Why, When and How to go about the short term investment?
I usually discourage short term investments all throughout since I have started making YouTube videos – a simple reason being, to me they seems to be get rich quick schemes in which most of the people will fail if they don’t have enough experience.
However, there are times when when you really need to have short term investments done for one reason or the other. Let’s see some scenarios when you might need to have the short term investments and then we will discuss why do you need these investments done at all:
So, if you have 80% of amount ready for a house you want to purchase, and now waiting for 20% to be accumulated – for that you might need 1-2 years more. In this scenario you would want that 80% amount invested in short term instruments in order to avoid any inflationary impact on actual house price.
Lets say your kids are about to go to university where it will require handsome fees – you already have most of the amount ready with you, but you want to grow that amount at a modest rate in next 1-2 years until the final day of fee payment – in this scenario, you would probably want to make investments such that currency fluctuation and inflation does not impact your end goal.
Lets say you have upcoming requirement of gold purchase in next 1-2 years but you don’t want to purchase the gold as of now for any reason. For that you want to hedge your bets against gold for that period of time so you save yourself against gold price increase at the time of purchase.
You have collected enough funds for your dream startup but need some more time for any reason – till that time you want those funds to grow (again at a modest rate) and want it to be invested in short term until you begin your startup journey.
So, the common goal in all above examples is that you want to have a short term investment in order to achieve a bigger target.
It is not at all recommended to have the short term investment to be considered as gambling instruments like leveraged trading in forex, stocks, crypto or investing in property on the hope that the property will appreciate with current trends.
Another thing to note here is that the short term investment is done to have returns in modest numbers and if you beat inflation with those returns, you should be happy with that working.
There are times when you want to hedge your bets against your end goal like mentioned in one of the above examples of purchasing gold. So, lets take a hypothetical case of you wanting to buy gold jewelry for an upcoming event in 1-2 years but you are not sure of the design as of now – plus you don’t have the full amount ready as well. What you can do in this scenario is start investing all the money for that purpose in some gold ETF – this way you will have the entire exposure of gold even with fraction of amount that you have and even if gold increases – you are 100% safe for your end goal.
Short term investments can be done in government bonds, savings schemes backed by government, money market mutual funds which are low risk instruments etc. What you don’t want to get involved with your short term investments are things like stocks, equity mutual funds, property etc.
I made a YouTube video discussing the same in detail which you can watch from the link below.
Moreover, watch the below videos which released last week in case you have not:
Keep hustling 🙂