5 Best Short Term Investments. For Extra Income Short-term investment is an effort to place funds in one or several types of assets for a short period in the hope of getting additional income or increasing the value of assets. Short-term investments are intended to finance marriage, finance health care, increase the budget for buying a house, and other needs that are needed in the near future.
What distinguishes it from long-term investment can be seen from its objectives. Long-term investment is intended to meet needs that are not needed in the near future, such as the availability of pension funds, ownership of assets in old age, and so on. How long is a short term investment? If asked how many years of short-term investment? Generally lasts from one to a maximum of three years. More than that is included as a medium-term investment.
What are some good investment products, in the sense that they can generate large amounts of money? Some short-term investment products can provide profits ranging from 5 percent to 20 percent per year, you know! For example, you start investing by regularly setting aside IDR 2 million per month in an instrument that can generate a yield of 20 percent, then in the third year your money will be IDR 276 million! Interesting right? Try if you just save, the third year you might only get Rp72 million.
How about you, are you interested? Before we discuss what are the profitable short-term investment instruments, it's a good idea to find out first what the investment characteristics for this tenor are. Characteristics of an ideal short-term investment Choosing a short-term investment should not be arbitrary, you know. Because the choice of investment products is not as flexible as long-term investments. What are the characteristics of investment products that are suitable for the short term? Let's review it below to make it clearer.
1. Liquid In short-term investments, you must choose instruments that are liquid or can be converted into money (current assets) quickly. Because the need for investment returns does not last long as well as pension funds.
2. Low risk Fluctuations in the value of your investment should not be too high. Therefore, it is highly recommended for you to choose low-risk investments with “stable” returns. High risk investments are also accompanied by high returns. But what happens if when you want to disburse the investment, its value actually drops. It's not luck, it's a stun. After knowing the two important characteristics of this investment, then we will discuss in detail about the investment instruments that are suitable for the short term. The most profitable short-term investment There are five short-term investment options that are usually often chosen. Easy and profitable is one of the reasons why this investment is in great demand. Anything?
1. Deposits The safest option and the easiest to understand working system is deposit. Customers will be given several options regarding the desired time period, starting from 1, 3, 6, 12, up to 24 months. Even the time period can also be extended automatically using the ARO (Automatic Roll Over) system. But regarding the disbursement, customers can only withdraw this investment when it is due. If you are lazy to leave the house, you can also become an online deposit customer. What does online deposit mean? You already know that in Indonesia, there are banks that open digital banking services. These banks have online deposit products. This very low risk investment, the rate of return is also not too large. Generally it is 5 percent in 2020 because it follows the BI benchmark interest rate. But there is a tax that you have to pay, and the amount is 20 percent.
2. Savings Savings is not only used as a place to save money. Savings can also be a profitable short-term investment instrument. However, the benefits are not large because the yield on interest that you will get from savings is also lower than deposits. But savings also have a plus because they are easy to disburse. So you don't have to wait for a certain period of time like a deposit. One thing to remember, savings can not be used as a long-term investment. Because the funds you save in savings will follow inflation.
3. Mutual Funds Mutual funds are investment instruments to collect funds from investors which will later be managed by investment managers by investing in a number of securities. Mutual funds are now also widely chosen by people for short-term investments because these investments are easy in terms of registration, top up funds, and are not subject to tax. However, not all mutual funds can be chosen to be managed in the short term because some types of mutual funds have a high risk. Call it like stock mutual funds and mutual funds mix. So what mutual funds are suitable for short tenor investments?
* Money market mutual funds. The entire securities portfolio of money market mutual funds are money market instruments. The risk is clearly very low, but the return is also not too large, which is approximately 7 percent in one year.
* Fixed income mutual funds. As much as 20 percent of the composition of the fixed income mutual fund securities portfolio is invested in money market instruments. However, the remaining 80 percent is placed into long-term debt instruments or bonds, either private bonds or government bonds. Although the value of your investment will fluctuate, the level of fluctuation is not severe. The profit can reach 9 to 10 percent per year.
4. Short tenor P2P Lending This investment allows everyone to give or apply for loans to each other without using the services of a bank as an intermediary. All of them are accommodated by companies that are specifically engaged in P2P lending. Based on the type of borrower, P2P lending is divided into two, namely consumer P2P lending and productive P2P lending. It is called productive because the borrowers are micro entrepreneurs. Meanwhile, what is consumptive is P2P lending, which frees the borrower to use the money for anything. In terms of tenors, P2P lending also varies. Some are a year, two years, and there are even days. If you want to lend funds in consumer P2P lending, choose one with a tenor of days because the risk is quite large. However, if the sector is productive, it is not a problem to choose a one-year tenor. Also make sure that the P2P lending site or application you are aiming for is licensed and supervised by the Financial Services Authority (OJK), has received very large funding from investors, and has credit insurance. The yield from P2P lending generally ranges from 15 to 20 percent per year. Pretty good right?
5. Government bonds Why can government bonds be a short-term investment option? Let's take the example of SBR009 which was offered on January 27 to February 13, 2020. Investments in government securities or SUN can start with IDR 1 million, with a floating coupon of at least 6.30 percent per year. Of course the coupon can go up, you know, but this investment is subject to a 15 percent tax. The maturity tenor of SBR009 is two years, to be more precise in February 2022. But there is an early redemption facility in February and March 2021. That means investors will get a portion of the principal repayment of SBR in 2021. How good is the return? Of course bigger than deposits. That's it, guaranteed by the state. Yes, yes, the people of that country owe you because they need money for development. Apart from SBR, there are also ORI and sukuk. Just choose what you want. Why choose short term investment? Why should you choose short-term investments over long-term investments?
The answer is that it depends on your goals. Short-term investments are suitable for those of you who want to achieve short-term goals, such as collecting a down payment (DP) for a house purchase. Well, if your monthly salary can't be used to pay the down payment, you can choose one of the five options above to make it happen. You can also choose to invest on this scale to take advantage of the excess cash flow for a while. Instead of using the money to buy consumer goods whose value is rapidly dropping, it's better to invest it. That way, the excess cash flow will generate a hefty profit. Is not it? So of the five short-term investment options above, do you think there are any that interest you? Or are you already running it? One thing that is important to know regarding investment is, adjust it to your goals and don't just buy the product. Different goals, different investment products. Lastly, don't forget to protect your finances later.
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