What Is Short Term Investment

Discourses about the importance of investing for the future are increasingly being intensified in various media, making many people today interested in investing. Moreover, currently there are various types of digital-based investment platforms that can be easily reached by people from almost all walks of life. It's just that, maybe there are still people who are afraid and hesitant to start investing because of a lack of understanding about this activity.

If you are one of them, maybe short-term investing can be a way out so you can start and get used to these financial activities. The reason is because short-term investments tend to have a lower level of risk and are easier to live with. Nevertheless, the profit opportunities that can be obtained are still promising.

However, like investment activities in general, you still have to learn what short-term investing is and what type of instrument or product is ideal to choose. For this reason, in order to be able to understand more about what short-term investments are, product recommendations, and profits, consider the following explanation.

Definition of Short Term Investment

Basically, what is meant by a short-term investment is an investment product that is made by depositing or saving a number of funds in certain investment instruments in a short period of time. Profits and capital from these investments can be disbursed in a relatively short time, usually from 3 months to less than 1 year.

There are funds or capital from investment activities that are of a fixed income or income for a certain period of time, or can be transacted and disbursed. Therefore, this short-term investment can be said to have many varieties or types and is able to provide promising profit results.

As an investor with short-term financial targets, the profits generally come from changes in interest rates. Therefore, in the not too long term, investors may only be able to get relatively small returns because the level of risk borne is also low.

Apart from being used as the main investment strategy, this short-term investment can also be a diversification strategy. In general, this diversification strategy is to place a certain amount of investment capital in instruments or products that have a lower level of risk. The aim is of course none other than to minimize the risk of loss in the investment portfolio when the capital market is unstable or volatile.

Types of Short Term Investment Instruments

After knowing the meaning of short-term investment, you also have to understand what instruments are ideal and suitable to be chosen in these investment activities. To be clear, here are some examples of worthy short-term investments to choose from.

1. Deposits

Deposits are savings products offered by banking institutions and have a working method of depositing funds within a predetermined period of time. Then, the funds will be disbursed according to the due date. The profits obtained from deposit investors usually come from the interest rate given and are fixed until the maturity date.

However, it should be understood that if a customer is forced to take deposit funds before the duration ends, there will be a fine that must be paid in nominal terms according to bank policy. Therefore, adjust the term of this deposit investment according to the need to avoid this risk.

In addition, make sure to choose a banking institution that is a member of the LPS or the Deposit Insurance Corporation. This aims to ensure investment security because there is a guaranteed return of deposits of up to 2 billion Rupiah when the bank experiences financial constraints. That way, deposit investments can be ensured to be safe and able to provide benefits without any worrying risks.

2. Mutual Funds

Furthermore, there are mutual funds which are investment instruments by working to collect capital from many investors at once and are managed by an investment manager. Because you collect funds from a pool of investors, you can start investing in mutual funds with small change, starting from just 10 thousand Rupiah. Besides that, because the management is carried out by the investment manager, you can freely invest and earn profits without the hassle of thinking about strategies for managing the funds.

There are many types of mutual fund investments to choose from, for example, money market mutual funds, stock mutual funds, and mixed mutual funds. However, if the goal is for short-term investments, it's a good idea to choose a low-risk mutual fund product, such as the money market.

In this type of mutual fund, investment managers will generally allocate funds in bonds with maturities of under 1 year or deposits. So, the level of risk is relatively lower but still able to provide a guaranteed profit.

1. SBN or Government Securities

Apart from mutual funds and deposits, you can also invest short term with SBN or Government Securities. The capital required to start investing in SBN is 1 million and can be purchased through a number of platforms. This instrument is included as a favorite of investors because it has relatively lucrative and safe profit opportunities because it is guaranteed by the state.

When you have SBN, you will get a capital payment along with a reward coupon within a certain period of time. There are several types of SBN to choose from, such as SUN or Government Securities, ORI, and State Sharia Securities or SBSN. So, you can freely invest in this instrument according to your needs and desires.

2. P2P Lending

The last choice of instrument is P2P lending, which is the activity of lending capital between investors and borrowers. Today, this instrument is quite popular and is chosen by many capital owners. However, compared to other products, P2P lending has a relatively higher level of risk, so you must understand how it works before jumping in.

In general, the way this instrument works is that investors invest in a number of borrowers who need financial assistance through fintech companies. Mainly, only choose fintech companies that are trusted and legal, and have been registered with the OJK or the Financial Services Authority. That way, you can ensure that the fintech company you choose is not a fraud.

 

Advantages of Short Term Investing

There are various reasons why many people are interested in making short-term investments. In addition to specific purposes, this type of investment can provide a variety of advantages and benefits that are a shame to miss, including:

1. Can Return Faster

Return or yield from this type of investment can be said to be quite fast because generally it only takes no more than 1 year. From the profit generated, investors have 2 choices, namely to re-invest it so that it can grow even more rapidly or withdraw it to meet certain needs.

2. Become a Passive Income Means

The second benefit is that this investment can be a means of passive income or flexible passive income. For example, through mutual funds, transactions can be made anytime and anywhere, or deposits that can choose their own expiration date as needed.

3. Ideal for Accumulating Emergency Funds

The last advantage, with short-term investments, you can quickly and ideally collect emergency funds. Instead of using a savings account, the higher interest rate provided by this investment instrument will certainly optimize your ability to fulfill these financial posts.

Most importantly, choose short-term investment products that have a high level of liquidity so that they can be easily disbursed whenever needed. Only then can this be an ideal vehicle for raising emergency funds.

Keep Investing According to Financial Conditions and Set Goals

That is an explanation of what a short-term investment is, the ideal type of product to choose from, and a series of advantages or benefits. Basically, in any type of investment, including short-term ones, you have to live it according to your financial condition and set the right goals. Only then can investment activities take place smoothly and consistently until the predetermined goals are achieved.