The Ins and Outs of Short Term Treasuries and Investing
Updated: Jun 3, 2023
The best ways to grow money short term.
*Not financial advice - your money, your choice*
With a recession looming and forecasts predicting that economic hard times will last into early 2024, many people are asking “What can I do with my money to get the best return over the short term?” (next 1-2 years).
This is a very short time horizon especially for investing and most “investing”, if you can even call it that, over such a short term is much closer to gambling.
That said, there are a few things that you can invest in to maximize your money over a short time horizon with some risk but much less than swimming with sharks in a chum-stuffed wetsuit (or playing craps if that’s more your speed).
Shark from PNGMart and Craps Table from SeekPNG
Some of these are:
There are some limitations for each of these, however.
High Yield Savings Accounts are the least restrictive in terms of the minimum amount and duration you need to keep the funds in the account.
Due to the fintech revolution, most HYSAs have an account minimum of $1 or less though, to get paid interest, most require that you keep money in the account through the end of the month.
If you opened the account a few days into the month then the interest you earn will likely be prorated so you’re not getting any interest for the days you didn’t have money deposited.
If you want to deeper into HYSAs, check out this Forbes article.
iBonds are a little more complicated and, contrary to popular belief, are not an Apple product. They are a U.S. Treasury product so they are significantly less easy to get, and use and they don't have those nice curved edges. Some key details from the U.S. Department of the Treasury:
Primarily electronic and can be purchased and kept safe in a TreasuryDirect account
$25 account minimum
You can choose to use all or part of your IRS tax refund to buy paper I bonds
$50 minimum amount
Max purchase allowed each calendar year
$10,000 in electronic I bonds + $5,000 in paper I bonds
Can cash in after 1 year
Caveat: If you cash in before 5 years then you lose 3 months of interest
A certificate of deposit (CD) is another savings product that earns interest but is paid out in lump sums for holding for a fixed period.
Some key stuff about CDs from Investopedia:
Differ from a savings account because the money must remain untouched for the entire term
Similar to an I bond in that if you touch them you risk penalty fees or lost interest
Usually have a higher interest rate than an HYSA because they are less liquid (can’t get money out as easily sans penalty)
Generally safer than stocks and bonds
Low opportunity for growth but provide a non-volatile, guaranteed return
Virtually every bank, credit union, or brokerage has a bunch of options
Shopping around can get you a pretty banging rate
Although you lock into term duration there are options for exit in an emergency or change of plans
It’s very important to remember that, with any financial product, there’s give and take. Investments that carry the least risk usually offer lower returns and the opposite is generally true of higher-risk investments.
Right now, I’m using an HYSA with Sofi, maxing out my Roth 401k match, and maxing out my Roth IRA but that doesn't always mean something is right for you. I’m contributing more to my HYSA than I am investing right now because I’m planning to purchase my first property in late 2023/early 2024 BUT this may not be the best choice for you.
If you’re wondering about how to buy a house/condo, I’ll be coming out with a home-buying guide in the next couple of months so be sure to subscribe if you haven’t already.
A better goal may be to invest as much as possible for the long term (into Index Funds if that’s your jam) so that you do your future self a favor! It may also be that you don’t have much to invest.
In that case, you can build the habits of saving and investing on a lowish income. I explain how I did it here.
Again, not financial advice! Your money, your choice!
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