Investment is the choice of many people to strengthen their financial position by increasing discussions in public spaces. In general, there are 2 timeframes for investment, namely short-term investment and long-term investment. There are also those who try to find out the meaning, benefits, risks and in advance of this type of investment.
Before deciding to choose this investment depending on the financial situation and the goals of the investment. In addition, you need more in-depth knowledge about short-term or long-term investments before jumping in with investing in your assets. This time, let’s find out more about what short-term investing is.
Definition of Short Term Investment
Short-term investments are investments that are temporary in nature. In general, these short-term investments have the advantage that they can be withdrawn in a shorter time. This is suitable for investors who want to invest, but want to get profits in less than a year.
The average short-term investment time ranges from 1 month, 3 months, 6 months to 12 months. Even though it doesn’t take a long time, this short-term investment can also provide an opportunity for investors to earn big profits.
One of these factors comes from the capital that was first allocated and the increase in interest rates that changed over time. But all investments have risks including short-term investments. Therefore, it is important for you to choose investments wisely to increase your financial returns, and not vice versa.
Example of Short Term Investment
There are many examples of short-term investments that you can use. Of course, there are advantages and disadvantages to each. If you want a short-term investment, choose the right type of investment according to your needs.
1. Money Market Mutual Funds
In general, there are 4 mutual fund options. However, for short-term investment options, you can choose money market mutual funds and fixed income mutual funds. Currently, the most popular investment instrument chosen by investors is money market mutual funds.
The fund system in capital market mutual funds collected will be invested in money market instruments such as money market securities, certificates of deposit, Bank Indonesia certificates, and so on.
Meanwhile, fixed income mutual funds have a system whereby the funds collected will be invested 80% in debt instruments or bond-based securities which are capital market instruments. Investing in mutual funds is now made easy by the availability of the best mutual fund application options that can be done online.
Deposits are one of the short-term investment options. When making a deposit you will get a certificate of deposit. There is a choice of timeframes that you can choose from 1 to 24 months to benefit from the funds you allocate for investment with the terms of the money being approved.
Deposits are a safe investment option that can provide reasonable returns in the short term. You can also set how long the duration of the money you deposit for investment.
3. Retail Government Bonds (ORI)
The next short-term investment that is classified as safe is the Retail Government Bond (ORI). ORI is a bond issued by the government, so the risk is more secure and very low. However, for investment in ORI, the minimum deposit is still quite large, at least IDR 3 million with an investment period of three years.
4. Retail Saving Bonds (SBR)
Retail Savings Bonds (SBR) are investment products in the form of bonds issued by the government, just like ORI investments. Funds received from SBR investors will also be used for the benefit of the government so that it is more secure. If using SBR it means the lender is from the bond issuer, in this case the state.
SBR investment is suitable for novice investors because the promised percentage is higher. The promised yield is usually around 7%, higher than deposits, which provide a profit of around 5-6%.
SBR investment has a term of 2 years with a promised return of funds every month. To invest in SBR deposits start from IDR 1 million, which is why it is suitable for the best short term investments.
5. Peer to Peer Lending (P2P Lending)
One of the short-term investments that is in great demand by the public today is P2P lending. Even though Peer to pee lending investments are high risk, they also provide high returns.
The many platforms that are the choice for this instrument make it easier for investors to invest their funds. We recommend that you learn more before using Peer to peer lending.
Tips For Short Term Investment To Be Profitable
Whatever the choice of short-term investment type, of course, has the goal of maximizing profits with minimal risk. Here are short-term investment tips to multiply profits.
Set Investment Goals
You have to set goals before deciding to invest, Don’t invest because it’s a trend. Having clear investment objectives will make it easier for you to choose investment instruments and investment strategies.
Choosing the Right Investment
There are many investment products on the market. Make sure not to be wrong in choosing the type of short-term investment. Before investing, you must adjust to your financial condition and needs before investing. Make sure to choose an investment product according to your needs and goals.
Study the Performance of Investment Instruments
Before investing, you must understand in detail the investment instrument that you will choose. Learn information about how to manage funds, the legality of investment products, risk of loss, profit taking systems, etc.
If you don’t understand the investment product you choose, you can’t be blamed if you experience a loss. You have to be observant and careful in choosing investment instruments so you don’t experience losses in investing. Be a smart investor to multiply profits.
Use Strategy to Invest
Investment is not just depositing funds and after that you don’t need to do anything else. You must have knowledge to invest. Because to get the maximum profit, it is necessary to apply a strategy for investment.
Advantages of Short Term Investment
Both short-term investments and long-term investments certainly have their respective risks. There are advantages and disadvantages of each. First of all, let’s see what the benefits of this short-term investment.
Advantages Generally Faster
One of the advantages of short-term investing is the flexibility of investors in determining when to invest. There are investments with maturities ranging from 1 to 12 months with the possibility of providing a higher rate of return.
Interest rates will affect the income or profits earned. If you have careful calculations, the capital you have for investment can get big profits.
Obtaining profit or income in a relatively short time makes it easier for you to allocate funds to short-term investment instruments to achieve your financial goals in the future.
Another advantage that we can get from short-term investments is flexibility. The purpose of this flexibility is that it is easier for investors to convert investment assets into cash.
You can take profits or part of the capital invested in short-term investment instruments if you have a sudden need. You only need to wait for the investment manager to take time to process payments for the funds you invest. Usually completed in a few working days.
Can Be Used For Emergency Fund Savings
Apart from investing for profit, Short term investments can also be used as savings for reserve funds. In good financial management, you need to set up an emergency fund.
An emergency fund is a source of funds prepared when you experience an emergency. You don’t need to worry because you already have an emergency fund from short-term investments. In addition, you can benefit from an increase in investment value based on the special funds that you set aside each month.
Disadvantages of Short Term Investment
After knowing the advantages of short-term investing, let’s find out the disadvantages.
Fluctuations in asset values are not a loss if you make long-term investments. However, for short-term investments, fluctuations in asset values have a significant impact on strengthening or weakening financial positions. So, before making short-term investments, you must know what risks and types of investments to use.
Need Special Attention
If making short-term investments to watch out for is the importance of paying special attention to the investments you make. Before making an investment, it is important to understand the risks, the type of investment you will choose, and other technical aspects.
In the short term, it is important for investors to monitor their short-term investment movements. In addition to special attention, you also need to devote sufficient free time to look after short-term investment prospects. Given the time investment, this is one of the downsides of short term investing.