can influence its sensitivity to interest rate changes. Government bond ETFs have less credit risk than corporate bond ETFs, which may offer higher returns but carry slightly more risk. Most short-term ETFs are highly liquid, allowing easy access to funds if needed before the end of the investment period.

If your time frame is less than a year, one option is the JPMorgan Ultra-Short Income ETF (NYSE:JPST). It invests in a portfolio of short-term, investment grade, fixed and floating rate structured and corporate debt while actively managing credit and duration exposure. You will also earn a small monthly dividend with a yield of over 5%. Schwab has also launched a competitor in the short-term ETF space. The Schwab Ultra-Short Income ETF (NYSE:SCUS) began trading this month and is Schwab’s first actively managed fixed income ETF. Like JPST, it invests in short-term investment-grade debt securities issued by U.S. and foreign issuers. Its fee is lower than JPST, but it has no track record to follow because it is new.

There are other alternatives for short-term investors, but overall the bottom line is that there are plenty of ways to earn a return on your investment. Short-term investing works just like long-term investing because higher risk can sometimes, but not always, bring you a higher return. Depending on your goals for the money you invest after the term, one of the options above may be right for you.

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This article Four Ways to Invest $10,000 in the Short Term originally appeared on Benzinga.com