Short Term Investments

Types of Investment

Short-Term Investment

Savings account:

This is the easiest and often the first banking product accessible to everybody. It doesn’t

require any huge deposit to open. Savings accounts earn a small amount in interest (anywhere

from 2.0% to 4.0%, often less), making them a little better than a piggy bank. The attractiveness

of this type of Investment is that it is within the Investors control. You determine how much to

put in your account and when to withdraw your money. There is usually no limit to your activity

in the account. Although in some financial institutions, interest will be withheld if withdrawal

from the account is too often within a stipulated period of time.

Money market funds(Fund Placement): Money market funds are a specialized

type of mutual fund that invests in extremely short-term bonds. Unlike most mutual

funds, shares in a money market fund are designed to be worth fixed amount of money
at all times. Money market funds usually pay better interest rates than a

conventional savings account. The rates of interest are sometimes negotiable and large
amount of money is involved.

Certificate of deposit (CD)(Fixed Deposit): This is a specialized deposit you

make at a bank or other financial institution. The interest rate on CDs is usually

about the same as that of short- or intermediate-term bonds, depending

on the duration of the CD. Interest is paid at regular intervals until

the CD matures, at which point you get the money you originally

deposited plus the accumulated interest payments. CDs offered by banks

are usually insured.

Making a choice of a short term investment depends on your income level. For a low

income level family, your investment can start with short term investments. The

advantages of starting with a short term investment include:

1. Ability to access funds as and when needed for immediate family needs

2. Ability to save or investment only what you can afford with impinging on the family's
standard of living

3. Opportunity to invest at your own level. Investment is very important!

Even if you start small!!

4. Making short term investment over a period of time ensures that you can have the

opportunity to make a long term or bigger volume of investment at a later period.