Short-Term Investments

The third type of investments is referred to as short-term investments. These are the most conservative types of investments available, well suited for those who have a relatively short period of time to invest.

In this section, you can learn more about:

The different types of short-term investments	The risks and rewards of short-term investing

Different Types of Short-Term Investments

There are several types of short-term investments, including:

• Money market funds
• U.S. Treasury bills
• Certificates of deposit (CDs) and,
• Commercial paper

The Risks and Rewards of Short-Term Investing

The Risks
While you may find the liquidity of money markets or CDs attractive, you should also keep in mind that these types of investments can expose you to a greater degree of inflation risk. As the prices of goods and services go up, the return on your short-term investments may not keep pace—in essence, reducing your buying power.

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The Rewards
What’s attractive about short-term investments is that they tend to fluctuate very little in value over time. So if you need to access your funds quickly, there’s less risk that the value of your investments will have dipped dramatically when you need to “cash in” your shares.

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